It seems like running up debt and spending imaginary money is all the rage these days. It’s not just the government, people do it with their private finances as well.
Now, MLB commissioner Bud Selig has given the Mets the means to do the same. According to this article by Forbes, Selig has given the Mets permission to increase their debt limit by $140MM. According to this article by Fortune, the Mets were already anywhere between $430MM and $625MM in the red as of April.
However, it appears the Mets will choose to be (for once) fiscally responsible. Instead of spending money on signing big-name, overpriced free agents, they are hunting for bargains this offseason. They won’t overpay Jose Reyes – if another team offers him more years and money the Mets are willing to spend, they will not get into a bidding war. They are trying to create a strong foundation in the minor leagues. In addition, they are looking for one or more (likely the latter) minority owners to pump about $200MM worth of cash into the franchise.
It seems like the Mets are increasing their debt limit to cover expenses and stay in business. They know they don’t have money to spend, and they’re doing the right thing by not spending it. Maybe the rest of us could learn a lesson from that.
Now, lest an entire blog post go by with only praise for Fred and Jeff Wilpon (and Saul Katz), their current state of financial affairs is all their fault. Yes, it’s true they were hoodwinked by a master con-artist. Yes, it’s true that Steve Phillips and Omar Minaya gave up money the same way Oliver Perez gave up baserunners (frequently, and with little thought), but in this day and age, there is no such thing as a hands-off owner. Given the economics of baseball, and all other sports, money is as big a factor as performance when acquiring new talent. And the Wilpons were the money.
And now they have no money. In fact, they owe a lot of it.
So, for anyone who still thinks the Mets, as a New York team, should live by the motto, “ABS” – Always Be Spending, they don’t have the money to spend. No matter what their geographic location, they will not sign Prince Fielder, Albert Pujols, C.J. Wilson, Warren Spahn, Rogers Hornsby, or any other big-ticket free agent this offseason.
For the financial future of the team, and for the future of the on-field product, the that’s a good thing.
34 comments
Ceetar
11/22/2011-7:47pm at 7:47 pm (UTC -4)
this is actually ‘good’ news. seems like it anyway. The Mets are likely going to be losing money this year, so any ‘acquisitions’ will basically be deficit spending in a sense. But without the ability to do so, it’d be pretty tough to do anything but hope and pray. With a higher ceiling, Sandy can make smart decisions that happen to cost money (Reyes for 5+1 at $19.5) that makes the team better and helps revenue surpass expenditure.
Anonymous
11/23/2011-12:28am at 12:28 am (UTC -4)
It is GREAT news!
Now ride your pretty unicorn over to Metland, and polish the 2011 Mets World Series trophy!
Mr North Jersey
11/22/2011-8:12pm at 8:12 pm (UTC -4)
Am I misinterpreting something?
The Forbes article says the Mets “could be increasing their debt”. It goes on to say it depends on what the new investors decide to do in “six years”. Who is to say what their debt will be 6 years from now. Does that make sense? If not can someone expand on what I may be overlooking?
“According to ESPN.com, the Mets
could be increasing their debt, currently well above $400 million, by
as much as $140 million. It all depends on whether the new investors
want to use their funds to buy equity stakes in the Mets or earn 3%
annual interest and cash out in six years.”
Anonymous
11/22/2011-10:39pm at 10:39 pm (UTC -4)
I got this one.
If the people that buy shares decide to keep them in 6 years, nothing changes.
But, if they decide to cash in (with the 3% interest), then the mets are on the hook for another big payout down the line
But, since it is unknown what they will do, the debt is only potential. So hence the “may increase” comment.
I have never seen anything quite like this myself. Truly creative financing, and frankly, probably just another creative way to circumvent the debt limit.
Hey, the Wilpons are real estate people, and that is the ultimate haven for creative (ok, flim-flam) financing!
MetsFan4Decades
11/22/2011-10:54pm at 10:54 pm (UTC -4)
Man, talking about rolling the dice…
If they don’t turn this franchise around pretty fast, which I’m assuming has a lot to do with projected increase revenues, their debt ceiling is going to drown them. They’ll have to sell.
Then again…hmmmm……maybe that’s a good thing.
Anonymous
11/23/2011-12:21am at 12:21 am (UTC -4)
another old RE investor trick. when you know you are broke, borrow more, since you either A) dig out of the hole, or B) just go BK anyway, so you have nothing left to lose!
rustyjr
11/22/2011-8:25pm at 8:25 pm (UTC -4)
I believe Howard Medgal when he says Fred Jeff & Uncle Saul are in deep Doo Doo
Anonymous
11/22/2011-10:41pm at 10:41 pm (UTC -4)
I doubt anyone truly understands their multiple layers of investments/debts (what entity owns what), but given enough time, a good CPA should be able to determine exactly how far underwater they really are.
I am guessing that the real estate operations are just as underwater as the BB end, just no one pays attention to that!
