Big News! (update: Mets Minority Stake For Sale)

[Ceetar]

metirish wrote: how many times are you going to say you are done with this before you stop commenting on it?

probably three. Or if it gets really really boring out there. Or something really interesting happens. Or the trial actually happens..

[batmagadanleadoff]

Questions. Questions. Questions.

New York Mets Getting Big Taxpayer Bailout Mar. 1 2011 - By MIKE OZANIAN I realize Major League Baseball has the widest antitrust exemption in professional sports. But when banks like JPMorgan Chase, Citigroup and Bank of America that have received over $200 billion in bailout help are propping up teams like the Texas Rangers (prior to the team�s sale in bankruptcy court last year), Los Angeles Dodgers and New York Mets with direct loans to the teams or via the league�s credit facility, shouldn�t congress be asking some questions? By my count, the Mets have a negative book value when you include the stadium debt not on the team�s balance sheet but must be paid for with revenue from Citi Field. Now the team even wants more money from JPMorgan. Don�t taxpayers have the right to know where the money will come from to pay back these loans, especially when banks have not paid back the money they have �borrowed� from taxpayers and they continue to make huge profits from their borrowing and lending spreads? Why is commissioner Bud Selig, who reportedly did not even tell team owners about the $25 million loan he approved to the Mets last November until recently, allowed to remain secretive on these issues?

http://blogs.forbes.com/mikeozanian/2011/03/01/new-york-mets-getting-big-taxpayer-bailout/

[batmagadanleadoff]

Edgy DC wrote: Ceetar wrote: So, if the Mets got money from a bank, would it negate the money they need from selling a percentage of the team? Is this one of those other options? or is it in addition to? I'm guessing no, this wouldn't negate that.

It theoretically could depending on the debt service. What would be the terms of this loan? How much time would the Mets have to pay it back?

[batmagadanleadoff]

Ceetar wrote: Ceetar wrote: So, if the Mets got money from a bank, would it negate the money they need from selling a percentage of the team? Is this one of those other options? or is it in addition to? I'm guessing no, this wouldn't negate that. metirish wrote: It's quite possible that the Mets will not meet various payroll obligations without this loan, NT a good working environment for any of the employees. If they secure this loan then how long before they need another? Mr Wilpon, Mr Katz and son of Fred please go, for the sake of the club go. But I wouldn't go that far, either. I have no idea. I give up. The players are doing stuff down there, so I'm done with this storyline until we have something conclusive about the owners, whoever they are, ability to bring in an expensive piece at the deadline, and retain/sign players in the offseason.

So now where will we turn to for coverage and commentary on the Mets' Madoff Mess?

[batmagadanleadoff]

If the Mets can't meet their payroll obligations, I nominate K-Rod as the odds-on likeliest Met to punch out Fred Wilpon.

[Benjamin Grimm]

I haven't been getting mired in the details of this. All I know is that if the Wilpons can no longer afford to run the team, they have to sell. My biggest fear around all this is that we're going to go through another period like the interregnum between the death of Joan Payson and the arrival of Nelson Doubleday. If the final outcome is going to be a full sale, then let's have it sooner rather than later.

[batmagadanleadoff]

Benjamin Grimm wrote: I haven't been getting mired in the details of this. All I know is that if the Wilpons can no longer afford to run the team, they have to sell. My biggest fear around all this is that we're going to go through another period like the interregnum between the death of Joan Payson and the arrival of Nelson Doubleday. If the final outcome is going to be a full sale, then let's have it sooner rather than later.

I agree but I suspect that the Wilpons will cling to the Mets desperately, placing their personal desire to retain ownership over the interests of the fans and the league.

They're gonna have to be pried away from the Mets.

[Edgy MD]

I doubt that the team is entering a second Grant's Tomb era. There may be trimming on the payroll expenses, and there frankly ought to be. But the post-Joan Payson period featured one heir who didn't want the team and another who didn't really know what to do with it other than let her daughters play with it and was afraid of losing money on it, while the guy managing the show had an axe to grind about the old days.

Jeff Wilpon wants the team, and it's valuable. If they lose control, somebody else who wants it will get it.

