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

[ashie62]

John Cougar Lunchbucket wrote: Einhorn always struck me as a little creepy. Deals like this usually come with enormous kill fees, I assume if DE isn't suing then the Wilpons made it worth his while. They now think they will get 10 guys to pony up $20 mills each, the whole thing sounds like a big failure to me, and if it results in Chapter 11 then great.

ALL Hedge fund guys are creepy.

So sell 10 Trophy "no-say" partnership for 20 million each to the same type of people that would like to own a race horse..

[Fman99]

John Cougar Lunchbucket wrote: Einhorn always struck me as a little creepy.

Of course, that's because Einhorn... is FINKLE.

[ashie62]

Gotta ask, what is FINKLE?

[Guest LeiterWagnerFasterStrongr]

[batmagadanleadoff]

There's a rumor beginning to circulate that the Mets and Picard are likely to settle the clawback lawsuit.

Sigh.

[batmagadanleadoff]

US District Court Judge Rakoff might release his decision on the fate of Picard's claims against Sterling for damages over and above fictitious profits, as early as today.

[Ceetar]

batmagadanleadoff wrote: US District Court Judge Rakoff might release his decision on the fate of Picard's claims against Sterling for damages over and above fictitious profits, as early as today.

The facts seem to be that all but two counts denied, and Picard has to prove that the Wilpons knew, not just should have known, to get anything above profits.

[Edgy MD]

And... the Mets owners complete a very busy day by finalizing their sales and paying off $65 million in loans.

Mets finalize sales of 12 minority shares Stakes each worth $20 million; club also pays $65 million in loans By Anthony DiComo / MLB.com | 03/19/12 9:03 PM ET PORT ST. LUCIE, Fla. -- The Mets have finalized the sales of 12 minority ownership shares and paid back $65 million in outstanding loans to Major League Baseball and Bank of America, according to a person with knowledge of the situation. The team has not commented on the deals. The Mets had been working to finalize the ownership sales for weeks, with two of the shares going to the team's parent company, Sterling Equities, and another four to the partially team-owned cable network SNY. The sales are worth $20 million each for a total of $240 million. The influx of cash has allowed the Mets to repay a $25 million loan to MLB, which had been outstanding for more than a year, and a $40 million loan they took out with Bank of America in December. The rest of the money is expected to help the team cover operating expenses and potential losses in 2012. Earlier Monday, before the trial could begin, Mets owners Fred Wilpon and Saul Katz settled for $162 million with the trustee seeking to recover funds from Bernard Madoff's Ponzi scheme. The Mets originally intended to sell one larger minority ownership sale, but they broke off talks to do so with hedge-fund manager David Einhorn last September. At that time, the team revealed an alternative plan to sell multiple, smaller ownership stakes, which has now come to fruition. Anthony DiComo is a reporter for MLB.com. Follow him on Twitter @AnthonyDicomo. This story was not subject to the approval of Major League Baseball or its clubs.

[MFS62]

But with the settlement, I wonder how much my share is going to be worth.

Later

(I just pegged someone's BS meter)

[batmagadanleadoff]

