As in just about any scandal, the facts continue to leak out. Today we learned that Major League Baseball has turned off the spigot that New York Mets owners Fred Wilpon and Saul Katz have been tapping to cover their short-term needs.
The latest information was that MLB had provided $25 million to the Metsies back in November….well before Madoff Trustee Irving Picard had slapped the estimated $1.0 billion suit on them….to cover “operating costs”.
Today, we learn that MLB’s largesse has come to an end. At first glance, one would think that with a $1.2 billion line of credit, MLB should be in a position to provide more help. What’s $25 million?
But the word in banking circles is that Selig and Co.’s actual loan to the club is much higher. More like $60 million. That’s almost 50% higher than the $41 million that Bud offered to help save the Texas Rangers last year as they slipped into bankruptcy, eventually selling to a group led by Nolan Ryan.
That Texas Rangers “experience”, tagged as “very easy” by Rangers then CFO Kellie Fischer, wasn’t exactly easy for everyone. Selig heard about it big time from other owners….accusing him of using their money to help Texas reach the World Series with last-minute deals to acquire pricey talent like Cliff Lee.
The owners’ anger is just one reason this has ground to a halt.
How about this one…..the major banks that have outstanding loans to Wilpon/Katz, estimated to be between $450 to $500 million….have pretty mixed emotions. The terms of the MLB loans call for the league to take “first position” among lenders when it comes to getting their money back….meaning the banks themselves, carrying the Mets for all these years, don’t get paid back until AFTER MLB. Now, one could argue that it’s in the banks’ best interest to keep the franchise financially strong to enable the team to sell for a hefty price. But, there is no guarantee that any sale will cover the entire debt….meaning they might get caught holding a piece of the bag.
I think there is another reason as well….one that is flying below the radar…..the Frank and Jamie McCourt fiasco. The couple bought the Los Angeles Dodgers in 2004 from FOX. Frank has been nothing short of shifty in his tenure of ownership…starting from Day One.
When negotiating the deal, McCourt was well short of cash and convinced FOX’s Tony Vincequerra, who handled FOX’s side of the sale, to lend him cash against the purchase, using a parking lot in south Boston as collateral. He defaulted on the loan shortly thereafter, FOX took possession of the property, and sold it. The entire Dodger story is a wild one and maybe I’ll get into a bit down the road….but like the Mets, the Dodgers are drowning in debt. Their looming trouble is a pending divorce between Frank and Jamie with actual ownership of the club up for grabs. If the ruling made last December, that the McCourts are joint owners holds up, someone is going to have to raise money to buy the other one out. Alot of money.
Needing cash to keep his franchise value high, just like the Mets, Frank found a lender outside of the banking system in FOX, with reports surfacing of a loan of $40 million to cover operating costs, but that must have simply been a stop-gap.
In January, at his request, Frank visited the MLB Park Avenue offices. He met with a team of execs from MLB that Commissioner Selig did not attend. In those meetings, Frank presented his future financial plan to keep his franchise sound, in part seeking MLB approval to leverage future broadcast rights into a reported incremental $200 million loan from FOX. The Commissioner denied his request.
That brings us back to the end of the Mets MLB credit line. I think Bud is using his noodle. He knows that McCourt is one litigious SOB and he cannot continue to treat the Mets in a different, more friendly manner than he treats the Dodgers. I think Bud rues the day he approved McCourt as an owner and he’d love to find a way to boot him from the chummy owners’ club….this divorce and cash crunch being his weapon of choice. But he needs to let it play out, over time.
That “time” is going to really squeeze our boys Wilpon and Katz. For you Met fans who plead for theses guys to sell the team, you can tip your cap to Frank McCourt because he is going to help bring them down. No more Park Avenue largesse.
I’d normally feel sorry for Wilpon and Katz, having lost $500 million when Madoff cratered and got arrested. But I can’t in the end because I don’t buy what they are selling.
Wilpon says that he never knew Madoff was running a fraud, that he had “put money into the account just 3 weeks before it all collapsed” and uses that action as his clear sign of naivete….but to me that means nothing….I think he suspected fraud for sure, he just didn’t know when the party was going to end.
Wilpon and Katz weren’t alone either. Madoff’s arrest shocked the financial community…not because he was caught, but certainly for the staggering amount of money he was “handling”. Fred and Saul simply thought they could keep printing “Madoff” money without detection and they too were caught by surprise when the party ended. Their money went in because they were greedy, and as the facts come out, needed the gains to operate their businesses. With $500 million in Madoff, they were earning roughly $80 million PER YEAR at the estimated 16% average rate of return.
With each day another tough story surfaces, each one giving a prospective buyer greater leverage to drive down the price. As appointed mediator Mario Cuomo sifts through the many details, facts and opinions provided by the Mets and the Madoff Trustee while attempting to reach a settlement, one thing is certain…the soup is getting really thick for Fred and Jeff Wilpon and Saul Katz.
THE LAST BITE
Hank Steinbrenner is a blow-hard owner who was handed the keys to one of our sports franchises from Daddy…..and I can now add him to the list of less-than-deserving “owners” Jimmy Dolan and Jeff Wilpon who inherited leadership, not earned it.