(CNN) -- The embattled Los Angeles Dodgers' ownership suffered a major setback on Friday, when a Delaware judge rejected the baseball team's $150 million refinancing plan.
The move gives fresh momentum to Major League Baseball's bid to take over the esteemed Southern California franchise, which has been mired in economic turmoil in part due to the acrimonious, costly divorce involving its owner Frank McCourt.
The franchise is incorporated in Delaware, which is why it filed for bankruptcy protection there instead of in California.
Its owners had tried to independently secure financing to keep the franchise solvent. Meanwhile, Commissioner Bud Selig and others at league headquarters offered the needed cash instead, while pushing the McCourts to resolve the money woes long term by selling the team.
U.S. Bankruptcy Judge Kevin Gross found that the financial plan being offered by Major League Baseball demonstrated a "substantial economic superiority" to the one proposed by the McCourts, which included a substantial loan from Fox Sports.
Gross noted that the Dodgers, under McCourt, must continue to negotiate with the league "cooperatively and in a good faith," something he said McCourt has refused to do in the past.
"It is unclear to the court how debtors think they can successfully operate a team within the framework of baseball if they are unwilling to sit with baseball to consider and negotiate even more favorable loan terms," the judge added.
Friday's decision is a reversal of sorts for Gross, who late last month approved the Dodgers' plan to get financing from Highbridge Capital, a unit of JPMorgan Chase. Still, he said that he'd reconsider that decision at a hearing, which was held Wednesday.
The league argued that its financing would cost the team less than the financing being provided by private lender Highbridge. The interest on the MLB loan would be at 7%, while Highbridge's would be at 10%.
Experts say Major League Baseball is making the loan offer partly to improve its legal position in its fight with the Dodgers.
Last month, Selig blocked a $3 billion local television rights deal that the Dodgers had reached with News Corporation unit Fox Sports. Selig ruled the contract was not in the best long-term interest of the team or the league, saying its intent mainly was to meet McCourt's own needs to settle his divorce.
The league escalated its attack on McCourt's ownership of the Dodgers around that time, stating in a court filing that he had "siphoned off well over $100 million of club revenues" and was "unable to properly distinguish between his personal interests and those of the club."