Megdal Math

The Wilpon Group buys some relief, but not for the Mets or their fans. By Howard Megdal 10:13 am Mar. 20, 2012 Fred Wilpon and his partners in New York Mets ownership just won big, twice. Following their $162 million settlement with Irving Picard, the trustee for the victims of Bernie Madoff's ponzi scheme, word was put out that Wilpon had sold 12 minority shares in the New York Mets, worth $240 million. The practical effect of Monday's settlement with Irving Picard, trustee for the Bernie Madoff victims, is that the Mets owners don't have to pay anything toward that settlement for four years, and the likelihood is much if not all of what they owe will come from other settlements made by Picard. At the very least, these two developments should mean that for the time being, they'll avoid being forced to sell the team. While it is still unknown who bought all of the minority shares�the already-identified new owners are, well, the old owners, with Jeff Wilpon and Saul Katz each purchasing a share, and SNY, the Wilpon-owned network, purchasing at least four�that matters less than the reality that if the Mets did take in $240 in exchange for 48 percent of the team, then the owners bought themselves time. How much time? Given what is known about their remaining obligations, as much as a year from this sale. Let's take a look at where the money is going. Of the $240 million, $40 million went out the door immediately to pay a bridge loan from Bank of America from last November, $25 million went to pay a past-due loan to Major League Baseball, and at least $100 million to JPMorgan Chase to pay down a portion of the $430 million debt against the team due in June 2014. That's $165 million of the sale that immediately went back out. It may be more: JPMorgan Chase might have needed more money to allow the Mets to take on new debt, which is what the sale is, since the owners can sell their stakes back to the Mets in 2018, for what it cost them plus three percent annual interest. But let's give the Mets owners the maximum possible use of this new money. That leaves $75 million to deal with this year's obligations. The owners will have to make a pair of payments on Citi Field�those payments totaled $43.7 million last year. They'll have $20 million in interest on the $450 million debt against SNY due in 2015, plus $30 million in interest on the $430 million debt against the Mets. If we assume that's been knocked down by a quarter, or even a third�those three obligations still total right around $75 million. That leaves essentially no breathing room for the team to deal with any team losses in 2012. But there is a massive difference between last season's budget, which saw the Mets lose $70 million, and this one. The team chopped $52 million off the books in salary, cut ten percent of their workforce, and even eliminated a minor league team (at an estimated savings of $800,000). If we assume, best-case, that the workforce laid off amounts to even $2 million�doubtful, if you know how M.L.B. employees who aren't on the field or executives are compensated�then we'll estimate that they chopped $55 million off the expenses, getting 2012 losses down to $15 million. The problem there is assuming their intake will be static as well. The Mets managed their 2011 budget with attendance of 2.34 million. Attendance, of course, is the financial lifeblood of a baseball team. Having cut ticket prices significantly, the Mets wouldn't even have the same revenue if every fan who attended in 2011 returned in 2012. And there's little indication that even that is happening so far. With every 200,000 fans worth $25 million to the Mets, even a drop to, say, 1.7 million fans in 2012 would create a shortfall equal to the money they need to pay off 2012 Citi Field debt and interest payments. But again, giving the team the benefit of the doubt�maybe the depleted roster, inspired by Terry Collins, will find a way to scrap their way into contention�let's say that the owners' projection of attendance increasing by ten percent in 2012 is correct. (That projection was rejected by Standard and Poor's late last year, and seems entirely at odds with both the product on the field and fan sentiment, but never mind.) That would keep revenue essentially flat, since they've reduced ticket prices. Their owners' dilemma is that in a year, that $240 million will be spent. And in 2013, they face the same payments all over again: two Citi Field payments, interest on their SNY debt, interest on their Mets team debt. And in the intervening year, because of these crushing obligations, they have little opportunity to improve the on-field product, making it hard to increase revenue. They will no doubt try to make some gesture to the fans to show that they mean to rebuild the threadbare team, even as they claim that all is now well with its owners. But without other circumstances changing, Mets fans will see the organization in almost precisely this position a year from now. And next time, there won't be any more minority shares left to sell.

http://www.capitalnewyork.com/article/null/2012/03/5514367/wilpon-group-buys-some-relief-not-mets-or-their-fans

[Ceetar]

He did a good job there, pretending that the $65 million in loans to BoA and MLB doesn't go to cover the 'losses' for this season. They didn't dump that money down a hole, they used it to pay salaries and what not. It's not a debt they owed, it's part of this season's operating expenses. I'm sure they're out a couple hundred thousand on interest and what not, but that's it.

[batmagadanleadoff]

Ceetar wrote: He did a good job there, pretending that the $65 million in loans to BoA and MLB doesn't go to cover the 'losses' for this season. They didn't dump that money down a hole, they used it to pay salaries and what not. It's not a debt they owed, it's part of this season's operating expenses. I'm sure they're out a couple hundred thousand on interest and what not, but that's it.

Loans aren't losses. Loans are balance sheet liabilities, and don't figure in calculating operating losses. The liability is "balanced" by the cash received on the money borrowed (loan). It's a wash because (excluding interest) the money received is offset by the loan repayment.



<-------- Look who I am.

OE --Those $65M loans were emergency loans taken more than half a year ago to cover immediate short term needs. Why would you think that those funds were used for 2012 expenses?

[Ceetar]

batmagadanleadoff wrote: Ceetar wrote: He did a good job there, pretending that the $65 million in loans to BoA and MLB doesn't go to cover the 'losses' for this season. They didn't dump that money down a hole, they used it to pay salaries and what not. It's not a debt they owed, it's part of this season's operating expenses. I'm sure they're out a couple hundred thousand on interest and what not, but that's it. Loans aren't losses. Loans are balance sheet liabilities, and don't figure in calculating operating losses. The liability is "balanced" by the cash received on the money borrowed (loan). It's a wash because (excluding interest) the money received is offset by the loan repayment. <-------- Look who I am.

