Der Kommissar's in Town

[Guest Mets � Willets Point]

Big news! Mets hire turnaround consultants. Could mean bankruptcy and sale of team.

[Ceetar]

https://twitter.com/#!/DanDotLewis

DanDotLewis has some thoughts on the matter too. Sounds like while it could mean that, it could also mean an attempt to 'turn things around' and retain ownership.

Dan Lewis @AdamRubinESPN The *whole point* of a Ch11 re-org is to allow the owners to come up with a reorg plan which allows them to retain ownership.

A lot of this is one sided because Rubin wouldn't make his tweets public and is apparently having a hissy fit about something Dan said.

Dan Lewis @DanDotLewis @AdamRubinESPN The Wilpons would become debtor in possession in a Ch11 filing.

[Guest Mets � Willets Point]

Either way, hopefully it's a sign of better fortunes for the team.

[Edgy MD]

Hopefully, certainly.

[Ceetar]

Mets � Willets Point wrote: Either way, hopefully it's a sign of better fortunes for the team.

seems hard for it to be worse right? either they'll help turn things around or help them sell if they can't afford the team. Either way should lead to a team that's able to spend.

[Guest John Cougar Lunchbucket]

What a dot douche.

[Edgy MD]

Ceetar wrote: Mets � Willets Point wrote: Either way, hopefully it's a sign of better fortunes for the team. seems hard for it to be worse right? either they'll help turn things around or help them sell if they can't afford the team. Either way should lead to a team that's able to spend.

Wouldn't have picked you for a grass-is-greener guy.

[Ceetar]

Edgy DC wrote: Ceetar wrote: Mets � Willets Point wrote: Either way, hopefully it's a sign of better fortunes for the team. seems hard for it to be worse right? either they'll help turn things around or help them sell if they can't afford the team. Either way should lead to a team that's able to spend. Wouldn't have picked you for a grass-is-greener guy.

sorry, there's always the crab grass of the ultimate buyer being a stingy, horrible owner. I hear bad things about Dolan for instance.

[Fman99]

Fucking Wilpons. Just sell already.

[Edgy MD]

Ceetar wrote: Ceetar wrote: Mets � Willets Point wrote: Either way, hopefully it's a sign of better fortunes for the team. seems hard for it to be worse right? either they'll help turn things around or help them sell if they can't afford the team. Either way should lead to a team that's able to spend. Wouldn't have picked you for a grass-is-greener guy. sorry, there's always the crab grass of the ultimate buyer being a stingy, horrible owner. I hear bad things about Dolan for instance.

No need to apologize. I'm not afraid of a stingy horrible owner so much as a (1) a prolonged bankruptcy period where assets have to be liquidated to cover debts, (2) a detached corporation who needs to see black ink above all else every year.

Beyond that, stingy isn't a threat so much as conservative might be. Stupid as it was for the Wilpons to count on those fake profits, they sunk that money into the operations rather than paying off their principle. In this economy, I'm not sure folks will have the guts to keep reinvesting as the investments aren't paying off like the Pons did.

But it's New York, and there'll likely be enough folks out there who want the vanity of pimping out the Mets in their name. Those folks will be bidding against the corporations, so we'll see.

But again, the (1) and (2) above are what I fear might lies beyond the 'Pons.

Fman99 wrote: Fucking Wilpons. Just sell already.

I know, but they look like they're playing to stay and the game is on.

[Ceetar]

Edgy DC wrote: Edgy DC wrote: Mets � Willets Point wrote: Either way, hopefully it's a sign of better fortunes for the team. seems hard for it to be worse right? either they'll help turn things around or help them sell if they can't afford the team. Either way should lead to a team that's able to spend. Wouldn't have picked you for a grass-is-greener guy. sorry, there's always the crab grass of the ultimate buyer being a stingy, horrible owner. I hear bad things about Dolan for instance. No need to apologize. I'm not afraid of a stingy horrible owner so much as a (1) a prolonged bankruptcy period where assets have to be liquidated to cover debts, (2) a detached corporation who needs to see black ink above all else every year. Beyond that, stingy isn't a threat so much as conservative might be. Stupid as it was for the Wilpons to count on those fake profits, they sunk that money into the operations rather than paying off their principle. In this economy, I'm not sure folks will have the guts to keep reinvesting as the investments aren't paying off like the Pons did. But it's New York, and there'll likely be enough folks out there who want the vanity of pimping out the Mets in their name. Those folks will be bidding against the corporations, so we'll see. But again, the (1) and (2) above are what I fear might lies beyond the 'Pons.

Not that 2014 is soon, but the Wilpons have impending debt there with Citi Field, as well as the Picard thing looming. I don't think there will be a prolonged bankruptcy period.

[Edgy MD]

This is where my lack of studies in these matters come through. How does another debt coming due accelerate the process by which the corporation will transfer through bankruptcy? I would figure that would only bog matters down further.