Anonymous
11/22/2011-8:42pm at 8:42 pm (UTC -4)
It’s going to get uglier before it gets pretty again. It’s almost better for Houston fans… Almost.
Anonymous
11/23/2011-12:27am at 12:27 am (UTC -4)
The Mets most certainly are not CHOOSING to be “fiscally responsible,” and how could anyone say that “the rest of us could learn a lesson from” them?
They horrifically mismanaged their business for years, let a horrible GM turn a division-winning NLCS team into a 2-time historic choker, and then as they raised payroll even more, they became a losing, 4th place laughingstock team, with a culture of laziness, apathy, and perpetual injury.
The Mets are doing precisely what people such as the Wilpons do when they are in deep sh*t–they are borrowing every last dollar, circling the wagons, jettisoning pricey assets, laying off low-paid workers, and trying to appease their customers with cheap, easy fixes like moving in the fences. In other words, doing absolutely anything to maintain control of the team, regardless of how bad it will be on the field and regardless of how many employees they have to can.
And there’s certainly not much to be learned from absolutely anything about how this team has been managed over the last decade, except how NOT to manage a hugely valuable asset.
Unless the goal is potential bankruptcy, asset depreciation, and public humiliation.
Adam "Prismo"
11/23/2011-2:22am at 2:22 am (UTC -4)
Absolutely agree with you Kingman, 100%
Look no further than the financial changes from 2006 to 2010 from Forbes after a quick calculation:
Debt to Equity Ratio (2006) of 72%
Debt to Equity Ratio (2010) of 426%
The Mets DOUBLED the piece of their value pie that is made up of debt in only a few years, meaning they started borrowing a lot of money. One rule of thumb I’ve heard (it varies) is that it’s bad to invest in a company with a D/E Ratio above 100% (meaning they have more debt than equity) and the Mets have reached at least 426%…and now are looking to carry even more debt.
I don’t claim to be anywhere near a financial genius, but even with 1.5 years of experience here this just doesn’t look promising.
Adam "Prismo"
11/23/2011-2:27am at 2:27 am (UTC -4)
I should add that selling $200MM equity to investors was a great way to help lower that debt piece of the pie…but apparently it was a ploy to just ask for more debt. Clearly the Wilpons either (a) are satisfied with their woeful debt/equity mix or (b) are in such dire financial straights that they needed $350MM in debt and equity in a hurry. I don’t know which is worse, maybe a combination of them both potentially being true is the worst.
Adam "Prismo"
11/23/2011-2:28am at 2:28 am (UTC -4)
Don’t you guys miss when I just said whether it would rain or shine?
Paul J. Festa
11/23/2011-2:49am at 2:49 am (UTC -4)
I wouldn’t know. You’re not on Twitter anymore. ;-) Besides, some weather guys go on to harder news anyway.
Anonymous
11/23/2011-3:23am at 3:23 am (UTC -4)
I think they are absolutely desperate and showing themselves as willing to go into infinite debt to hold onto the team.
It is truly incredible where they and the team stand compared to five years ago right now.
In Nov 2006 we were a “couple of players away” and the Wilpons were flush with cash, planning SNY and Citi’s future and 150 mil payrolls.
Now we may have a payroll below 100 mil, Madoff’s in jail, litigation continues, we have finished 4th three straight years, and we may have not yet seen the worst of it.
The Wilpons are kind of like Brett Favre and Willie Mays—they don’t know when to quit and won’t before it gets VERY ugly.
Anonymous
11/23/2011-4:32am at 4:32 am (UTC -4)
my friend, it has gotten ugly. We just don’t know how ugly the bottom is.
and like I told MF, in classic RE developer style, they are going to take every dime that anyone will give them, figuring it all goes away anyhow when they declare BK!
Anonymous
11/23/2011-2:06pm at 2:06 pm (UTC -4)
You got it sir! They will take everything, borrow everything, lay off every last person, watch the team lose 100 games, etc. Alas, I am afraid that Fred’s ultimate nature might not be as benign as everyone thought.
Stick–have a great holiday tomorrow, and go Dolphins!!
SaltyGary
11/23/2011-2:43pm at 2:43 pm (UTC -4)
Kong, it’s called “Last Minute Grooming”. Watched this Baboon show and when the leader is threatened by another male trying to take over the pack, the leader frantically runs around and grooms all the baboons. Literally running to each one picks off a quick bug and runs to the next. It’s this whole show of “look at me I am still great, look at all the good things I do”. In the end his ass got squashed.
Changing those fences look a lot like bugs on a baboons back.
Anonymous
11/23/2011-3:20am at 3:20 am (UTC -4)
Well, as usual I agree.
They are running their own personal Ponzi now.
Borrow more and more to pay back some other lenders and bondholders, fire a few employees to pay for fence-moving, and just pray that either the team miraculously competes and/or the real estate market miraculously rebounds before it all comes crashing down.
