Tag: wilpons

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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Mets To Lower Ticket Prices

In a letter to season-ticket holders, the Wilpons wrote:

“Everyone at the Mets – our Ownership, GM Omar Minaya, Manager Jerry Manuel, the coaches, players, front office and staff – shares your disappointment with the 2009 season. You soon will hear from Ownership and Omar about how we plan to improve the ball club through a combination of player signings, trades, enhanced player development and continued commitment to one of the highest player payrolls in MLB.

We are currently finalizing our ticket pricing for 2010. Season Ticket prices will be reduced by an average of more than 10 percent, with several seating areas being adjusted by more than 20 percent. Every Season Ticket Holder invoice for 2010 will be less than 2009.”

Big woop.
mets_tix
More than TEN PERCENT???? And “several” seating areas reduced by more than TWENTY??? WOW !!!!!

Why does this news not excite me? Mainly because I stopped buying ticket packages three years ago, when the prices started to obnoxiously rise at a rate completely incongruous with my shrinking amount of disposable income. A 10-20% reduction drops the pricing structure from “impossible” to “way out of my budget”.

But that’s because the Mets increased ticket prices about 12% across the board after their last playoff appearance, raised them another 20% after the greatest collapse in MLB history, and of course raised them by astronomical proportions (in some cases, as much as 100%) for Citi Field’s inaugural season.

Dave Howard’s explanation for the 2008 raise in prices was this:

“We considered where we were in the marketplace. Our average ticket price is still the lowest among the nine major pro sports teams in the New York area,” Howard said Saturday. “Our payroll is among the highest in baseball. We put our resources back into the team. We tried to strike a balance.”

I never understood what the Mets’ Shea Stadium ticket pricing had to do with Knicks, Devils, Nets, and other teams that played half as many home games and had half as many seats available. And you can’t ever compare your ticket prices to the Yankees — unless you start spending like the Steinbrenners. But Howard needed some kind of stat to use to support his case.

The most recent letter from the organization promises sweeping changes in the offseason — indeed, we’ve already seen the firings of several key people in the front office and at the minor league levels. More should be on the way, but hopefully, this time, there will be some kind of plan in place — rather than change for the sake of change (please, no Art Howe moves this time!). The tidbit about “…continued commitment to one of the highest player payrolls in MLB” is intriguing — and ambiguous. Obviously they won’t be in the $200M range of the Yankees, but they can drop from their current $150M payroll to as low as $110M and still be among the highest budgets in MLB. For example, the Red Sox were at around $120M on Opening Day 2009, the Cubs at $135M, the Angels were at $114M, Phillies were at $113M, and the Dodgers started at $100M.

Prior to the 2009 season, the Detroit Tigers lowered ticket prices and raised their payroll. I don’t see that happening in Flushing. But if nothing else, it should be a newsworthy offseason.

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