Mets Finances -- The Offseason (Bonus: 2014 season content)

[batmagadanleadoff]

Mets owners look to refinance $250M loans
By Josh Kosman
September 30, 2013 | 11:58pm


NY Mets principal owner Fred Wilpon, right, and partner Saul Katz, left.

One of the more important negotiations for the Mets this off-season will be their move to refinance roughly $250 million in bank debt, The Post has learned. It�s too bad for Mets� fans that even if the franchise hits a home run with its lenders and manages to pull off the deal without paying any principal, it won�t affect the budget for players� salaries next season, sources said. That�s because the team is deciding now how much money the GM has to make acquisitions, and the refinancing talks are slated for this winter. However, fruitful talks with the banks could see an increase in moneys allotted for 2015 salaries, a source said. Owners Fred Wilpon and Saul Katz, looking at a sizable principal payment this spring, have started reaching out to banks, sources added. The owners want to postpone repaying principal while they continue to shore up finances after several years of steep losses, burdensome debt and a showdown with the trustee for the victims of Bernie Madoff. �The big question for the Mets is whether they will need to make a principal payment,� a source said. Team owners remain confident that with the value of the team rising, they will not need to pony up any cash during the refinancing, sources said. �This is seen as a decent loan,� a source close to the lending group said. The Mets are expected to lose more than $10 million this year, sources said, after a $23 million loss in 2012 and the $70 million lost in 2011. The Amazin�s are in a better bargaining position with their lenders now than they were just two years ago, when the banks said the team violated the terms of its loan covenants. The Mets were able to raise $240 million last year by selling 40 percent of the team to a group of minority investors that included hedge-fund honcho Steven Cohen and comedian Bill Maher. On the bright side, the value of all MLB teams has risen since Guggenheim Partners ponied up more than $2 billion for the LA Dodgers in March 2012. The Mets maintain they now are worth a whopping $1 billion, up from an estimated $600 million in early 2012. A Mets spokesman declined comment.

http://nypost.com/2013/09/30/mets-owners-look-to-refinance-250m-loans/

[batmagadanleadoff]

And now, the Mets' rebuilding plans depend on J.P. Morgan Chase
By Howard Megdal
11:27 am Oct. 2, 2013