[Valadius]

I repeat:



It's all over, Jeffy!

[Edgy MD]

I don't know what folks are rooting for (anybody but the Wilpons?), but I just want stability.

They really have a chance to do something here with this GM and his management team.

[Guest LeiterWagnerFasterStrongr]

And that's the real shame.

Part of the draw-- for us and them-- with bringing them here was the whole giving-the-smartyplants-money-to-work-with rigamarole, right?

[Edgy MD]

So I'm not sure why anyone would necessarily root for the Wilpons to fail here. A process is in place that you may or may not believe will benefit the team and them. But if you do believe it...

[batmagadanleadoff]

In my fantasy, the owners go but the GM stays.

I should add, though, that my fantasies never come true.

[Benjamin Grimm]

Edgy DC wrote: I doubt that the team is entering a second Grant's Tomb era. There may be trimming on the payroll expenses, and there frankly ought to be. But the post-Joan Payson period featured one heir who didn't want the team and another who didn't really know what to do with it other than let her daughters play with it and was afraid of losing money on it, while the guy managing the show had an axe to grind about the old days. Jeff Wilpon wants the team, and it's valuable. If they lose control, somebody else who wants it will get it.

It's not an exact parallel to the situation in the late 70's, but the result could be much the same. If the Wilpons decide to stubbornly hang on, even after it's clear that they can't do the club justice, we'll have a lean period that will end only when inevitability catches up to Fred and Jeff.

And that's why I'm saying that if they're going to go, let's do it now and not after that painful three-year (or whatever) period. They've had more than 30 years running a big league baseball team, they won a World Series, and had four other playoff teams, and they fulfilled their dream of rebuilding Ebbets Field. If this is the end of the road, then they need to come to accept it.

I'm not saying we've reached that point... I honestly have no idea. I also don't know if that point will ever, in fact, be reached. This is just what I see as the worst-case scenario, and I'm hoping it doesn't come to pass.

[Edgy MD]

If the 'Pons stubbornly decline to hang on despite their fortunes continuing to fail, the team will transfer, because unlike the children of Charles and Joan Payson, they don't own the team outright, but through a series of tremendous loans that they are taking out tremendous loans to pay off. If they can't meet their obligations to their creditors, they'll either be forced to sell or have the team siezed.

Under either circumstance, I don't see it languisihing as a neglected asset. Baseball is a much bigger and more competitive business in today's world.

[Benjamin Grimm]

Edgy DC wrote: Under either circumstance, I don't see it languisihing as a neglected asset. Baseball is a much bigger and more competitive business in today's world.

That's a good point. Under that scenario, there would probably be more turmoil than there was between Payson and Doubleday, but it probably wouldn't drag on indefinitely.

[Valadius]

What are the odds that the next owner of the Mets is... Irving Picard?

Irish, get Paddy Power on the phone.

[Guest LeiterWagnerFasterStrongr]

Edgy DC wrote: If the 'Pons stubbornly decline to hang on despite their fortunes continuing to fail, the team will transfer, because unlike the children of Charles and Joan Payson, they don't own the team outright, but through a series of tremendous loans that they are taking out tremendous loans to pay off. If they can't meet their obligations to their creditors, they'll either be forced to sell or have the team siezed.

So... not Payson Kids II, but CBS-MFYs II?

[batmagadanleadoff]

Brian Ross
Writer, journalist, documentarian, and political satirist
Posted: March 1, 2011 11:48 AM

What's the difference between the mob and Major League Baseball (MLB)? You know, that's a really good question.

Writers were gleefully typing away last week, with the New York Post reporting the $25 million bailout by MLB of the New York Mets and owner Fred Wilpon. Wilpon and his team have been embroiled in the Bernard Madoff ponzi scheme. The trustee for the Madoff victims, Irving Picard, sued Wilpon trying to recover nearly a billion dollars from him and the Mets. Picard said that Wilpon and his team should have known that Madoff's inflated returns were too good to be true.

