The best case for the Wilpons is still a very bad one for the Mets and their fans
Would you believe that the New York Mets, winners of six straight games, are in even worse financial trouble than we thought?
An article on the Fortune website brings the full extent of debt held by the New York Mets' ownership group into sharper relief. According to a potential investor in the team, the debt figure of $430 million is actually closer to $625 million, once additional liabilities, like the deferred money owed to long-retired Mets Bobby Bonilla, Bret Saberhagen and others and the $70 million the Mets expect to lose this year, are added to the tab.
Fortune writer Daniel Roberts goes on to make the observation: “At the very least, Fred Wilpon, Saul Katz, and Mets fans can feel happy when they compare the dire situation in Queens to a similar, but worse, crunch in Los Angeles.”
That's right, in terms of Wilpon and Katz. But the numbers don't support anything joyful for Mets fans. What it looks like is that the owners’ best-case scenario—that they find a minority investor willing to inject lots of capital into the team for a non-controlling stake—won’t do much more than stave off an inevitable sale of the team to a new owner.
Consider the plan, as Roberts details it:
“What the Mets want now, of course, is to find a Mets fan or a group of fans with pockets deep enough to buy a 49% share of the team for around $200 million. Such a deal wouldn't solve everything, but it would give the Mets a good start on the right path. Wilpon and Katz could pay back the $25 million loan to the MLB (given by Bud Selig in November, though they didn't reveal it until February). They'd have funds to help cover this season's losses. They could set aside a reserve, if they need it, for the [$1 billion Madoff Trustee Irving] Picard lawsuit. And of course, they could continue doling out their $145 million payroll.”
OK. Let's assume everything in the rosiest possible terms for the Wilpon ownership group. They find a buyer who will give them $200 million for 49 percent of the team, no strings attached. There are real doubts about whether any such buyer exists, absent the ability to have first right to buy a majority ownership stake should the team need to be sold. But let's stick with best-case.
Of that $200 million, implementing that plan would mean paying back that $25 million loan, which Bud Selig has said is due by the end of the season. That leaves $175 million. Let's take away the $70 million in expected losses, which leaves $105 million. Let's even assume that none of this money is needed to pay the $50 million in debt service due on Citi Field, which is unlikely, and that financing all of that $145 million payroll is covered in the $70 million loss.
That only leaves a little more than $100 million in the reserve fund to cover what they’re going to end up paying out to the Madoff victims. The major problem with that is the Picard lawsuit is two parts: $300 million in “fictitious profits”—the Ponzi money the Wilpons and Katz were paid out by Madoff that wasn’t actually returns on investment, but simply other people’s money—and another $700 million in damages for allegedly ignoring red flags concerning what Madoff was up to.
The rosiest scenario is that a bankruptcy judge (whose court, by the way, places the burden of proof on the Wilpons, not Picard), finds the Wilpon ownership group owes none of that $700 million.
But no one seriously expects that the Wilpons can keep the $300 million in fictitious profits. This is settled law. And it was settled in this very court, by this very judge (Burton R. Lifland), after the standard was argued by this very trustee, Irving Picard.
So in this best-case scenario, the Wilpons pay off their MLB loan, absorb 2011 losses, have around $100 million toward the Picard suit. They then face the prospect of finding another $200 million to pay off the remainder of the suit (again, this assumes they have to pay none of the $700 million in additional damages sought), plus absorb 2012 losses, which are likely to be considerable if the team again fails to make the postseason.
And they won't have another 49 percent of the team to sell while remaining majority owners. As Leo Bloom once observed to Max Bialystock, “You can only sell 100 percent of anything.”
So sure, Major League Baseball's decision not to intervene in the Mets' ownership situation as Bud Selig has with the Dodgers is great news for Fred Wilpon and Saul Katz. They get the chance to keep seeking financial help, and hoping against hope that a judge will, for some reason, rule against himself.
But for Mets fans? MLB's actions, or lack thereof, do little more than ensure financial instability in Flushing for the foreseeable future.