You've been waiting your whole life for this moment.

What I meant was, that money that they borrowed, was money they used for losses this year. for payroll, for salaries, for equipment. They bought things with it. Yes, it balances to 0, but you can't ignore the 65million INCOME from taking out he loan in the first place.

[batmagadanleadoff]

Ceetar wrote: Ceetar wrote: He did a good job there, pretending that the $65 million in loans to BoA and MLB doesn't go to cover the 'losses' for this season. They didn't dump that money down a hole, they used it to pay salaries and what not. It's not a debt they owed, it's part of this season's operating expenses. I'm sure they're out a couple hundred thousand on interest and what not, but that's it. Loans aren't losses. Loans are balance sheet liabilities, and don't figure in calculating operating losses. The liability is "balanced" by the cash received on the money borrowed (loan). It's a wash because (excluding interest) the money received is offset by the loan repayment. <-------- Look who I am. You've been waiting your whole life for this moment. What I meant was, that money that they borrowed, was money they used for losses this year. for payroll, for salaries, for equipment. They bought things with it. Yes, it balances to 0, but you can't ignore the 65million INCOME from taking out he loan in the first place.

See my edit, above.

[Ceetar]

2012 expense. The BoA loan was taken out earlier this year.

I don't recall what the MLB money was used for. maybe that's true, but the 40million from Bank of America was used for expenses this year. Sure, they paid 40 million back, but they still have the 40 million they took out in the 'coffers' so to speak, of which they're using to pay players and build walls and place phone calls to teams about Jason Bay.

[batmagadanleadoff]

Ceetar wrote: You've been waiting your whole life for this moment. What I meant was, that money that they borrowed, was money they used for losses this year. for payroll, for salaries, for equipment. They bought things with it. Yes, it balances to 0, but you can't ignore the 65million INCOME from taking out he loan in the first place.

But money received from loans isn't income either. The loan has to be repaid.

Also, see my edit (OE).

[Ceetar]

batmagadanleadoff wrote: Ceetar wrote: You've been waiting your whole life for this moment. What I meant was, that money that they borrowed, was money they used for losses this year. for payroll, for salaries, for equipment. They bought things with it. Yes, it balances to 0, but you can't ignore the 65million INCOME from taking out he loan in the first place. But money received from loans isn't income either. The loan has to be repaid. Also, see my edit (OE).

I did. The loan was taking out this winter.

My point is the Mets got 40 million from Bank of America and 40 million from 2 investors. In a normal functional business, Money from the investors goes to the team. But the Mets didn't have that money yet, so they took money from the bank to give to the team, and sent the money from the investors to the bank.

This isn't a Madoff fund that they simply lost money into a hole, nor is it repayment on a building. They got to use 40 million dollars on the team. When Megdal does his math there, he says "40 million out the door immediately" and then says the Mets have "no breathing room" to cover losses after other debt repayments. This math ignores the 40million they got from the bank. Where did it go? Towards expenses presumably, so it has to be factored in.

[batmagadanleadoff]

I'm not following you. Megdal makes a credible case that the $240M to be received by the Mets will be used almost entirely to make loan repayments. So according to Megdal, unless the Mets make large profits this season, the Mets are unlikely to increase payroll significantly. Because the money won't be there.

You say the Mets spent the $40M on 2012 expenses? What expenses? The secretarial pool's dental plan? The team cut $50M in salary and jettisoned a whole minor league team.

[Ceetar]

batmagadanleadoff wrote: I'm not following you. Megdal makes a credible case that the $240M to be received by the Mets will be used almost entirely to make loan repayments. So according to Megdal, unless the Mets make large profits this season, the Mets are unlikely to increase payroll significantly. Because the money won't be there. You say the Mets spent the $40M on 2012 expenses? What expenses? The secretarial pool's dental plan? The team cut $50M in salary and jettisoned a whole minor league team.

the 90+ million dollars they owe the players? The electric bill? salaries for the front office/ticket staff? I dunno, they took out the loan this year though. So it'll be on the ledger on both sides, debit and credit. plus the credit from the investors. Either you apply that credit to the team/expenses, or the Bank of America loan. but you have to do one. Megdal is not assigning the 40 million dollars they got from the bank that I saw.

[Edgy MD]

Two names of minority investors leaked. One is Bob Pittman, Clear Channel CEO (which merely implies that he's a tool).