Yet no one seemed to be asking the obvious question:

Where does the league, not the teams, get that kind of jack? What allows Bud Selig, who, as Commissioner, is supposed to be there primarily to uphold the ethical standards of the game, to act as the Don Vito Corleone of baseball, and dole out that kind of money on behalf of the individual owners? To get its exemption from antitrust law, baseball was defined as a bunch of separate businesses. Do they meet that standard today?

Having read baseball's antiquated rule book from cover to cover, there is no explicit authorization that I can find in the establishment of the Commissioner's office that gives Selig broad and sweeping fiscal powers, or that allow him to operate that office as a national center for financial policy that would invalidate the premise of baseball's antitrust deal with the government.

According to the Post, not only did Selig authorize the latest $25 million bailout of the Mets, but the team is on the hook to MLB for $75 million, which means that this latest bailout was added to $50 million already owed the league. This isn't the first time this has happened, either. Selig bailed out the Texas Rangers when their fiscal prairie schooner hit the rocks.

The mob makes up its own rules as it goes along, and strong men rule by muscling their way into power. The MLB is likewise an old-boy, back-room institution run by fiefdoms of power brokers who do as they will. The difference is that the MLB holds one very big card in their hand: No fear of U.S. antitrust laws.

The MLB is the only business entity that has a federal exemption from the same anti-competitive monopoly laws that 99.99% of other American businesses must abide by.

The United States Senate Judiciary committee, in a web article, explains how this came to pass:

In years prior, a number of laws such as the Sherman Antitrust Act, the Clayton Antitrust Act, and the Celler-Kefauver Act were enacted to prevent companies from illegally forming or maintaining a monopoly in a particular market. Baseball, however, had routinely escaped federal antitrust scrutiny, as courts ruled that organized baseball did not qualify as "interstate trade or commerce," as defined by antitrust laws. The issue required clarification by the Supreme Court, and, in 1922, the Court heard arguments in Federal Baseball Club v. National League. The Court, including former college baseball player and then-Chief Justice Howard Taft, decided unanimously that the Sherman Antitrust Act did not apply to Major League Baseball because the "business [of] giving exhibitions of baseball" did not constitute interstate commerce. That opinion was delivered by a former amateur baseball player, Justice Oliver Wendell Holmes.


Congress heaped on to that decision in 1961, when they passed the Sports Broadcasting Act. It allowed the nation's professional teams engaged in baseball, basketball, football, and hockey to negotiate single network agreements for national broadcasting rights for their respective leagues. The precedent for the legislation, though, still hinges around the Supreme Court decision of 1922.

MLB's Far-Flung Empire

MLB's owners have expanded their centralized operations since the 1960s by creating a whole host of limited liability partnerships and corporate entities outside of the main MLB framework that control everything from merchandise licensing to ticketing to money management to media ownership. These businesses serve MLB, and often work at its direction, whether directly or indirectly, as the same owners make up the majority of the limited partnership interests in these supposed "side" businesses.

It is these side businesses that bring in the lion's share of revenue that keeps baseball teams funded and help pay astronomical player salaries and fat paydays for all of the owners in towns great and small.

Media Control

Over the last decade, MLB Advanced Media, L.P. (MLB.com) solidified its control over news on the sport. Owners view the all of the news of baseball as "content," an extension of the entertainment product which they put out on the field. The owners, no longer content with the revenue from rebroadcast of the games themselves, wanted a piece of the sizable market for chattering about baseball, showing highlights, and reporting the events of the day in the sport.

MLB.com, owned by the largely the same owners who own the news source MLB, competes with every major and minor news publication in print, on the web, and on television in the country.

They know that media is moving to the Internet. By establishing a huge, dominant television and Internet presence, it gives their authorized media arm huge advantage over other media outlets.

Already MLB.com has its own priority news space at events like the Winter Meetings, and first access to everything from press releases to access to players and coaches, owners, and power brokers in the game. The only companies which are granted similar access to MLB.com for their reporters and videographers are big outlets like ESPN and Fox, who pay hefty annual access fees, estimated in the millions to obtain the access that MLB.com has. It has been impossible to get MLB.com to answer the question as to whether they pay any fees to MLB for such access. Calls in the past for an answer to that question have always been deflected or deferred.