The New York Mets' media blitz on Monday, in conjunction with extending the contract of manager Terry Collins, produced the kind of headlines the team was presumably hoping for. "Terry Collins officially back, and Mets seem ready to spend," and "Alderson: Mets set to spend this offseason" and "Jeff Wilpon, Sandy Alderson say it's time for Mets to stop talking and start winning." And why not? As Alderson pointed out on Monday, the Mets have $25 million in salary commitments for 2014, David Wright's $20 million and Jon Niese's $5 million. Even if they bring everybody back who is arbitration eligible, that's another 11 players, at an estimated $22.3 million. That's just north of $47 million. And back in June, Alderson said the Mets should have a $90-100 million payroll, so the team could add "enough to be competitive because we can use the money on position players, which is our problem right now.� Soo what's the holdup? Oh, right. The crippling debt. The New York Post reported on Tuesday that Fred Wilpon and his partners are reaching out to banks now, attempting to re-finance the $250 million loan due against the team in June 2014 without having to pay any more of the principal due. There's some really useful information within that news, so let's break it down. For one thing, it allows us to account for that $160 million the Mets owners got last winter, borrowing from the last bit of equity they had in their ownership stake of S.N.Y. Annually, the Mets have been servicing their debt to the tune of roughly $90 million, between the loan against the team coming due, the loan against S.N.Y., now greater than $600 million, due in 2015, and the twice-annual debt balloon payments on Citi Field. That the other $70 million went toward paying down that loan, from $320 million to $250 million, means the last of the money is almost certainly gone. The Post also reported that the Mets lost only $10 million in 2013, down dramatically from the $70 million loss in 2011. But that difference of $60 million is a reflection of decreased payroll spending, not of increased revenue. (The Mets have seen revenue drop significantly over the past few years, thanks to fielding a team degraded by lack of resources.) Now, the Mets have a winter to survive without selling minority shares in the team (been there, done that), or by tapping their equity in S.N.Y. (also been there, done that). It is noteworthy that when they did the latter last winter, they managed to get only an additional $160 million, even though the value of S.N.Y. doubled from $1 billion to $2 billion since the Mets owners originally borrowed $450 million against it back in 2010. It is also noteworthy that during this re-financing, the term of the loan didn't change: it's still coming due in 2015. But first the Mets need to get past that $250 million due next year. Whether they can is entirely up to J.P. Morgan Chase, which essentially needs to weigh things like whether by delaying, they stand a better chance of getting their money, or if they are better off forcing a sale now, when they are at the front of the line, chronologically. This seems to matter to J.P. Morgan Chase, as it did both when they refused to let David Einhorn ahead of them in the repayment line during negotiations in the summer of 2011, or by forcing the Mets to reduce the amount due to David Wright between the day he signed his extension and June 2014. Hypothetically, they could give up this chronological position, and also determine that delaying without asking for any principal is best, and even be comfortable with the Mets spending on free agents this winter to help improve the chances of the Mets becoming profitable again. But there's been no indication that they're happy to do any of these things before now, which has led to the years of austerity. There's another problem, beyond even getting the loan refinanced, extended, and avoiding any principal payment: the Mets' owners then need money to spend on the team. Remember, they've managed to cover team losses and finance their debt, not with incoming capital each of the past two years, but by selling the asset of minority shares for 2012, and borrowing against S.N.Y. for 2013. With these options closed to them now, exactly how they raise the money to cover any 2014 losses, let alone finance their debt, remains another problem to solve. And once that's taken care of, then, and only then, can they conceivably move forward with some kind of budget for 2014. Every dollar spent on a free agent might well be a dollar ownership needs to cover losses and debt service, just as has been the case in prior winters, but without the infusion of capital from minority share sale or additional loan against S.N.Y. It's all got to come from somewhere. It's been darkly amusing to watch the Mets, 18 months after the trustee suing them determined they were circling the financial drain, make statements of good financial health absent any change or reason to believe them, even within the context of taking basic steps merely to survive. They've done so again. Now it'll be up to the good people at J.P. Morgan Chase to determine how closely those statements can hew to reality. It isn't any wonder that the vision of competitiveness back in June from Sandy Alderson has given way to this kind of hazy conversation. We want to believe their promises. But what the Mets do won't necessarily be up to them.

http://www.capitalnewyork.com/article/sports/2013/10/8534231/and-now-mets-rebuilding-plans-depend-jp-morgan-chase

[Ceetar]

expected to lose more than 10 million, and waaaay more than that coming off the books implies the Mets have a lot of money they can spend to break even.

Is anyone really suggesting that the Wilpons will be planning to reach into Mets profits to make payments? It seems if they were that strapped that they were banking on the team being profitable in 2013 so they could milk money off the top, they'd have lost control years ago.

It is looking like the Mets will be profitable next year. That seems to be part of the plan of hiring Alderson to start with and it's a good base to work with. See? Things are looking up.

[ashie62]

I don't believe any creditor would want to drive the Mets into Bankruptcy and leave the disposition of assets to a trustee.

Companies in far far worse shape than Wilpon get loans and restructuring in larger amounts everyday...

JP Morgan does not want to own a baseball team, they want to get paid and are likely to offer manageable terms...

I don't believe any of this will have a serious impact on the 2014 payroll...

[batmagadanleadoff]

Ceetar wrote: expected to lose more than 10 million, and waaaay more than that coming off the books implies the Mets have a lot of money they can spend to break even.

Both articles stress that the Mets are able to keep losses low only by slashing costs (i.e., payroll) rather than by increasing revenues. So I'm not so sure that I agree with you there. It appears to me that the Mets will need to keep payroll at current Mickey Mouse levels to avoid losing significantly more money than they lost in 2013.

My WAG, based on what I read today, is that the Mets get to refinance their big impending debt payment and thus, avoid paying principal for another while. I remain somewhat skeptical, however, about the Mets ability to sign even a Sin Choo Choo type free agent. Unless practically nobody else wants that guy.

