Fred Wilpon, worryingly, on why Mets fans shouldn’t be concerned about his ownership
Fred Wilpon's on-again, off-again P.R. push on the legal and financial crises that threaten his hold on ownership of the New York Mets resumed this morning, when he gave a 22-minute interview to reporters at the team's spring training complex in Port St. Lucie, Fla.
Wilpon's answers confirmed some news about the ownership group's pursuit of minority investors, who would provide the capital to allow Wilpon and his partners to pay some fast-approaching debts, but mostly they just muddied the waters.
In the course of the interview, Wilpon shifted the timeline for pulling in those minority investments, attempted to assign responsibility for unpopular baseball moves to general manager Sandy Alderson (instead of attributing them to the austerity his own financial missteps have forced on the team), and made a number of assertions that he contradicted in the course of the same interview.
Let's start with the minority owners.
Wilpon said this: “We have seven partners ... in terms of groups. We have seven whose money is in escrow because they've been through Major League Baseball. We have two that are ready to almost finalize in Major League Baseball, and a couple of others that are in the process. It's a real process. If you have three, four people in your group, everybody is vetted. They're all in there. And we hope to be able to close that out shortly."
Parsing that out: Wilpon and his partners have been saying that they hope to sell ten minority shares in the team at $20 million each, to raise a total of $200 million. But the seven deals with "partners" that Wilpon refers to here are, well, they don't say much about the owners' ability to attract outside money.
As has been previously reported, four of the minority stakes have been spoken for by SNY, the cable network that Wilpon and his partners own; the buyers for another two shares are Wilpon's son Jeff and his partner Saul Katz; and the buyer of the seventh share is Steven A. Cohen, manager of the hedge fund SAC Partners, who is currently bidding to buy the Los Angeles Dodgers and seems to be committing to the Mets transaction as a gesture of goodwill to the league.
Wilpon also acknowledged that the money for those seven shares will remain in escrow until ten shares are sold. In other words, without at least three more shares sold, there is no cash infusion at all forthcoming for the Mets.
Wilpon also revealed in today's interview that the Mets could sell as many as 12 shares, rather than the ten that they've previously discussed. That increases the potential amount of money they can raise in the offering to $240 million. But potential revenue from this sale, a year in the making, isn't going to be helpful—Wilpon and his partners need actual cash, and fast.
As Wilpon described it: "None of the money that's coming in, by the way, is going out. All of the money that's going in is staying in the club ... It will be better for the organization because we'll pay off a lot of debt. We'll reduce the first mortgage on the team debt. And we will have additional ready cash to run the team."
This, too, is problematic. It's impossible to square the idea that none of the money is “going out” with Wilpon's own acknowledgment that this money is needed to, well, go out to pay down various debts. Is paying a $40 million bridge loan to Bank of America, a $25 million loan to Major League Baseball, and a large sum to JPMorgan Chase—likely around $100 million, since that was the total the bank was to receive of David Einhorn's money last summer—toward the $430 million debt against the team keeping that money within the team? Of course not.
That total, $165 million, is most of the $200 million the Mets owners would earn from selling ten shares, or even of 12 shares, or $240 million.
Either way, bringing in that amount of money relies on Wilpon and his partner-owners finding three to five people or groups willing to invest in keeping the current ownership group in place. Those people or groups (whose shares could be redeemed, with three percent annual interest, in six years) would also have to be willing to place themselves in line for repayment behind the holders of the remaining debt against the team due in 2014, the $450 million due against SNY in 2015, any judgment in a $386 million lawsuit against Wilpon and his partners brought by Irving Picard, trustee for the Bernie Madoff victims, and a large portion of the $600 million remaining in debt payments on Citi Field.
That immediate debt number could swell in the coming days, with Federal District court Judge Jed S. Rakoff set to rule on a summary judgment request from Picard that would put the floor for any court resolution at $83 million. Should Rakoff make such a judgment, Wilpon and his partners would need to pay that $83 million, or post a bond worth 110 percent of that total—roughly $91 million—in order to appeal. Adding that to the $165 million already on its way out the moment the minority shares sell. It isn't clear how Wilpon and his partners would get through such a ruling while still hanging onto the team.
Wilpon declined to answer a question about whether the shares will close in the coming weeks, providing a nonsequitur about the legal proceedings instead: “But I don't want to comment about what's happening now in the courts."
Of course, the sale of minority shares has nothing to do with any discretion Wilpon claims here about the court case with Picard.
Wilpon made a similarly unenlightening statement concerning the effect Bernie Madoff's collapse has had on team finances.
Wilpon said this: “When you say financial things, when I said three years ago that the Mets weren't affected by the Madoff thing, I was telling the truth—I know you don't want to hear it—because we weren't sued then. This was prior to the suit, OK? Then did it affect it? Sure.”
Leave aside the mountain of evidence that the Mets funded a vast array of team functions—from cash to make payroll to self-insuring their players—with their Madoff accounts, supported by internal team emails. The debts that threaten the long-term viability of the Wilpon ownership group came as a direct result of refinancing obligations once guaranteed by their Madoff holdings. And the refinancing of both Mets debt and the SNY loan were negotiated many months before Picard filed suit against the Mets in November 2010.
Even Wilpon's claims that the decision to let Jose Reyes sign with the Florida Marlins was Sandy Alderson's decision was undermined by other things Wilpon said within the same interview.
On whether Reyes' departure had anything to do with Madoff, Wilpon replied:
"I've said, no, because I don't think Sandy would have made the kind of arrangement that he was able to make elsewhere. I think Sandy offered $100 million if he stayed on the field and that he could earn. And the amount of time was less time than he got elsewhere. So that was Sandy's decision. Absolutely Sandy's decision."
Leaving aside the reality that the Mets never offered Jose Reyes a contract, let alone the hypothetical one described by Wilpon, the embattled Mets' owner then went on to explain that yes, Madoff was a contributing factor, though he ascribed this exclusively to the lawsuit—one in which Wilpon has yet to pay a penny, other than legal fees.
"No, because it was affected by the revenues we got," he said. "It was affected by the operations of the team and what the team was doing. Don't forget, it's been a motion picture. There was a point when the suit was almost three times what it is now. It seems to be, hopefully, going in the right direction. It has some effect, but that was not the deciding factor."
As a result, Wilpon's answer earlier in the interview that “we didn't make many major moves that Sandy [Alderson] and Terry [Collins, the manager] wanted to make” obviously comes much closer to accuracy.
As Wilpon admitted, “Listen, we certainly act in certain broad parameters. But the parameters always change.”
Sandy Alderson's public statements over the past year certainly reflected that. And it makes Wilpon's subsequent statement that David Wright's future would be dictated by Wilpon's “intention is always to follow what the baseball people [say]” seem very silly. The Mets are jettisoning assets for cash. They're long past making baseball decisions about their most valuable players.
Neither does Wilpon's cheery statement that fans “shouldn't be concerned about us owning the franchise, because we intend to own the franchise for a very long time” mean much anymore, or his impossible-to-believe assertion that “whether [fans are] happy about that right now or not, I don't know.”
If the Wilpon group finally sells the Mets, it won't be because it's what they intended or wanted to do, and it won't be because they cared about the wishes of the fans. It will be because they finally ran out of money and time.