To make sure that these fees for journalists to exercise the First Amendment on MLB fields are paid, new policies for media access were enacted a year or so ago that now limit media credentials as well.

Images and video gathered at MLB parks and events have been limited to 72 hours on the Internet. This discourages smaller publications from competing with MLB.com on the web by having any substantial content libraries beyond a day or two. It even keeps giants like Sports Illustrated, which run monthly images, and have an enormous library, off the web unless they pay the hefty rights fees.

MLB.com took over Minor League Baseball's Internet & television operations as well. Over the last decade, MLB attendance has kind of flat-lined unless a steroid-induced athlete is chasing a record, but Minor League Baseball (MiLB) attendance soared more than 11 million. So MLB pushed MiLB to join its web empire, picking up millions in managing websites, advertising revenues, additional ticketing fees, and the opportunity to sell major league TV packages to hundreds of thousands who would probably not have otherwise been targeted.

MLB, as a news-maker, adopts rules for media credentials which support the owners' competing news business with rules that favor MLB.com. This is exactly the kind of insider corporate behavior that antitrust laws were designed to combat.

Merchandise & Ticket Sales

Major League Baseball Properties, Inc., their merchandising arm charges high licensing fees, and would seem to negotiate as one entity rather than as a collective of the separate teams. By way of MLB.com's store online, they aggressively market to their email lists of site users and tv package subscribers, encouraging them to shop at MLB.com's online store first and foremost.

MLB, through another deal, bought Tickets.com in 2005 to go toe-to-toe with Ticketmaster. Teams, particularly in the minors, were continually arm-twisted to join the Tickets.com network.

The more independent minor league owners initially bucked the back-door increase in charges for their ticketing that the owners were taking out of their pockets, but jeopardizing the relationship which brings the players, trainers, and coaches delivered to their doors in the farm system at virtually no cost is a powerful disincentive to complaining about it.

Federal Blessing

The owners' Kobe beef cash cow is perpetuated by your federal government, which, back when baseball was actually the national pastime, responded to their lobbying and the mania for the game that Americans held in the 1920s with a level of protectionism that even the well-fed oil lobby has to look at with humble awe.

The owners would like to tell you that there is no monopoly, because all of their limited partnerships are run separately from MLB.

In theory, perhaps, but in practice, everyone tacitly understands that the league makes rules like the 72 hour photo/video use rule to protect its side businesses which reap in the millions that they need to make record profits and pay out ever-increasing salary demands even as the major league game has flat-lined for attendance in any year other than the steroids-laced home run records chases of Bonds, McGwire, and Sosa.

The only David that has had the deep enough pockets to face the Goliath sports leagues is a hat and garment manufacturer, American Needle.

Their lawsuit against the National Football League (NFL) delivered a huge victory last May when the U.S. Supreme Court by a 9-0 vote overturned the ruling in favor of the NFL in a 2008 decision in the 7th Circuit of the federal appeals courts. The case is now being re-evaluated by the appeals courts in light of the Supreme Court's new direction.

Stan Brand, Vice President of MiLB, said as much in remarks in 2009 at the Winter Meetings a few months prior to the decision. His take on its impact was significant:

"In the event that the Court validates the lower court ruling and the single entity theory, we should be prepared to ensure that any legislative initiatives that may be undertaken do nothing to undermine the significant protections achieved in the Curt Flood Act. And we should be ready, which I have no doubt we will be, to explain to our fans, the Congress and the public why baseball's antitrust protection has served the public interest and the communities in which we play for almost nine decades."


It would be hard to sell Baseball's antitrust exemption as a benefit to consumers. It cuts down competition in what they buy to wear, what they read, and what they watch. It has cost fans and the taxpayers millions, between markups passed along by advertisers who help companies like ESPN eat the millions in rights fees, and the many government bond deals that power the stadium building wave that has hit both major and minor league baseball over the last decade.

Their dominance of merchandising and ticketing has driven the costs of the game to unsustainable levels. The Yankees debuted their brand new stadium to empty seats behind home plate because they were simply too costly for even large corporations to pony up for them.