[Ceetar]

batmagadanleadoff wrote: Ceetar wrote: expected to lose more than 10 million, and waaaay more than that coming off the books implies the Mets have a lot of money they can spend to break even. Both articles stress that the Mets are able to keep losses low only by slashing costs (i.e., payroll) rather than by increasing revenues. So I'm not so sure that I agree with you there. It appears to me that the Mets will need to keep payroll at current Mickey Mouse levels to avoid losing significantly more money than they lost in 2013.

sure. Payroll was about 90 million this year. If they lost 10, that means they made 80 million. (Of course, that's a sketchy number as no one knows if it includes naming rights (probably not) or even MLB licensing money)

Megdal floats ~$47 million after arbitration. rough, because guys might get non-tendered or agree to deals slightly lower than expected via arb. Fine. That's still $33 million dollars covered by revenue, that the Mets don't need to 'find money' for or be covered by the Wilpons. Of course, that's assuming they're assuming equal attendance, but if they spend even some of that I doubt they lose much in that dept.

So again, it boils down to if the Wilpons were budgeting way out years ago with the expectation of being able to pull money from the Mets accounts in 2014+ by never signing anybody. It's possible, but I don't know if that's the case.

Additionally, as the Wilpons desire to refinance and creatively account probably hinges somewhat on the amount of money they actually have, they might be better off projecting a 0 balance from the Mets. Especially if keeping them is a priority. "See Chase? We have no expected income from that, your best interest is to refinance". Hence the "Alderson is free to spend" meaning he's free to spend Mets money, as he's always been free to, there just hasn't been any. Now there is.

Let's see.

[batmagadanleadoff]

I think I lost you at your first sentence. Doesn't losing $10M mean losimg $10M? Payroll would have had to have been zero for the Mets to have made $80M.

[Ceetar]

batmagadanleadoff wrote: I think I lost you at your first sentence. Doesn't losing $10M mean losimg $10M? Payroll would have had to have been zero for the Mets to have made $80M.

they spent 90 and lost 10.


so how much did they make? (Gross, not net)

80.

what's payroll currently at for 2014.

$47.

The Mets are currently estimated to make $33 million in 2014.

[Lefty Specialist]

JPMC will refinance the loan. They don't want the hassle of writing it down and forcing the sale of the asset. It's like the old saying, "If you owe the bank ten thousand dollars, they own you. If you owe them ten million dollars, you own them."

[HahnSolo]

I'm lost too. Now, I'm not much of an economist Ceet and am probably in total misunderstanding about what you are saying, but if they spent $90m on payroll and the franchise lost $10m, where do you get that they made $80m? I don't get how the franchise's loss, subtracted from what they spent on payroll gives you a "made" $80m.

[Edgy MD]

His distinction is gross vs. net. They made 80 million gross (before accounting for expenses). They lost 10 million net (after accounting for expenses.

But of course, that 80 million figure is rather goofy. They made far more. And they spent far more than the team's payroll.

[Edgy MD]

batmagadanleadoff wrote: Both articles stress that the Mets are able to keep losses low only by slashing costs (i.e., payroll) rather than by increasing revenues.

The first doesn't really say that. The second implies that, but it's certainly not true.

[Ceetar]

Edgy MD wrote: His distinction is gross vs. net. They made 80 million gross (before accounting for expenses). They lost 10 million net (after accounting for expenses. But of course, that 80 million figure is rather goofy. They made far more. And they spent far more than the team's payroll.

right, it's goofiness is a large part as to why we really have no idea what the financial picture is.

I think that that's strictly ticket/stadium sales versus payroll. But I'm not even sure it's accounting for the deals with Aramark or Union Square Hospitality Group. Hell, we don't even know if the Mets get a cut of hot dog sales or get a flat fee from Aramark. It might not even count ad sales or parking fees.

[ashie62]

Lefty Specialist wrote: JPMC will refinance the loan. They don't want the hassle of writing it down and forcing the sale of the asset. It's like the old saying, "If you owe the bank ten thousand dollars, they own you. If you owe them ten million dollars, you own them."

That...

[ashie62]

Edgy MD wrote: batmagadanleadoff wrote: Both articles stress that the Mets are able to keep losses low only by slashing costs (i.e., payroll) rather than by increasing revenues. The first doesn't really say that. The second implies that, but it's certainly not true.

Payroll is not the only place to cut costs...The are many items on the fixed cost side of the ledger to evaluate..

Winning more games would be the easiest quickest way to increase revenues.

[Vic Sage]

if winning more games would be easy, why haven't they?

