Wilpons get cash, but not enough to bring spending back up on the Mets

Jeff and Fred Wilpon. ()
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Early Friday morning, Bloomberg reported that a refinanced loan Fred Wilpon and his Mets ownership group engineered, likely using the SportsNet New York regional cable network as collateral, provides "at least $700 million" in new money.

This was a necessary deal for them, in terms of their ability to survive as owners. But given their massive debt obligations, it's not a large enough windfall to provide ownership with the capital necessary to invest in the Mets, after several years of enormous cost-cutting has left the team without so much as a viable major league outfielder.

The loan appears to eliminate the possibility that the enormous sums previously due in 2014 and 2015 will force ownership out, while saddling them with even larger debt service obligations and starving them of their final source of annual profit.

It isn't hard to figure out why financial instutions would lend them additional money, despite years of losses and massive existing debt. The value of SNY has skyrocketed since the group borrowed $450 million against its 65 percent share back in 2010. If SNY is valued at, say $2 billion, a 65 percent stake would presumably have $1.3 billion of collateral to borrow against. If the new loan is $700 million, that means the network was likely valued around $2 billion. Coming just after the Yankees' YES network was valued at $3.1 billion for a recent sale, that certainly isn't a crazy number.

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Now, consider what $700 million would mean to Wilpon and his partners. Prior to the restructuring, they owed $320 million in debt against the team, with that loan coming due in June 2014. Let's assume that obligation disappears. That still leaves $380 million.

Not so fast. The Wilpon group also owed $450 million in loans against SNY, with those previously set to come due in 2015.

But while those two enormous sums previously loomed as potential ousting dates for ownership, it was servicing those debts, along with the twice-annual debt-balloon payments on Citi Field, that forced Wilpon and his partners to cut spending to the bone on the Mets. Despite this cutting, the team operated at a loss in 2012.

In 2011, for instance, the Mets paid a combined $50 million in interest on a then-$430 million debt against the team and $450 million against SNY, a total of $880 million. Another $43.5 million went out in debt payments on Citi Field.

If the new loan is $700 million, added to the already-borrowed $450 million against SNY, they will be servicing debt of $1.15 billion. At the same combined interest rate as they were paying, plus Citi Field debt, that's at least $110 million out the door for the duration of the new loan term before they begin dealing with other expenses. And it isn't safe to assume the new interest rate is static, either.

Now, that also assumes that revenues remain static, and that is to be determined. Going against those revenues is Standard and Poor's estimate that team revenue will decline in 2013 by eight percent.

There's other potential limitations here, too. The same boom in value of live sports television, which is what created the massive spike in SNY's value and made the loan possible, is providing other teams with a ton of new money they don't need to spend on massive current debt. Salaries, therefore, have risen considerably this winter. 29 other teams are spending that new capital on players, at least in part. That money, for the Mets, is going toward survival.

And that infusion isn't a one-time thing for the other teams, either. Teams like the Angels, Rangers and even the Reds will be getting considerably more money in local television revenue in the coming years, money that can go toward the team. Salaries are unlikely to stop going up around the league, meaning that whatever meager amount ownership can divert from debt service will go progressively less far in each passing offseason.

The Mets, by contrast, receive well below market rate from SNY for annual television rights, and they locked into that deal for the long term as part of inducing SNY to purchase a large number of minority shares in the team last year to keep ownership afloat. (A lucrative asset like Mets television rights, at cut-rate price, is another reason SNY's value was so high, and the Wilpon stake something to borrow against.)

The deal calls for paying the Mets between the $68 million they received in 2011 and $83 million in 2015. By contrast, the deal signed by the Angels last winter pay them an average of $150 million per season over the next 20 years. (In a related note, they signed Albert Pujols and C.J. Wilson.)

So while every major league team will get an additional $50 million in national television revenue, the Mets included, starting in 2014, that's a tiny bit of parity compared to the massive disadvantage the Mets face as a franchise by using SNY's new value for ownership survival, instead of competing in the escalating marketplace of Major League Baseball. That's a problem from now until the day ownership has money to spend, whoever it is.

As per Standard and Poor's analysis, if the Mets stabilize at 2.3 million fans (which will require an attendance jump no one is expecting anytime soon), they'll still be losing money annually. But with the new loan around to help subsidize losses, it is hard to see an annual bite sufficient to force them out.

The real question is whether the new loan comes with a longer time horizon, or if the balance will still be due in 2015, with the sale of their stake in S.N.Y. the only real path to clearing that debt hurdle. Comcast/Time Warner, the minority partners in S.N.Y., have right of first refusal on any sale of the Wilpon stake in the network. That means their stake, sold, won't earn as much as it would in a bidding war.

And by not being able to package SNY with the team, the value of the Mets drops considerably. A Mets franchise without television rights--in fact, with television rights providing cut-rate revenues for many years--won't inspire anything like the kind of bidding war that resulted in the Los Angeles Dodgers selling for $2.15 billion.

But for now, all of that is likely moot. If this new loan comes with additional time built into it, that does give them some more leeway to figure out some other way to raise well over a billion dollars. Perhaps SNY's value will continue to skyrocket, and they can borrow against that new collateral.

Otherwise, whatever the term of the new loan is will be the next realistic date the Mets' owners might be able to increase spending on the team in a significant way.

In the meantime, don't expect much.

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