Pittman is the former CEO of MTV Networks and was COO of America Online Inc., which doesn't exactly dispel my tool suspicions. His specialty is "boosting brands." Maybe that can help the Mets. My specialty is boosting Volkswagons.

The other guy is Kenneth Lerer, Wilpon buddy and chairman and co-founder of The Huffington Post, which --- how do I put it? --- doesn't really absolve him of toolsomeness with me.



General Partner of Lerer Media Ventures, an angel fund in New York City, Vice-Chairman of Betaworks and Chairman of BuzzFeed. He is a past Executive Vice President of AOL Time Warner and was a founding partner of New York based corporate communications firm Robinson, Lerer, and Montgomery.

Common thread is AOL and media in general. Mets look like they got more Democrat-aligned, as well.

[Frayed Knot]

I recently read someplace where Clear Channel is losing money hand over fist. Maybe that means he'll blend in nicely.
Pittman's former wife is Sandy Hill Pittman, one of the 'celebrity climbers' that were part of the ill-fated trek up Mt Everest that became part of Jon Krakauer's 'Into Thin Air'

[batmagadanleadoff]

The New Yorker weighs in.

Excerpt:

All of this is excellent news for the Mets owners, who were hanging onto their ballclub by the skin of their teeth. Had they lost the trial, it is almost certain they would have lost the team as well. The settlement gives them some much-needed breathing room, and allows them to avoid the embarrassment and cost of going to court. That said, many obstacles remain for the Wilpons, as they are still weighed down by massive debt: over a billion dollars combined on the team, a new stadium, and their regional sports network, SNY. On top of that, the team itself has become a financial drain. After years of late-season collapses, disappointing play, and off-field drama, fan confidence has hit a new low. Attendance has dropped sharply�the team lost seventy million dollars last year�and payroll has dropped with it. In fact, this year�s payroll will be fifty million dollars lower than last year�s, the largest such drop in baseball history. Things got so bad last year that the team had to take out a twenty-five-million-dollar emergency loan from Major League Baseball and a forty-million-dollar �bridge� loan from Bank of America. To raise capital, the Wilpons are selling off twenty-million-dollar minority-ownership stakes in the team. While your twenty million dollars won�t buy you any say in how the team is actually run, you do get a four-per-cent ownership stake, a sweet business card, and the option of being paid back with interest in six years. The Wilpons are signalling that they have locked up twelve such stakes, which will provide a much-needed infusion of cash to pay back their creditors. The twist, of course, is that at least one of the stakes is being bought by SNY, which the Mets partially own. In other words, the team is lending money to itself. On top of that, three more of the stakes are being bought by the owners themselves. Sound crazy? Welcome to the world of the Mets. This was undoubtedly a great day for the Wilpons, but was it a good day for the Mets? Much of the uncertainty about the Wilpons� finances has dissipated, and fans won�t have to sit through the indignity of a trial when they just want to watch baseball. Still, it�s unlikely that the payroll will return to its pre-Madoff level any time soon. Even Sandy Alderson, the Mets general manager, recently admitted, �Our job is to outperform our payroll.� And let�s not forget about the team itself, which is off to a dreadful start this spring. Their young and exciting first baseman, Ike Davis, has Valley Fever, a potentially serious lung infection, while their best player, David Wright, is already injured. Those players who are on the field have been sloppy and ineffective, and it seems improbable that the team has much of a chance of besting the Phillies and Braves. At the very least, the trial would have served as a perverse diversion from the circus on the field, and we could have blamed the team�s likely insipid play on all the distraction. But who knows�perhaps this team really will surprise us. Until then, let�s watch some baseball and hope for the best. Leo Hindery, the founder of the Yankees� YES network and former Obama economic advisor, put it best yesterday: �It would be nice to eat a hot dog, watch some nice kids play baseball, and not ask about Mr. Picard in a lawsuit none of us really understood to begin with.� Amen.

Read more http://www.newyorker.com/online/blogs/sportingscene/2012/03/good-news-for-mets-owners-if-not-mets-fans.html#ixzz1ph6wEt4s

[Edgy MD]

Exchange from March 5.

Howard Megdal ? @howardmegdal
March just got MUCH tougher for Fred Wilpon and company.

Edward Hoyt ? @EdgyDC
@howardmegdal I don't think anybody thought the 'Pons would walk off scott free. I think the judge gave both sides motivation to settle.

Howard Megdal ? @howardmegdal
@EdgyDC Nope. Neither side has the slightest motivation/ability to settle. Wilpons lack the cash, Picard needs this precedent wiped away.