Standard and Poor’s thinks Fred Wilpon’s Mets have yet to hit bottom

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Citi Field. (Photo via Paul Hadsall's flickr stream.)
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The New York Mets have gotten successively worse, as a baseball team, each season since they started playing in Citi Field back in 2009.

Related: Attendance has gone down in each of those seasons from the previous one, placing an increasing stress on the already strained finances of the team's ownership group.

Standard and Poor's expects the trend to continue in 2013.

Nearly a year after the settling of the suit against Fred Wilpon and his partners by the trustee for the Bernie Madoff victims, an independent observer has come to the conclusion that the team's ability to finance its stadium debt is worse than it was a year ago, just a few months from the scheduled trial date. (A similar conclusion from the trustee led to a settlement of that suit in the first place.)

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The ratings service announced late last month that it was lowering the rating on the bonds issued to finance Citi Field to BB, two levels below investment grade, while continuing to rate the outlook as negative. And a deeper look at the supporting reasoning yields a familiar set of conclusions: the ratings agency believes attendance will drop further, on-field play will get worse, and the ownership group's ability to cover losses is worse than it was a year ago.

As Standard and Poor's points out, a baseball team's attendance figures tend to correlate with on-field success. (More ominously for the Mets, who have cut payroll substantially since 2011, and have yet to sign a major league free agent this winter, the correlation between payroll and attendance is even stronger.)

Accordingly, with so much of the bond payments financed by gameday revenue, that the Mets have seen their attendance drop from more than 3.1 million in 2009 to just over 2.2 million in 2012 is problematic by itself.

A year ago, when Standard and Poor's lowered the bond rating to BB+, it rejected management's projection that attendance would increase by 10 percent, and correctly so: the 2012 Mets saw a decline of three percent in attendance over 2011. Standard and Poor's projects the Mets to lose even more of their fans in 2013, down another five percent.

Unmentioned is the team's significant hike in ticket prices, however, which could complicate efforts to minimize the attendance drop. The 2013 All-Star Game, which will be hosted at Citi Field, also goes unmentioned. That could conceivably help, though recent hosts have seen very little effect on attendance from it.

Beyond overall ticket sales, the Mets saw declines in retained seat revenues (fancy name for season tickets, down 13 percent in 2012), and advertising as well.

Only suite revenues went up, and by 11 percent. But even then, there's a catch: that jump was self-financed.

"About 20% of the suites are now being supported from payments from SMLP, the owner of the Mets, for use by the new limited partners brought in last year," the report said.

Put another way, an area that the Mets had planned on to make the stadium debt pay for itself is being subsidized by ownership. And that became necessary as inducement for minority partners to give ownership cash through purchase of minority shares that simply allowed Fred Wilpon and his partners in Mets ownership to pay past-due debts in March 2012 and covering interest payments on their still-massive team debt and debt against S.N.Y. in 2012.

No wonder Standard and Poor's expects the cash available from Citi Field revenues, in total, to drop eight percent in 2013.

Meanwhile, exactly where the Wilpon group will get the money to do the same thing in 2013 remains a question mark, with the effort to refinance their debt against the team by borrowing further against their last profit center, S.N.Y., still not completed. That sets up a difficult 2013, and a looming $320 million payment they'll need to make on June 2, 2014, should ownership get that far.

Standard and Poor's projects attendance to eventually stabilize around 2.3 million.  That's less than what the Mets drew in 2011, a year when they lost $70 million. Stabilizing at that level either means unsustainable losses, or a vastly reduced payroll for as long as attendance remains at that level, barring a new owner capable of investing in the team and reversing this downward spiral.

Even this level of recovery leads the ballpark to have "revenues grow by 2% and expenses grow by 3% for the balance of the debt term." That's not going to produce extra revenue for anyone, but rather a deficit to be covered by ownership.

So the Mets owners still have a mountain of debt as 2013 dawns, while their effort to refinance it to pay short-term expenses and forestall a larger moment of reckoning have yet to come to fruition. Citi Field is a drag on their survival effort, not a boon.

And an independent monitor of their situation doesn't see that changing anytime soon.