[MFS62]

I'm not a financial guy, so I'll just go back to the Megdal article for a moment:

It's been darkly amusing to watch the Mets, 18 months after the trustee suing them determined they were circling the financial drain

I'll bet Megdal is amused by the situation, darkly or brightly. He should stick his head in that drain and listen to someone flush.

Later

[Gwreck]

I also would note that it's reasonable to assume that gross revenues will also be decreasing in 2014.

[ashie62]

Gwreck wrote: I also would note that it's reasonable to assume that gross revenues will also be decreasing in 2014.

I hope not...

[ashie62]

Vic Sage wrote: if winning more games would be easy, why haven't they?

Cause they suck?

[batmagadanleadoff]

Sports Business
Mets� Promise of Cash Isn�t Promise to Spend
By RICHARD SANDOMIR
Published: October 5, 2013

excerpt:

Sandy Alderson�s comments last Monday about the Mets� off-season spending could not have comforted fans whose patience and desire to buy tickets are understandably frayed after five consecutive years of losing. Alderson, the Mets� general manager, said the team had plenty to spend now that about $40 million in contracts was coming off the books. He called that flexibility, and perhaps it is, given the bind that contracts like Johan Santana and Jason Bay�s put the team in. But it is not the sort of flexibility that induces gleeful dancing on the 7 train. Why? Because he said that the team�s payroll might not exceed this year�s, about $87 million. Or, he added, it could go down. Three conclusions can be divined from Alderson�s statements: ? The Wilpon family is still too strapped to let Alderson elevate the payroll much beyond where it was. ? Alderson had better spend that $40 million with the combined savvy and wizardry of past and present general managers like Pat Gillick, John Mozeliak and Walt Jocketty. ? The Mets are, for now, a middle-market franchise playing in New York. That is what happens when a team�s owners have been fleeced by Bernard L. Madoff and have made some bad free-agent signings, and their ballpark grows emptier each season.

http://www.nytimes.com/2013/10/06/sports/baseball/mets-promise-of-cash-isnt-promise-to-spend.html?_r=0

[Guest d'Kong76]

Amusing you stopped quoting when you hit the next
sentence that didn't fit your agenda.

[Edgy MD]

My main takeaway is that Fred Wilpon uses words like "Zimmo."

[batmagadanleadoff]

Kong76 wrote: Amusing you stopped quoting when you hit the next sentence that didn't fit your agenda.

If I really did have an agenda (and I can guess accurately as to what you probably think my agenda is) then the portion of the NYT article that I didn't quote would support rather than undermine that agenda. I suppose you can claim that some small and mid market teams are somewhat successful, but this would depend on how you define success. You wanna call the Pittsburgh Pirates a success because they're in the playoffs this year? I can't stop you.

The truth is that the wealthy or big market teams are twice as likely to make the playoffs as their poorer cousins. And the bottom 10 or so market/payroll teams have virtually no chance to win a World Series. I'd be very happy to support a mid-market team, especially if I was paying Pittsburgh cost of living expenses and Miami ticket prices.

You've been fucked up the ass by the Mets owners: they built a small market stadium and figured to make up the revenue lost from a smaller seating capacity by raising ticket prices to among the highest levels in MLB. But you can't notice that because you're half crazed from your own forum agenda, which has absolutely nothing to do with the Mets.

[Guest d'Kong76]

You are one bitter prick.

[batmagadanleadoff]

Kong76 wrote: You are one bitter prick.

No. You're the bitter prick. You work yourself into a godammn frenzy every time you check into this forum and see one of my posts. And then you have to muster every ounce of self-restraint you can possibly muster just to stop yourself from writing some stupid insulting post directed at me. Right? Bingo? Which you can't do anyway. So how does this work again? You take another shot at me. And then when I respond, I'm a bad guy for responding. Right?

[Guest d'Kong76]

No 'godammn frenzy' over here, batmags.

Telling me "You've been fucked up the ass by the Mets owners"
is confrontational.

[metirish]

Am having terrible visions of Fred and Saul and the hershey highway.....

[Guest Mets � Willets Point]

metirish wrote: Am having terrible visions of Fred and Saul and the hershey highway.....

You didn't need to share.

[metirish]

I'm blaming Batnags.