Wilpon puts Mets money woes ‘in the rear-view mirror,’ all evidence to the contrary
Wednesday, February 13, 2013 was a landmark day for Fred Wilpon and the New York Mets.
After years of crushing debt brought on by the evaporation of their holdings with Bernie Madoff, Wilpon took in the Florida sunshine, smiled, and announced to reporters that the team's financial difficulties were over.
"It's all in the rear-view mirror," Wilpon said, after arriving at the team's spring-training complex in Port St. Lucie.
"The family is in great shape," he said. "The family really is in great shape. Sometimes luck is the residue of design."
This would be great news for Mets fans, who have watched their team decline as the Wilpons' problems ravaged the Mets' payroll.
If it were true. Which publicly available evidence suggests it isn't.
"It wasn't, as people have written, the reason," Wilpon said about bank debt. "It was a balance there, because we had to make sure the banks got paid off all of the debt. There's no one in my family"—there's the Katz family, the Wilpon family, kids—"[that now] has any personal bank debt. Zero. Everything has been paid. We don't owe a dollar to anybody. We have mortgages on buildings and stuff like that, but we don't owe a dollar."
If that's true, it all happened since the beginning of this week.
According to public Uniform Commercial Code filings, the following people had outstanding debt as of Monday, February 11, 2013: Fred Wilpon, Saul Katz (Fred's brother-in-law and fellow partner in Sterling Equities), Judith Wilpon (Fred's wife), Richard Wilpon (Fred's brother), The Fred Wilpon Family Trust, The Fred Wilpon 2003 Descendants Trust, and numerous other Wilpon and Katz family members.
That's beside the point, really: it is a pair of enormous debts against a pair of Sterling Equities' holdings that have caused ownership to dedicate available resources toward servicing that debt annually, and whose principal is coming due. (The Mets declined to comment on whether Wilpon's comments applied to either of those debts.)
U.C.C. filings confirm that the $320 million debt due against the team in June 2014 is an active debt. And Wilpon and his partners already owed $450 million against their 65 percent ownership stake in S.N.Y., due in 2015. Their latest loan, an additional $160 million secured in December, added to that total.
For Sterling to be debt-free, Wilpon and his partners, less than two months after borrowing $160 million to help pay, among other things, day-to-day expenses, will have needed to come into possession of more than $900 million to take care of these two debts alone. Merely refinancing, or convincing lenders to push the due date back, wouldn't make them debt-free, according to any reasonable understanding of the term.
And that doesn't even take into account the hundreds of millions in total left to pay on bonds issued to finance Citi Field. That total ran the Mets $43.7 million in 2011, at least that in 2012, and remains on the ledger for years to come.
Just servicing those three debts cost more than $90 million in 2011, and more than $80 million in 2012. That service cost went down because when the Mets sold their $240 million in minority shares, $110 million went toward paying down the debt against the team, lowering it to the $320 million it currently sits at from $430 million. The rest went toward paying off loans that kept the team afloat ($40 million to Bank of America, $25 million to Major League Baseball), and servicing debt that remained. (This was confirmed by a source familiar with the team's plans at the time.)
Accordingly, to perform the same servicing trick once again, the Mets needed that $160 million loan this past winter.
Their diminishing ability to pull off that trick each winter is what led Irving Picard, trustee for the Bernie Madoff victims, to give up pursuing money from Wilpon and his partners, which he believed he'd never get, because they simply didn't have it. He would have been in a fight with the Wilpons' creditors.
But Wilpon is saying that all the bank debt is now paid off, not just serviced, and not by those hundreds of millions in loans, but by all that money that had previously been spent on the Mets.
"That's what made us tight," Wilpon said. "We were still getting revenues. Lots of revenues. But those revenues were going to pay off debt. That's done."
Even after supposedly getting rid of the debt, though, Wilpon offered a caveat in terms of the Mets' ability to start increasing their payroll again.
"This is, to me, a break-even business," Wilpon said. "I always strive to break even. I'm not looking to make any money. I strive to break even. So if [fans] don't show up, that's hard. So you have to balance it."
The Mets lost $70 million in 2011, and then, after slashing payroll from $143 million to $91 million, lost $23 million in 2012. They did so while drawing 2.24 million fans, to watch a 74-win team.
Then they added almost no new talent of note this winter, while trading Cy Young Award winner and fan favorite R.A. Dickey. They received some good young prospects in return, but it is highly unlikely that any of those players will materially contribute to a winning team in 2013.
Standard and Poor's, when recently lowering the rating on Citi Field debt, estimated the Mets would lose eight percent more money in 2013 than they did in 2012.
So while salaries get cleared from the books after 2013, such as the $31 million Johan Santana will earn and the $21 million the Mets still owe Jason Bay (and have publicly said they are counting on 2013 expenditures, though it was deferred), exactly how much of the freed-up money can go to improving the Mets is unclear, given continuing debt service and the reckoning of that $320 million in principal coming due in 2014, and then the well over $450 million due in 2015.
It's not like this is the first time Wilpon claimed that everything would be smooth sailing moving forward. That's what he said in the days that followed the revelation of Bernie Madoff's fraud, long before the lawsuit. And that's what he said this time last year, when he made the same claims of solvency, denying any effect of the lawsuit at the start of spring training last season, or after the lawsuit was settled, when Wilpon and others in the Mets organization tried to pin the lack of spending on a lawsuit that, ultimately, won't cost them any money at all until at least 2016.
The only way to clear the way for additional spending from Wilpon and his partners is if the debt isn't delayed, but if it just ceases to exist.
And that's what Wilpon is suggesting is the case.
"I don't know what the market will be at that point," Wilpon said. "But the payroll will be commensurate with anything we've ever done because we can do it. Remember, the people have to come to the ballpark obviously. If you have a competitive team, they will. Everything that was in the past, that you guys saw the pain that we went through, is gone. It's gone."
It sure would be nice to think so.