Banks and Major League Baseball prop up the Wilpon group, but for how long?

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Jeff and Fred Wilpon. ()
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Has the New York Mets ownership group become too big too fail?

That is the question at the moment, since the New York Times reported Monday evening that Bank of America provided Wilpon and his partners with a $40 million bridge loan, even though between debt against the team, against their television network, and against Citi Field, the ownership group has around $1.5 billion in debt at the moment. That doesn't include a penny of what they might need to pay in the lawsuit brought against them by a trustee for the victims of Bernie Madoff's Ponzi scheme, in which the Wilpon group was adjudged to have been a net "winner."

In reality, even if everything in the current plan goes right, the Wilpon group doesn't have any obvious pathway to solvency. And the latest news simply reinforces the notion that the Mets owners have run out of money, and are also running out of time.

This latest bridge loan is supposed to get the team's owners through to March, by which point, they claim, they'll be able to raise $200 million by selling off ten separate minority ownership stakes in the Mets.

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According to the bank's financing statement, the loan is due back five years from the date of the agreement—November 28, 2016. But that is likely a date created to reassure the other lenders that Bank of America won't jump the line in the event of a bankruptcy.

And the Mets confirmed late Monday night that they will pay the approximately $25 million to the city of New York, which is the latest of the twice-annual debt installments due on Citi Field.

It represents just the latest in the obstacle course of debt the Wilpon group is picking its way through in an attempt to keep the team and avoid bankruptcy.

This latest loan of $40 million, to be paid back in March, is largely needed to pay that Citi Field debt. So let's look at the team's finances, acting under the assumptions that the Mets pay off that debt, and that the $40 million in Bank of America money gets them through the winter.

Come March, if the team has completed deals with ten minority investors for approximately $200 million—an extraordinarily tall order—$40 million gets paid back for the bridge loan. Another $25 million, owed to Major League Baseball and currently past due, also gets repaid.

That leaves $135 million to get them through the season with a team that lost $70 million last year. While salaries have been slashed—approximately $50 million has come off of the payroll, and most of the Mets' top players have been jettisoned—it is reasonable to expect that they won't draw more fans than they did last year, even at a discount. And with ticket prices cut as well, what tickets do sell won't bring in as much revenue as they did in 2011.

But let's be extremely optimistic, and estimate the team loses just $35 million next year. That leaves $100 million. That's just about enough to cover the two more debt payments against Citi Field, the $30 million in interest on the debt against the team, and the $20 million in interest on the debt against SNY.

And it doesn't address some other massive issues for this ownership group: the $430 million in debt against the team (due in 2014), the $450 million in debt against SNY (due in 2015), or even a penny of the massive legal fees they'll be paying to fight the Madoff lawsuit, with a trial date set for March 19 of next year. Oh, and they'll owe $200 million, plus 3 percent per year, to their ten minority investors in 2017.

So the best-case scenario places them right back in this position a year from now—on the brink.

So then why did Bank of America lend these people the money at all? And why did the other lenders go along with it?

For Bank of America, which holds a substantial portion of the team's SNY debt, keeping the Wilpon group around in the hope of getting back back some money makes more sense than bailing on them and entering a bankruptcy proceeding with the other lenders. What would follow—and what is an eventuality if the lenders can't nurse the Wilpon ownership back to health—is a free-for-all with massive claims to be paid to a multitude of creditors.

And what will exist to pay them? The sale of a team whose value isn't greater than the debt owed against it and its stadium and a TV network, SNY, that isn't worth much without a deal to show Mets games.

And rest assured, a new team owner, who may or may not own SNY as well, is going to pay attention to the $150 million per year the Angels recently received for their television rights, and contrast it to the $63 million per year SNY pays the Mets. One way or another, that model will change, and not to SNY's benefit.

Once again, none of this includes any potential judgment against Wilpon and his partners in the Madoff suit. That potential burden currently stands at $386 million, with the potential to rise on appeal, and not including substantial legal fees to fight the battle along the way.

Two endings are likely here.

One is that the Wilpon ownership group misses a payment. This week's debt payment to the City of New York could have done it, for example, but the loan allowed them to keep going. It's hard to see how they'll manage to avoid missing a payment if they fail to find minority investors by March. If they do, it will likely be the point at which the lenders give up on them and race to the front of the line for bankruptcy.

Another possible ending is that Major League Baseball enforces its own rules regarding debt—the Wilpon ownership group has been in violation of them for at least three years now—and forces a sale of the team. As a statement from the team made clear last night, M.L.B. signed off on the new loan, just as M.L.B. has allowed the Mets to owe them $25 million long beyond the agreed deadline for repayment.

It is hard to believe that the banks and M.L.B., which is watching one of its marquee clubs shrivel and turn to dust before its very eyes, will keep pretending everything is OK for much longer.