Tag: madoff

Blog Roundup: Wilpons Still in Debt

After dropping 2 of 3 from the defending champion Cardinals, The Mets find themselves 7 games under .500, and 9 games out of the wildcard.

The good news is, R.A. Dickey pitched 6.2 innings to earn his 18th victory on Wednesday.  With 5 starts left, he has a great chance of reaching 20 wins, and he also has a great chance of winning the NL Cy Young award.  The bad news is, the Mets are going nowhere fast.

According to the first link below, the Mets lost $70 million in 2011, and they are on track to lose $23 million in 2012.   That means they will likely not spend money this offseason, and may even look to cut salary.  So, the team will have to make do with what they have, and once again, find bargains on the free agent and trade markets if they want to improve.

It will be interesting to see how the front office approaches the offseason and 2013.

To the Blogs:

Enjoy the links, and keep checking out Mets Today.

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Blog Roundup: Financial Edition

The heavyweight court bout between Wilpon, Katz, and company vs. Irving Picard ended in a…well, sort of split decision.  All in all, it was good news for the owners of the Mets, as Fred, Jeff, and Uncle Saul only had to payout a paltry $162 million.  After the ruling, the Mets were able to sell 12 minority ownership shares of the team at $20 million apiece, infusing $240 million into the organization.  This allowed them to immediately pay back their debts to the Bank of America and Major League Baseball.  That’s the good news.  The bad news is, the Wilpons won’t be forced to sell the team.

The Blogs check their accounts:

  • Ian O’Connor of ESPN thinks Fred is still a loser.
  • Hardball Talk says the Wilpons are happy, and praise Mario Cuomo (this is not a blog post from the mid-80s).
  • Amazin’ Avenue explores the ramifications of today’s ruling.
  • MMO wonders if this means better days ahead.
  • Metstradamus examines what this does to the culture of negativity among Mets faithful.
  • Tedquarters, meanwhile, is always thinking about his stomach (apologies to Han Solo).  How would you define a sandwich?

We here at Mets Today work for free, so we don’t have to worry about million dollar settlements.  Stay tuned for more Mets news.

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Picard Down To His Final Out in the Bottom of the Ninth

NOTE: this was written by MetsToday loyal reader and legal consultant Robert Tandy, Esq. It is an overview of what is happening with the Irving Picard case vs. Sterling Equities. Mr. Tandy will keep us posted on developments in the case with periodic updates. -Joe

On February 23, 2012, the ten individual partners of Sterling Equities (the “Sterling Defendants”), their family members, trusts, foundations, and affiliated business entities will move for summary judgment dismissing the Trustee’s remaining causes of action against the Sterling Defendants.

By way of background, the procedural history of the case can be summarized as follows:

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Mets Borrowed 25 Million from MLB

Honestly, I thought we could go a week without another off-field bombshell … but unfortunately, the latest news that the New York Mets borrowed money from the MLB coffers as recently as December cannot be ignored.

Major League Baseball provided $25 million to the owners of the Mets as they struggled to deal with a cash shortfall last fall and a looming lawsuit seeking hundreds of millions of dollars for victims of Bernard L. Madoff’s vast Ponzi scheme, according to two people briefed on the arrangement.

The direct intervention of Commissioner Bud Selig to help sustain the operations of the franchise — confirmed by the Mets on Friday — is perhaps the most striking evidence yet of the financial distress that for many months has plagued the team’s owners, Fred Wilpon and Saul Katz.

So it’s not bad enough that the Mets are in the middle of the Madoff scandal — they’re also in dire financial straits. Hmm … dire straits … money for nothing … oh me and my silly puns …

Seriously, this information would explain the Mets’ sudden need to obsess over payroll, after years of spending freely. You can talk all you want about the payroll budget being too high and it not being necessary to field a winning team, but that was never the point. The point was that the Mets, over the past few years, repeatedly claimed that the payroll was flexible, and in fact said there was still room after signing Jason Bay last winter. That tune changed swiftly this past fall.

The Mets have exhausted baseball’s standard bank line of credit, tens of millions of dollars that Mr. Selig and the sport’s owners make available to teams for a variety of reasons in the course of a year. The owners also have more than $400 million in debt on the team. Thus, the additional money provided by Mr. Selig — done in secret last November — might have been crucial in keeping the club functioning.

Is it a coincidence that the Mets took this “secret loan” from Selig at around the same time Sandy Alderson — who was recommended by Selig — was named the Mets GM?

By the way, Fred Wilpon is not denying that there was a loan — but the rest of MLB didn’t know about it until recently:

“We said in October that we expected to have a short-term liquidity issue. To address this, we did receive a loan from Major League Baseball in November. Beyond that, we will not discuss the matter any further.”

One team executive in baseball said that the Mets had not yet repaid the loan, and that Mr. Selig had informed baseball’s executive committee of the loan only last month.