[Ceetar]

Edgy DC wrote: This is where my lack of studies in these matters come through. How does another debt coming due accelerate the process by which the corporation will transfer through bankruptcy? I would figure that would only bog matters down further.

I guess not. I don't really know. beyond my paygrade. I guess in bankruptcy it just makes it messier having another pile of debt jump on?


Did the Rangers file for bankruptcy? how long did that take?

[Edgy MD]

The Rangers' recovery seems like a pretty ideal model. Certainly the Dodgers are spending money in bankruptcy, but these don't seem like typical situations. The Dodgers, of course, always have this wonderful asset in the stadium and the land it sits on, but the Wips only have paid off on a fraction of the stadium and perhaps half of the TV station. (Or so I understand. Mongo only pawn in game of life.)

[Guest John Cougar Lunchbucket]

The thing about a bankruptcy is that what happens is ultimately is up to the creditors and a judge. If the Mets owners were able to get financing that could pay their bills and the creditors approved it, then they could retain the team in a Chapter 11, but if creditors were convinced that selling the team would give them a better return then they'd likely back that solution.

[Edgy MD]

As one of those creditors is MLB, I imagine Selig will have a lot of say.

I get the idea that the big stadium payments that hit them every year are offset in part by the big payments they receive from CitiCorps (or whatever they're called now) sort of being earmarked. In general, I think the stadium debt is largely offset by the stadium asset. But even that is slipping away.

They lost $70 million. They've cut costs and I guess could survive another year in the red, but not that deep in the red. Like anybody, the key is the performance of the business.

[Ceetar]

Edgy DC wrote: They lost $70 million. They've cut costs and I guess could survive another year in the red, but not that deep in the red. Like anybody, the key is the performance of the business.

And CRG can't pitch.

[metirish]

Ceetar wrote: Edgy DC wrote: They lost $70 million. They've cut costs and I guess could survive another year in the red, but not that deep in the red. Like anybody, the key is the performance of the business. And CRG can't pitch.

and divisions foes have gotten better.

[Guest Mets � Willets Point]

metirish wrote: Ceetar wrote: Edgy DC wrote: They lost $70 million. They've cut costs and I guess could survive another year in the red, but not that deep in the red. Like anybody, the key is the performance of the business. And CRG can't pitch. and divisions foes have gotten better.

And Leon's getting LAAAAAAAAAAARGER!

[Frayed Knot]

Here's the part I'm having trouble grasping (about the whole deal, not just this recent development if this really is a development):
When exactly did this team start "hemorrhaging money" as I believe Fred once put it?

I mean if you're losing $70 mil a year on a high but not extremely so payroll with decent attendance, fairly high ticket prices, and a what has to be a favorable TV deal, how is it possible that this operation ever ran a profit or ever could in the foreseeable future? Cutting payroll $30-40 mil only means a smaller but still huge loss, especially since it probably means a corresponding loss in attendance.
And while I realize that the stadium added a chunk of obligations, if that's what threw the team into the red how is re-organizing things going to change the math?
And if that math is what it is why do the current owners want to hang onto the team so badly?
And none of this (or very little) has anything to do with Madoff!

Bottom line (pun intended) is that something's fishy here, and when I say fishy that doesn't necessarily mean crooked but more like I don't take the numbers and claims being thrown as gospel. There clearly are financial problems but the picture being painted here is one where things went from one extreme to the other with very little to explain how or why.

[Guest John Cougar Lunchbucket]

I think it's possible in this case.

For one they had a guaranteed $-maker in Madoff, which was so effective it basically became their only financial strategy (according to the trustee complaint, anyway). Take that away and they were subject to the risks of a shitty stock market like the rest of us schnooks.

Second, I suspect they must have badly overestimated the revenues the new stadium would deliver. I am certain they drew up their gameplans with the assumption they'd sell close to every seat in the new joint at the prices they initially set, not to mention the possibility they'd rake in the $$ with postseason games, etc. That they failed to reach any of these goals is partly a result of bad timing with the economy, exacerbated by terrible job of marketing and bad decisions on the baseball front. They failed in almost every way.

[MFS62]

Here's the part I'm having trouble grasping (about the whole deal, not just this recent development if this really is a development): When exactly did this team start "hemorrhaging money" as I believe Fred once put it?

THAT is the question that must be answered.
It was Tax Law that made the Wrigley family sell the Cubs after many years of ownership. IIRC*, the law states that a sports team's operational losses cannot be taken as deductions (against other income) if those losses have continued for over seven years. At that point, the team is considered a "hobby" and the deductions are no longer allowed.

If the losses have been occurring for a number of years, but helping the Wilpons w.r.t. the other revenue, the benefit will be ending soon and they will have to make the decision to take the real financial hit or sell. The first may cause the second. We can only hope.

Later

* = My mother always wanted me to be an accountant. I'm not. But I did stay at a Holiday Inn Express.

[Ceetar]

Madoff doesn't really factor in. That's more of a Wilpon thing. It didn't really affect the revenue/payroll formula, it just gave them more money to pay them with.