The game has suffered as well. Players from the days before free agency, who played for a fraction of the scratch that big-dollar athletes are paid today played far better ball on a regimen of beer, cigarettes, and women, than today's overpaid, often-juiced athletes.

Congressmen took an interest in MLB when the Mitchell Report revealed the rampant performance-enhancing substance abuse that mars the game. It was short-lived, high-profile, and probably not under their jurisdiction anyway.

The business practices of the owners of MLB and their various businesses are though. It is high time that, in this era of increased accountability, the Congress revisit the trust-bending deals struck by the Supreme Court in the 1920s, and the 1961 session.

If Bud Selig can issue a check to the Wilpons and the Mets for millions, along with the many other centrally-run operations by the owners that benefit MLB, then it is a national business entity, and it should no longer enjoy the unfair competitive advantage that it wields.

That's my shiny two.

http://www.huffingtonpost.com/brian-ross/mets-money-mishap-revives_b_828745.html

[Edgy MD]

Not to go all ceetar on you, but there're a lot of glaring misrepresentations there.

[batmagadanleadoff]

Well, I'm not Brian Ross, and I'm probably about to start a topic that can't be adequately addressed here, but do you think that MLB's antitrust exemption is fair, or at least consistent with the Supreme Court's other rulings?

[Edgy MD]

I think that MLB's anti-trust exemption is un-American, an offense to the Sherman act, an assualt on logic, and terribly unhealthy for baseball as a cultural institution.

="Justice Douglas, dissenting in United States v. Columbia Steel Co."]We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace--both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace...In final analysis, size in steel is the measure of the power of a handful of men over our economy...The philosophy of the Sherman Act is that it should not exist...Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men...That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it.

[Frayed Knot]

The NFL - without the blanket anti-trust exemption that MLB enjoys - has routinely lent money to team owners even to the point of keeping ones afloat run by borderline criminals, gamblers & drunks.

I've said this before in other topics, but even though I agree that the anti-trust exemption is bad law, it's one that has been severely whittled down over the years and I think is too often used as a red herring to explain just about any perceived problem with the sport.

[batmagadanleadoff]

Baseball pulls plug on Mets. Where's Tim Marchman to pile on?

Baseball Said to End Big Loans to Mets By DAVID WALDSTEIN Published: March 1, 2011 The Mets, in need of cash to pay off loans and meet other financial obligations, can no longer look to Major League Baseball for substantial monetary assistance, according to two people briefed on the team�s finances. The league, having already extended the Mets a $25 million loan in November to help the team meet operating costs, will not make another major loan to the club, according to the two people. The people would not be identified because they were not authorized to speak publicly on the matter. Baseball�s decision to restrict the Mets� access to further emergency funds probably leaves the team�s beleaguered owners, Fred Wilpon and Saul Katz, without their best remaining source of cash as they struggle to maintain control of the team in the face of a $1 billion lawsuit brought by the trustee for victims of the Bernard L. Madoff fraud. Mets officials did not respond to two requests for comment. The two people briefed on the situation said baseball could conceivably re-evaluate its position in the coming months if it thought it needed to protect its larger interests, like trying to avoid a fire sale of one of its elite clubs. In addition, with opening day a month away, baseball could make a modest short-term loan to help the Mets avoid defaulting on certain payments, like player salaries. But it would not be enough to rescue the Mets� owners in any long-term sense, the people suggested. �It�s tapped out,� one of the people briefed on the situation said, referring to the availability of more money. After months spent denying they faced any financial difficulties, the Mets, with significant debt on their team and cable television operation, announced in January that they were seeking to sell 25 percent of the team, valued by Forbes magazine last year at $858 million. They recently acknowledged they would consider selling a larger stake but maintained they would never sell a controlling interest. The Mets say the sale offering is because of the �uncertainties� surrounding the lawsuit filed by the Madoff trustee, Irving H. Picard. The lawsuit, filed in December, accuses the owners of having turned a blind eye to the possibility Madoff was operating a fraud, all while they invested ever more of their money and reaped ever more of his �fictitious� profits. The judge overseeing the suit has chosen Mario M. Cuomo, the former New York governor, to try to serve as a mediator in settlement talks. But the Mets appear to be under significant financial duress independent of the lawsuit. The $25 million loan, which was made after the Mets had already used up an M.L.B.-sponsored line of credit worth tens of millions of dollars, was extended to the Mets before the lawsuit was filed. Some in the industry see the loan as an indication that because of their heavy indebtedness, they are no longer able to borrow substantially from traditional commercial lending institutions. With pressure mounting, and the financial pipeline from M.L.B. shut off in any meaningful way, the Mets� ability to keep creditors at bay could hasten the sale of a portion of the team as they seek cash. The Mets, of course, would love to get the best price for the piece of the club, but the process takes time as potential buyers must be vetted first by the club�s representative in the sale, Steve Greenberg, and then Major League Baseball. Baseball recently intervened to try to shore up another franchise, the Texas Rangers. In June 2009, soon after Texas� holding company defaulted on $525 million in loans, Major League Baseball provided the club with a $15 million line of credit. Then, in November 2009, baseball again used its $1.2 billion credit facility to let the Rangers borrow up to $10 million more. The Rangers had apparently used $18.5 million of the $25 million by the time they filed for bankruptcy protection last May. Several days after the filing, baseball agreed to provide the team with another $21 million loan. When the loans became public, the owners of several other teams complained that the loans gave the Rangers a competitive advantage, particularly when the team traded for the ace pitcher Cliff Lee. In subsequent court testimony, Kellie Fischer, the Rangers� chief financial officer, said that the team�s lending relationship with baseball �works for us.� Fischer testified: �We�ve never had any issues with borrowing money as far as getting funded timely and providing information back and forth. M.L.B. has been very easy for us to work with.� But the loans and working relationship notwithstanding, the Rangers� owner, Tom Hicks, was still forced to sell. The team was sold for $593 million last August, and the loans were repaid. Richard Sandomir and Michael S. Schmidt contributed reporting.