Sooo … the Mets owe some $400M to banks for various debts and another $25M to MLB. That said, selling a 25% stake in the team — about $200M or so — isn’t going to cover even HALF of their total debt. It appears that the Wilpons will need to sell a much more substantial piece of the team. Add in the fact that it also appears that the team currently has trouble getting money via traditional avenues and you realize that the Wilpons have very little leverage in making a sale.

“The fact that the loan is coming from baseball would be a jarring event because, as with the Texas Rangers, the league is effectively a lender of last resort,” said Marc Ganis, a sports industry consultant. “It would indicate the team cannot get loans from normal commercial sources, which could be taken as a sign of very significant problems.”

There’s one more fly in the ointment that isn’t going to please the banks and won’t help the Mets’ line of credit:

Baseball, in involving itself with struggling franchises, enjoys a powerful status. In the event of a bankruptcy, it gets its loans repaid first — ahead of banks, and perhaps even Mr. Picard, the Madoff trustee.

I would imagine that a baseball team is similar to any other privately funded business, in that its ability to acquire loans and have “good credit” is critical to keeping things going and in future success — particularly in distressed economic times, when revenues are lower. These factors certainly play into a prospective buyer’s decision process as well as at the negotiating table during a purchase. Which would explain why there has been so little interest in finding buyers for the team.

One last quote from that NYT article:

According to one person briefed on baseball’s involvement with the troubles of the Mets, the club has faced cash shortfall issues for at least a year.

If that’s true, it suggest that the team is having trouble generating revenue even after opening one of the newest, most expensive, fully featured ballparks in the largest market in the country. Again, not a piece of info that attracts potential buyers.

This team is in deep financial doo-doo, independent of the Madoff suit. And things won’t change until new ownership takes over the team.

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Reactions To News That Mets Are For Sale

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Mets For Sale

So much for the conspiracy “theory” — as it turns out, the Madoff scandal did and does affect the Wilpons and the New York Mets in particular, despite countless denials to the contrary.

From last week’s press release:

As Sterling Equities announced in December, we are engaged in discussions to settle a lawsuit brought against us and other Sterling partners and members of our families by the Trustee in the Madoff bankruptcy. We are not permitted to comment on these confidential negotiations while they are ongoing.

However, to address the air of uncertainty created by this lawsuit, and to provide additional assurance that the New York Mets will continue to have the necessary resources to fully compete and win, we are looking at a number of potential options including the addition of one or more strategic partners.

I’ve always enjoyed the Mets’ strategy of releasing bad news on a Friday, whenever possible, so that the media pickup is somewhat lessened. They’ve done it consistently with player injuries, arrests, suspensions, and firings, for example.

Another consistency regarding news out of Flushing: telling us things are fine, when they aren’t — a theme that ran repeatedly with the player injuries of 2009 and 2010.

I was going to write my own, original response to this latest situation, but someone already published a piece that pretty much sums up my thoughts, so why reinvent the wheel? See Barstool Sports NYC. That site could be considered NSFW and has some foul language, so I’ll give you snippets of the best parts.

But mark my words, this is the beginning of the end for the Wilpons owning the Mets. For 3 reasons – 1. This is how the Mets … operate. How many years have we heard about a Carlos Beltran “strain” and 6 weeks later we find out he needs season ending surgery? How many times have we seen Reyes as “day-to-day” and it turns out to be like 90 … days? This is what they do. The come in real low in an effort to keep everyone calm and as time goes on you realize just how (bad) of a situation they are in and all the sudden its a full blown disaster. So all this “just looking for financial partners” and what not is the tip of the iceberg. 1 year ago the Wilpons promised Madoff wasn’t an issue at all. Now its somewhat of an issue. And in another year we’ll find out it they’re completely broke.

Pretty much how I see it, too. But there’s more good stuff from Barstool:

2. The fact that they announced this without a bidder lined up means this Madoff lawsuit is 150 times worse than they ever expected. Seems like they were sucker punched by the potential severity of this suit. This is a New York baseball franchise. Top 3 profitable franchise in all of baseball. And they are basically putting out an open casting call for financial partners? Thats like the kinda (stuff) I do on Barstool. Put up a picture of a chick and ask the Stoolies to find her. Just announcing you are now open to whoring yourself out without any prospective partners already lined up is … desperate. It’s like online dating. The Mets are … J-Dating right now.

Barstool sums up the Wilpon ownership era thusly:

I’ve always maintained this team will never win a World Series under the Wilpons management. Too incompetent, too timid. Always willing to go three quarters of the way, but never willing to go the distance. The Mets will always be stuck in no man’s land with the Wilpons – Never rebuilding, but never winning. That’s New York Mets baseball under Fred and Jeff Wilpon.

I agree with most of these points. In particular, that this recent news is only the tip of the iceberg; there will be much, much more as this lawsuit drags on.

By the way, in case you missed it, we had an interesting discussion in a comments thread from December 8, 2010, where we suspected “something big” regarding the Madoff situation was going to come out eventually.

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