Mets Avoid Default on Citi Field Bond Payment

English: Citi Field at Night
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A report by Forbes details the Mets bridge loan from Bank of America and how it was used to pay the debt payment on bonds that financed Citi Field. I wrote about the bridge loan on Monday and the story for the Mets gets worse as more details emerge. The Mets partially funded Citi Field with $547 million of tax-exempt bonds. A payment was due last month for $43.8 million and the Mets didn’t have the money to pay.

The holding company for the bonds, Ambac Assurance Company, had promised to pay the debt payments if the Mets defaulted. But Ambac went belly up in 2010 and filed for bankruptcy. So the Mets defaulting on the debt payment would have left the bond holders with nothing to show for their investment in the team.

The Mets still have payments coming due of $32 million in each of 2013 and 2014. So there’s still a chance they could default. But the Mets are planning to use the $40 million bridge loan to tide them over until they can sell pieces of the team to “small” investors in hopes of raising $200 million.

It’s a sad state of affairs for the Mets. Hopefully, it won’t end in bankruptcy court like the Dodgers and Rangers did recently. In the meantime, we’re the ones left holding the bag with a team that doesn’t appear to have a chance of a winning record in 2012.

Mets Borrow Another $40 Million

SUN VALLEY, ID - JULY 06:  06:  New York Mets ...
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The New York Times is reporting that the Mets borrowed another $40 million on top of the existing debt against the team. The Mets already borrowed $25 million from Major League Baseball last year and haven’t been able to repay MLB despite the reported due date being last June. Bank of America issued this latest loan and it was approved by MLB and the lenders that already hold a majority of the debt against the Mets.

The Mets spokesman did acknowledge the loan and described it as a bridge loan. Presumably, the bridge references the Mets attempt to sell small pieces of the team to investors after the deal with David Einhorn fell apart this summer. The Mets appear to be struggling to maintain liquidity. There were reports in the past month that Fred Wilpon and Saul Katz had to put $38 million of their own into the team recently to keep it afloat.

This latest loan and appearance of financial desperation will lead to further calls from Mets fans for the Wilpons to sell the team. Recent poor performances and reducing the payroll instead of investing in the on-field product is leading fans to, rightfully, lose faith in the financial ability of the Wilpons to field a winning team at any point in the near future.

MLB Allows Mets Near Record Debt Level

ST LOUIS, MO - OCTOBER 28:  MLB commissioner B...
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In the continuing saga about the Mets trying to get out from under the Madoff lawsuits and the attendance problems, MLB has allowed the Mets to secure more debt than the $400 million that’s already on the books. The Mets are now taking out a series of small loans against the team from investors in the $15-$20 million range. The SportsMoney blog has a post today detailing the Mets desperate plight to raise cash and comparable situations in MLB (Rangers and Dodgers).

The investors are offered a chance to get their loan back plus 3% annually in six years or just keep a small stake in ownership of the Mets with no chance for a majority share. Apparently, JP Morgan and other debt holders must have signed off on this strategy. They certainly didn’t like the Mets plan for a $200 million loan/ownership stake from David Einhorn this summer.

This new set of loans will take the Mets to approximately $540 million plus interest leveraged against the team. Keep in mind that the Dodgers, currently in bankruptcy, have the highest ever debt against a team at $555 million.

It sure looks like the Mets are following the path of the Rangers and Dodgers which both ended with team sales via bankruptcy court. But Bud Selig and his good friend Fred Wilpon keep telling us that the Mets are doing fine even though the Mets haven’t repaid their secret $25 million loan from MLB that was due last summer. Maybe some Mets fans would be happy if there was an ownership change for the team?

Mets’ Wilpon Trying to Avoid Jury Trial in Madoff Case

Bernard Madoff's mugshot
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Mets owner Fred Wilpon filed papers with the Federal District Court in Manhattan attempting to avoid a jury trial against Irving Picard, the trustee for the Madoff victims. According to a report in the NY Times on Friday, the issue at hand is that the two remaining charges against Wilpon are generated from bankruptcy law according to Wilpon’s legal team. Generally, a bankruptcy case wouldn’t contain a jury component. The judge would render verdicts.

Wilpon and his legal team were emboldened by Judge Jed Rakoff dismissing nine of the eleven charges against Wilpon last month. So they want the same judge to render a verdict during a trial for the remaining two charges.