They won’t end up in jail like Bernie, but they won’t go quietly into that good night. They will not leave until the Mets are broke and buried in last place. Which could be within 12 months.
Anonymous
11/23/2011-1:53pm at 1:53 pm (UTC -4)
apparently they learned from the best.
Anonymous
11/23/2011-2:07pm at 2:07 pm (UTC -4)
Bingo!
Happy holidays NJ!
Anonymous
11/23/2011-10:40pm at 10:40 pm (UTC -4)
Considering the extreme negative publicity that will engulf both the Mets franchise and the league when the inevitable hits the proverbial fan Selig must believe he will be retired at that point in time.
Paul J. Festa
11/23/2011-2:48am at 2:48 am (UTC -4)
The government’s several trillion dollars in debt, and yet they continue to spend. Compared to them, the Wilpons are tightwads. (joke) And as I said, they got themselves into their own mess.
Adam "Prismo"
11/23/2011-2:56am at 2:56 am (UTC -4)
LOL don’t get Kingman and me started on politics.
Anonymous
11/23/2011-2:07pm at 2:07 pm (UTC -4)
LOL is right!
Happy Thanksgiving Adam!
Anonymous
11/23/2011-4:33am at 4:33 am (UTC -4)
well, people often say the Yankees have a license to print money. But the Feds literally do it!
MetsFan4Decades
11/23/2011-7:26pm at 7:26 pm (UTC -4)
All Stickman, Kingman, Prismo comments above on the Wilpons and Sterling Mets are spot on. The more I read about this, the more pathetic it gets.
When Madoff was first arrested, the Wilpons were quoted as saying the problem wouldn’t interfere with the operation of the Mets. Yeah…define ‘interfere’….
Over on Mets Fever yesterday, he has a timel ine of sorts on quotes from Alderson and beat writers with quotes from Sandy on the Incredible Shrinking Payroll. Somehow, we went from around $130 MIL projected for 2012, down to about $95 MIL projected for 2012.
http://www.metsfever.com/2011/11/aldersons-shrinking-payroll-in-quotes.html
Now I can’t shoot the messenger about that. Alderson works for the Wilpons. He only has what’s available to work with. Problem is, it’s much less than we were all led to believe a year ago.
Going to get ugly indeed…..
SaltyGary
11/23/2011-8:01pm at 8:01 pm (UTC -4)
This is in no way to defend the Wilpon’s but I am just trying to throw out another scenario. Keep in mind they are losing an additional 50-60 million a year due to poor attendance. So if the team is in bad shape with a 140m player salary for 2011, dropping it down by 40m makes a lot of financial sense while the team rebuilds. It has been very clear since day one of Alderson that the farm was going to be re-built and the building the team was going to be a long term approach. We are only a year into this. It does not make financial sense to keep the salary level at 140m. Attendance will still be at the same level as last year, and that amount of money cannot bolster the starting rotation, outfield and bullpen. They would essentially be throwing money into the fire just so the fans can have the false impression that they are not effected by Madoff/Omar/Phillips.
It will get better with or without the Wilpon’s it’s just going to take a couple more years.
MetsFan4Decades
11/23/2011-9:19pm at 9:19 pm (UTC -4)
I hear you, Salty. I have no problem with rebuilding, particularly the farm system which went to pot under Bernazard & Co.
I’m just not sure if the Wilpons were deliberately trying to insult our intelligence back when or they really were delusional in thinking it wouldn’t affect baseball operations.
Either way, it’s been a lousy 3 years of NY Met baseball. I just hope it will only be a couple of more years until we’re climbing back up.
Anonymous
11/23/2011-10:02pm at 10:02 pm (UTC -4)
The financial problems can extend beyond acquisitions to improve the major league talent level. If because of them the allocated resources are significantly reduced for scouting, minor league coaches and equipment and for drafting and signing the most talented youngsters you end up with a situation akin to the mid to late 1970′s Mets. So if the Wilpons remain in control while their financial situation continues its negative spiral to destruction you may not see the ballclubs uphill climb in a few years.
Anonymous
11/23/2011-10:16pm at 10:16 pm (UTC -4)
I want to wish everyone a Happy Thanksgiving and wish myself a Happy 69th birthday. All my ex-wives, kids and grandkids are giving me a party tomorrow so it should be fun.
Adam "Prismo"
11/24/2011-3:04am at 3:04 am (UTC -4)
Amazing! Happy birthday and Thanksgiving!
MetsFan4Decades
11/25/2011-2:25pm at 2:25 pm (UTC -4)
wow – Happy 69 years young, gategem!
Hope your party was a blast.
Anonymous
11/23/2011-10:21pm at 10:21 pm (UTC -4)
BTW Warren Spahn pitched for the Mets and Rogers Hornsby was a scout and third base coach for the Mets.