http://www.nytimes.com/2011/03/02/sports/baseball/02wilpon.html

[ashie62]

The Mets credit line with MLB was tapped out at 52 million. The additional 25 is either a show of faith from MLB or a bad investment.

Nothing more or less..Geez, most Fortune 500 companies have overnight lending activity. This is not a big deal.

[Guest John Cougar Lunchbucket]

Mets starting to resemble a company headed toward Chapter 11.

[Edgy MD]

I think it's more than starting.

But I think a lot of folks are setting themselves up for disappointment --- sort of like the Wilpons --- by seeing what they want to see.

[MFS62]

John Cougar Lunchbucket wrote: Mets starting to resemble a company headed toward Chapter 11.

Interesting.
If the Mets go Chapter 11, does that mean the Wilpons do, too?
Is that a way for them to avoid having to pay any penalties/ give backs?
Does it make the team a better, or worse, investment?

Calling all accountants. Anyone know?
Later

[ashie62]

MFS62 wrote: John Cougar Lunchbucket wrote: Mets starting to resemble a company headed toward Chapter 11. Interesting. If the Mets go Chapter 11, does that mean the Wilpons do, too? Is that a way for them to avoid having to pay any penalties/ give backs? Does it make the team a better, or worse, investment? Calling all accountants. Anyone know? Later

BK11 for the Mets would require a bankruptcy petition filed by a creditor or The Mets (asking for protection)naming the Mets, as Incorporated, as plaintiff's or defendant.

Most likely Wilpon etal. would be advised to file BK for all of their personal and corporate assets so as to protect them also.

Penalties...If you are regarding Picard, no avoiding them. Reducing them after negotiation with Picard and the BK trustee is likely.

Better investment? The trustee would sell the reorganized assets to the highest bidder (Selig has zero say who) at what would likely be a discount to valuations seen now.

There are investment firms that do nothing but buy companies out of BK and repackage them. Think "Chainsaw Al Dunlap" and Scott Paper or KKR..

These are my best guesses.

[batmagadanleadoff]

At least some of Picard's allegations now seem to have more than a ring of truth -- namely that the Mets were so leveraged that they came to rely on Madoff''s unrealistic profit stream, without which the team could not function.


(And hence, the owners looked the other way).