Picard filed a motion claiming that the victims of fraud in this case are entitled to a jury trial against the alleged perpetrators of fraud like Wilpon and his brother-in-law Saul Katz.

The Madoff fraud case is a stench that’s been hanging over the Mets for far too long. This is going to be the second offseason that the Mets have had to walk a financial tightrope when negotiating with free agents. Although the highest potential verdict against Wilpon in now $386 million instead of $1 billion, it still inhibits the Mets ability to re-sign Jose Reyes and negotiate with other free agents.

I’ve heard so many Mets fans tell me that they wish Wilpon would sell the team and go away. It’s hard to argue that point when the Mets are in the midst of one of the darkest periods in team history. At least the early 1960’s Mets had the excuse that they were an expansion team. The current crop of “stars” like  Jason Bay are playing in a brand new park and still can’t draw a decent crowd. It’s a sad state of affairs for this team.

Mets Trying to Sell Smaller Stake in Team

NEW YORK - AUGUST 06:  New York Mets Chief Exe...
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According to the NY Post, the Mets owners had a conference call with the group of banks that have approximately $500 million outstanding in loans to the team. Fred Wilpon and banker Steve Greenberg expressed confidence that they would be able to sell several “smaller” shares of the team by the end of 2011 after David Einhorn pulled out of deal to invest $200 million last week. [The picture at the right is Wilpon and Einhorn in happier days].

A couple of months ago, JP Morgan sent a tersely worded letter to Wilpon stating that some covenants of the loan had been breached by Wilpon. The letter didn’t say Wilpon was in default. But you know where this was headed.

During the call, Greenberg also told the lenders that their potential exposure to the Madoff lawsuit had been reduced recently. And it came out that Wilpon and Saul Katz had kicked in some amount under $50 million of their own money to keep the team running.

It sounds like the tone of the call was that everything was great as far as the Mets owners are concerned. They’re still going to take on minority investors by the end of the year, the Madoff lawsuit isn’t as bad as it could have been, and the lenders should be assured that there aren’t any immediate financial problems. We’ll see if that turns out to be the case.

Picard Drops Damage Claim Against Mets’ Fred Wilpon

Bernard Madoff's mugshot
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It looks like the Wilpons have won round 1 in a legal battle against Irving Picard.

According to Mark DeCambre of the New York Post, Picard dropped his damages claims against the Wilpons and Sterling Equities.  DeCambre says that profits that were made by the Wilpons are being sought in bankruptcy court.   DeCambre also says that Picard dropped the claim against the Wilpons because he was told that it won’t hold up in court without any evidence.

Adam Rubin of ESPN New York said on his twitter page that the Mets could now be liable for $300 million dollars instead of the original $1 billion dollar estimate back when this whole fiasco started.

This is good news for the Mets and the Wilpons.   I know I am not an economic anaylst or expert, but this actually is good simply because the Wilpons will probably pay a lot less then what they would have paid (if the damage claim held up), and now the Mets will probably be less affected by this for the future to come.

The only other question in this whole saga is whether or not the Wilpons will be found guilty of making profits off of Madoff.  If the Mets get away with that claim, the Mets will get their hands out of this mess, and (if a deal is in place) the new minority owner David Einhorn will be stuck as the minority owner.   All in all, this is still good news.  We’ll have to wait and see what happens in court.

Report: Einhorn Could Own Majority of Mets in Three Years

PORT ST. LUCIE, FL - FEBRUARY 17: Owner Fred W...
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ESPN is reporting that the real motivation for David Einhorn to invest in the Mets is coming to light. We were all wondering what Einhorn was really getting for his $200 million dollar investment. Apparently, he doesn’t get much, if any, say in the running of the Mets. That will still be up to the Wilpon whether we like it or not.

The report states that Einhorn is buying 33% of the Mets for his $200 million. In three years, Einhorn will have the option to increase his percentage of ownership to 60%. But the Wilpons can block that move by giving Einhorn his $200 million back while allowing him to maintain 33% ownership.

If the ESPN story is true, it sheds some light on Einhorn’s real motivation. He’s allowing the Wilpons to use his money for three years and if they can’t pay it back at that time, he can take over the team. It’s a nice move by Einhorn and a risky one for the Wilpons. That lawsuit by the Madoff trustee should be settled within the next three years and determine the future ownership of the Mets.