The Mets much talked about financial woes seem to get worse every day. If it’s not a report about their Madoff lawsuit, it’s revelations about their crushing debt and falling revenue. The latest bad news came in a one-two punch from Forbes and the New York Times.
First, Forbes released their list of MLB franchise valuations and noted how the Mets debt situation was threatening the overall health of baseball. Baseball’s system of revenue sharing generally works with larger market teams contributing to a pool of cash for the smaller market teams to remain competitive with. However, with the financial problems of teams like the Mets and Dodgers, that pool shrunk by nearly $30 million last year. The Mets have $450 million in debt, their revenue fell 13% last year and their attendance was down 25%.
The second hit came from the New York Times, who reported that the Mets lost a total of $50 million last year. They drew nearly 600,000 fewer fans to their new ballpark. The Times also says that Mets are projected to lose another $50 million this year. Not good news for an organization currently driving up and down Wall Street begging anyone for a loan just to cover basic expenses, despite the fact that Moody’s investor service rates their outlook as “negative.”
The value of the Mets franchise has fallen an estimated %13 over the past year, which is shocking for a team that just opened a new ballpark. Typically, a teams’ revenue and valuation climb steadily in the wake of a new park… The Mets are seeing just the opposite.
With the Madoff lawsuit still looming and MLB unwilling to loan the Mets any more money, one has to wonder just how bad this can get? The overall value of the teams is still almost $750 million, a number that is sure to fall again next year, so their value is greater than their debt for now… But as we’ve learned their value is dropping and their debt is mounting. If they did get a judgment against them in the Madoff case, it would likely break the club. Surely the Wilpon’s could sell it, but we could potentially see a situation where the league has to take over the club for a time.
Over the past few weeks, we've been covering what I think has been an "amazin'ly" (get it lol) under-reported story about the financial meltdown of the New York Mets. First, they were sued for a billion dollars by the victims of the Bernie Madoff ponzi scheme after it was revealed they did business with the disgraced financier. Then, the Wilpon family who owns the team announced that they were putting up 20-25% of the team up for sale in hopes of an infusion of cash to help cover their expenses.
Then, the team admitted that they had taken a $25 million loan from major league baseball to cover their basic expenses last year. At the time, the team claimed the loan was to help cover a "short-term liquidity issue." But clearly it's more serious than that. It was later revealed that the $25 million was on top of $50 million they had already borrowed from Major League Baseball. In the wake of this, Moody's Investor Services even lowered their outlook on the teams' parent company to "negative." In fact, banks who are holding Mets debt are selling it off at a discount to lower their exposure to the struggling team.
Now, the New York Post is reporting that the Mets are seeking yet another loan "in the tens of millions of dollars," this time from J.P. Morgan to continue to cover their expenses. The report says that MLB is "exerting strong pressure" on the bank to give the Mets the loan. The kicker is that the Mets are already into JP Morgan for $430 million in outstanding loans. The Post's sources were conflicted about whether the team would get the lifeline it's seeking.
"They [JPMorgan] believe the Mets still have the capacity to borrow," a source said.
But another source said, "Are you kidding me?" when told about the loan. "You don't lend into a distressed situation," that source said. "This is a very risky loan," with the team losing about $50 million a year.