This week in âLast Week in BizBallâ, Mets update, plus the weekly tidbits
AN UPDATE ON THE METS (MADOFF, DEBT RESTRUCTURE, MORE)
Speculation around the financial well being of the New York Mets began as soon as it was revealed that owner Fred Wilpon was a client of Bernard Madoff. Conjecture about the Wilpon familyâs ability to retain ownership of the franchise abated in October when the bankruptcy trustee charged with recovering funds for investors reported that Mets LP (a team affiliate, the Mets are owned by Sterling Equities) withdrew close to $50 million more from Madoffâs firm than it had invested. The Mets relationship with Madoff was in the news again LWIB due to a lawsuit over alleged losses suffered by retirement plan participants at Sterling Equities. Jonathan Stempel reported for Reuters, âThe complaint filed Friday in Manhattan federal court said Sterling invested $16.2 million, or 92 percent, of the 401(k) plan's $17.6 million of assets with Madoff.â The filing of the lawsuit reignited the media speculation surrounding the state of the Wilpon empire. Andrew Marchand wrote for ESPN, âThe suit dredges up the biggest issue hanging over this franchise, and until the Wilpons either clear up everything with their actions or sell the team, these questions linger: What exactly is the financial state of the team? And how is that affecting what fans are seeing year in and year out?â
Sports pundits were quick to lump together the lawsuit over alleged mismanagement of the 401(k) plan with the Mets diminished attendance this season (2010 avg. approx 33,700 compared to the 09 season end avg. of almost 39,000), their failure to bolster their roster for a playoff run during a July collapse plus the challenges the Wilpons face with their real estate empire to conclude that the Mets are in a financially tenuous position. But is the Mets situation as dire as many think? LWIB the SportsBusiness Journal reported that ratings for Mets games on their RSN (SNY) are up almost 2% this season. As well LWIB, a different SportsBusiness Journal report outlined how SNY is borrowing money to pay dividends to the RSNâs investors. Whether that reflects negatively or positively on the state of the Wilpons is open to interpretation.
SportsNet New York, the New York Mets-controlled regional sports network, is borrowing $450 million, more than half of which will flow to the channelâs investors as dividends, sources said.
SNY launched in 2006 with Comcast and Time Warner as minority partners, sidestepping the distribution issues YES and the New York Yankees encountered in that networkâs first years. SNY borrowed $200 million in 2007, largely to pay back startup costs fronted by the investors and the Mets, the sources said. That debt is being refinanced as part of the larger transaction. Of the remaining $250 million, $239 million will go out in dividends; the reminder is for fees, the sources said.
The distribution to the Mets might stoke further speculation that the team is in need of funds after the clubâs owner, Fred Wilpon, lost substantial sums in the Bernie Madoff investment scandal, but it is not uncommon for a core team to lose money but see profits generated by its RSN. The Yankees, for example, lose money as an individual franchise but more than make up for it through YES, which in 2008 executed a more than $1 billion financing.
As recently as a few months ago, the Mets ability to refinance $375 million of debt was perceived as evidence that the Wilpons were in a much healthier financial state than many pundits believed. Daniel Kaplan reported for the SportsBusiness Journal in May, âThe New York Mets holding company is close to refinancing $375 million of debt, sources said, underscoring that despite the teamâs troubles at the gate and concerns about the franchiseâs owners, the Wilpon family, having lost money in the Bernie Madoff investment scandal, the club continues to perform well financially.â A June report in SportsBusiness Journal indicated the Mets refinancing included more onerous terms for the club than has previously been the norm for owners in MLB. The role of MLB in attempting to force lenders of Hicks Sports Group to approve of the sale of the Texas Rangers is cited as a factor behind the âextra guaranteesâ in the Mets new loan.
The New York Mets completed a refinancing earlier this month that, according to sources within the deal, required the owners to put up more personal collateral than they wanted.
âThey did not [reduce] the price. Thanks, Rangers,â said one banking source in the deal who requested anonymity because of the confidential nature of the Mets loan. âAnd they restructured it to decrease the holding company portion and put significant [Fred] Wilpon and [Saul] Katz guarantees on the holding company.â
The New York Mets are positioned to be a financial powerhouse in MLB. They are one of two MLB franchises in the best baseball market in the world. In recent years they have added the two crucial revenue generators that separate the wealthy from the less wealthy in MLB, the club owned RSN (in MLBâs best TV market) and a new stadium. (Which includes a $400 million naming rights deal with CitiBank) As for the WilponsâŠ.who knows?
THE WEEKLY TIDBITS
- LWIB, John Ourand of the SportsBusiness Journal provided a snapshot of local and national TV ratings do date this season in MLB. The most talked about aspect of the report was the news that the Red Soxâ local TV ratings are down 36% over last season. The Red Sox rank fifth in local TV ratings after having led MLB in local numbers every season since 03. Nationals local TV ratings have jumped 140% this season and Rays ratings are up 70% to place them seventh overall. Illustrating the enormity of the NYC TV market, the Yanks and Mets rank twelfth and sixteenth respectively in ratings but rank first (328,000) and second (244,000) in average number of households tuning in. Ratings are up over last season for 16 teams. Numbers were not available for Blue Jays games but the Toronto media has been reporting strong ratings throughout the season. National numbers for Fox, ESPN and Turner have all been relatively flat.
- Are the Yankees readying to relocate their Triple A franchise from Scranton-Wilkes Barre? Are the Yankees and Mandalay Baseball readying to buy the SWB franchise? Seems the local stadium authority is at odds with the Yankees and Mandalay Baseball over which side should be on the hook for renovations to PNC Park. Ballpark Digest provides details.
Here's the deal. The Multi-Purpose Stadium Authority still owns the SWB Yankees. But the 2006 agreement that saw Mandalay and the New York Yankees take over management of the team and the ballpark -- an agreement that saw both put some serious money into PNC Field and team operations -- also gave the pair the right to buy the franchise down the road for $13 million, which is quite a bargain for a Class AAA team. It also, claimed the pair, committed the authority to build a new ballpark or renovate the existing one, though the provenance of that part of the deal is somewhat fuzzy.
Which is why we're probably headed to some sort of showdown in Scranton/Wilkes-Barre. It's a good, but not great Triple-A market, as the team isn't drawing that well (4,515 per game, second to last; only the Charlotte Knights draw worse). There are other markets in the International League footprint that would love to see Triple-A ball, and if Mandalay and the Yankees pull off a purchase of the team with no improvements coming to the ballpark, they'll probably have carte blache to see a new market: what town wouldn't love to host the Yankees' top farm team?
- This being an even numbered calendar year, many Player Development Contracts between MLB franchises and their minor league affiliates are up for renewal. In the short term, it appears the Yankees and SWB will remain partners as their PDC expires in 2014. LWIB Josh Leventhal compiled an updated list on the status of PDCs for Baseball America, see it here.
âLast Week in BizBallâ will return August 16.
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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