I don't know how they plummeted to losing 70million so fast, unless that numbers fudged in some way. Is it counting the Citi money? How exactly do SNY profits factor in? I'm not sure that info is public enough that anyone knows exactly what the total picture looks like.

But bad timing with the economy. Prices go up, from healthcare for their employees, to electric bills and all that other overhead stuff. I'd guess there were expenses, things like extra scouts or that extra minor league team, that they 'paid for' via Madoff investment profits that now look like pretty bad deals. Are they now factoring in losses from those things into the 70million?

[metirish]

Ceetar wrote: Madoff doesn't really factor in. That's more of a Wilpon thing. It didn't really affect the revenue/payroll formula, it just gave them more money to pay them with.

How can you reconcile the beginning and ending of this sentence?

[Ceetar]

metirish wrote: Ceetar wrote: Madoff doesn't really factor in. That's more of a Wilpon thing. It didn't really affect the revenue/payroll formula, it just gave them more money to pay them with. How can you reconcile the beginning and ending of this sentence?

it doesn't factor into the equation. Strictly from a "Are the Mets profitable" standpoint. The equation isn't

(How Much the Mets Make +random investments)= (How much we pay to operate the team)

The Madoff stuff was never part of Mets revenue. Or at least, it shouldn't have been. The idea (at least it is now) is to plan for your intake of money to = payroll. I suppose they probably put all the season ticket holder money into a Madoff account, and maybe they even calculated the return on that as part of the budget to match Mets expenses, but that change isn't going to suddenly make the Mets a 70 million dollar losing prospect.

[Frayed Knot]

John Cougar Lunchbucket wrote: I think it's possible in this case. For one they had a guaranteed $-maker in Madoff, which was so effective it basically became their only financial strategy (according to the trustee complaint, anyway). Take that away and they were subject to the risks of a shitty stock market like the rest of us schnooks. Second, I suspect they must have badly overestimated the revenues the new stadium would deliver. I am certain they drew up their gameplans with the assumption they'd sell close to every seat in the new joint at the prices they initially set, not to mention the possibility they'd rake in the $$ with postseason games, etc. That they failed to reach any of these goals is partly a result of bad timing with the economy, exacerbated by terrible job of marketing and bad decisions on the baseball front. They failed in almost every way.

I get all that -- but $70 Million?!?!?! (on top of maybe $50mil the year before)
Assuming those numbers are even close to correct it's hard to see how this owner or any owner EVER made money running this franchise or, if this was all triggered by over-reaching in the stadium deal, how this or any other owner ever could.

[Edgy MD]

Frayed Knot wrote: When exactly did this team start "hemorrhaging money" as I believe Fred once put it?

According to this hotshot, the pendulum swing in 2010.

[Edgy MD]

John Cougar Lunchbucket wrote: I think it's possible in this case. For one they had a guaranteed $-maker in Madoff, which was so effective it basically became their only financial strategy (according to the trustee complaint, anyway). Take that away and they were subject to the risks of a shitty stock market like the rest of us schnooks. Second, I suspect they must have badly overestimated the revenues the new stadium would deliver. I am certain they drew up their gameplans with the assumption they'd sell close to every seat in the new joint at the prices they initially set, not to mention the possibility they'd rake in the $$ with postseason games, etc. That they failed to reach any of these goals is partly a result of bad timing with the economy, exacerbated by terrible job of marketing and bad decisions on the baseball front. They failed in almost every way.

Add to that perfect star, crippling injuries to virtually every player signed to long-term, high-value contracts. Those not typically injured helped matters by under-performing shockingly (Bay, Perez) or punching family members in the face at the stadium (Rodriguez).

It's like the fates aligned against the at the one time they dropped their pants enough to expose themselves to the fates. It's almost beautiful.

[Frayed Knot]

Edgy DC wrote: Frayed Knot wrote: When exactly did this team start "hemorrhaging money" as I believe Fred once put it? According to this hotshot, the pendulum swing in 2010.

So, assuming that we're to take those figures as accurate, we need to simply accept that, with virtually no change in expenses, revenues for the club suddenly fell by over 100 million dollars (or close to 25%) in the span of one year (and then further after that) as this club flipped from being in a positive-$50mil situation to a negative-$50mil in the blink of an eye.


Attendance fell approx 20% between 2009 & 2010 which, when combined with lower prices, could put a dent in finances.
But the paid gate is only a portion of income (it certainly is a much smaller portion than in previous eras) and if the set-up of this team is such where anything short of 3+mil asses-in-seats each year (essentially its capacity*) leaves the club swimming in red ink then we're back to my earlier question about how the team stayed afloat this long or could reasonably expect to in the future.



* 42K x 81 games = 3.4 million

[Benjamin Grimm]

I have to admit, I haven't been following this money story all that closely, but...

Didn't the $70 million figure come from something that Sandy Alderson said? And didn't he also say that the $70 million figure represented more than one year?