Wilpons on Verge of Important Re-Fi
According to the New York Post, Mets ownership is close to refinancing a $250 million dollar loan. The re-fi is expected to give the team more financial flexibility:
Until recently, it wasn’t certain investors weren’t going to insist the team owners pay down some of the loan to get the refinancing done.
Wilpon and Katz will not be asked for any cash paydown, sources said.
Plus, interest payments are expected to stay about the same, a source with direct knowledge of the situation said.
The Mets spent about $87 million on free agents this offseason – a marked jump in spending from the past few years, in particular last offseason, when they spent only $5 million. Perhaps optimism about this re-fi was part of the reason the Wilpons felt comfortable loosening their wallets this winter.
They’re still not spending with the big boys – and no one is going to outspend the Yankees, whether you play in New York or not – but the point is to have the financial flexibility to make the moves you have to make, rather than settling on a team full of minor league contracts with invites to Spring Training.
I doubt this news will inspire any more huge transactions this offseason – Stephen Drew is still in play, but the Mets seem to be treating him as a nice-to-have, not a must-have.
As much as I’ve been critical of the Wilpons, they are at least making an active effort to get out from under the debt left to them by Bernie Madoff.
I hope the next time Fred Wilpon says his financial troubles are over, like he did last year, that it’s really the truth.
This is good news for the Wilpons, and hopefully for Met fans, but the story has been overblown from the point that it was “hanging over their heads”. Thanks to the YES/FOX deal, the sale of the Dodgers, and the recent new TV deals signed by the Dodgers, Phillies, Mariners, etc., the Wilpons have more than enough equity and near certain future cash flows for any bank to refi that $250 mil.
The signing of $87 mil in FA contracts this season should not be mis-represented as “spending”. It is not spending, it is a commitment to spend, and the commitment is spread over several seasons. Alderson bragged the other day about “spending” the 5th most of any team in this FA market. The only thing that matters is the total payroll commitment for 2014, and how that relates to the quality of the product on the field and the ticket prices. In that regard, he should be utterly embarrassed, as Met ticket prices remain near the most expensive, they operate in the largest market, they have a bottom third 2014 payroll, and a bottom third record, with a growing streak of losing seasons.
If I was a lender, I would be imploring them to spend more to up the talent level and competitiveness of the team, right now, as that is the only way to increase revenues and approach profitability.
Did/do we know the details of this original restriction?
There were some positives to come out of the terms that I have read. The big one is that the Wilpons don’t have to pay down the $250 million load as condition for refinancing. This will be important because they will need all the capital they can get their hands on because the next loan (against SNY), comes due in 2015 for $600 million. If you were worrying how the $250 million would effect 2014’s payroll, how do you feel about 2015’s payroll knowing the Wilpons need to settle a $600 million loan?
As far as financial flexibility, I don’t see how the terms of the loan improves it. From what I have read, the Mets will continue to pay the same in loan payments per year, but the length of the loan has been extended. The Mets have been losing money for years. Since their loan payments are fixed, they either have to increase revenue or cut payroll to balance the budget. The Wilpons could use their own money to pay the difference, but from what the Madoff trustee had to say, that doesn’t seem likely to happen. Right now, based on what I have read, I am predicting the Met’s payroll to go even lower in 2015, not up.
The Mets have a knack for turning corners. They turned a corner when they got rid of the Perez and Castillo contracts. They turned a corner after the Madoff settlement. They turned a corner after they shed the Santana and Bay contracts. Now they are turning a corner with the $250 million refi. Yet after each corner, with each gain of financial flexibility, they cut spending across the franchise, especially in payroll. Why exactly are you believing them now? Oh, one last rant. Financial flexibility means you have the money and the willingness to spend/invest money. Wake me up when that happens.
Like any soap opera the decision to own the Mets is a mixture of the heart and the ego for Fred Wilpon. However, he is smart enough to separate his real wealth (real estate) from his play money (the Mets). Besides, if he didn’t have the team what would he do with li’l jeffy? Owning the team gives Fred a place to park his son and keep him away from the real family business.
Good points above. However, I do not agree with the sentiment that the Wilpons are still “in the woods” in any way. That is yesterday’s news. The owners of the Mets, love them or hate them, are billionaires, with a capital B. This debt is drastically overrated. Yes, the Mets are refinancing a $250 mil loan coming due, and yes, they do not need to raise a dime to pay it off. The reality is that multiple banks will willing to take on that loan. Why? Because the Mets are a sound bet. And why are they a sound bet? Just look at what else is going on financially in MLB. Look at the selling price of the Dodgers. Fox paid $1,5 billion for YES. The Dodgers signed a TV deal getting them $340 mil a year. These numbers place the value of SNY at a minimum of $1,5 bil. The refinancing of $600 mil will not be difficult.
The Wilpons do have a lot of debt, but relative to the value of their assets, it is not overwhelming or unmanageable. They basically need their assets to generate more revenues to offset the losses. They will likely need to increase payroll to improve on the field talent and competitiveness.
Yes, I guess it is pretty easy to blog and to agree to spend other people’s money! That said, I have been claiming last year and this that they should be spending some (not Yankee, Dodger, Angel) to preserve a better on the field product. I believe Joe J. agrees with the notion that you can rebuild and compete at the same time. I can give them a pass on 2010 and 2011 given the devestation of the Madoff mess and the Picard lawsuit. But, albeit without access to their full financial picture. I don’t get why they couldn’t invest another $10 to $15 million to fill some gaping holes on the team and five it a puncher’s chance, be it last year or this. No, they can’t spend their way to matching up with the Nats, but there is something to be said for truly fielding a competitive team, one that has a good shot at finishing over .500 and playing solid baseball without AAAA players being imposed on the paying customers. They still have a chance to do this for 2014 if Alderson can acquire a legit bullpen arm and a legit candidate to compete with or usurp Tejada at SS. For my 2 cents, I think that approach would position them much better for 2014-2016. Alderson knows damn well that while Drew is no savior, he would clearly improve the team in 2014, so long as he can be had for no more that 2 years. Ditto with Balfour, even though that ship has sailed, an arm like his would fit perfectly in providing depth while still leaving room for young guns to take a leadership role if they earn it.