Wednesday, December 14, 2011

The Wilpons: In Over Their Heads And Sinking Fast

To say the Wilpons have been bad owners would be unfair.  Since acquiring the team in its entirety in August 2002, they have spent $1,159,942,209 on payroll (source), averaging nearly $116 million annually on opening day.  At no point during that time, did the organization enter a season lower than seventh in terms of payroll, in all of MLB.  Baseball fans can ask for little else than to have an owner who doesn't hesitate to invest in their team.  However, to say the Wilpons have been bad investors, is a totally different story.

Monday's news that the team has taken on a $40 million dollar bridge loan, care of Bank of America, certainly has to signal the beginning of the end for the Mets' front office spendthrifts.  This is the second time in just over a year that the organization has had to reach out for operating funds, having borrowed $25 million dollars from MLB in November 2010.  The loans, when combined with the fact that the Mets reportedly lost $70 million dollars in 2011, appear to signal that the end is near for the now cash strapped ownership group.

Let us not forget that this likely all started due to an erroneous decision to invest in Bernie Madoff's ponzi scheme, which has resulted in a lawsuit that could cost the Wilpons as much as $300 million.  Their response to that, was the sale of an estimated 20% of their beloved team to David Einhorn.  The deal would have provided the Wilpons with at least $200 million, but fell apart in September 2011 when ownership altered the deal at the last moment.  Their latest venture in hopes acquiring operating capital, involves selling off $20 million portions of the team.  Those portions can be redeemed after six year at a rate of 3% interest, which as ESPN's Adam Rubin tweeted, is the equivalent of assuming even more debt.

Unfortunately, the debt trail doesn't end there.  Staring the Wilpons in the face long term, as pointed out by Bob Klapisch, are debts of $430 million against the team due to be paid by 2014, $450 million against Sports Net New York (SNY) due to be paid by 2015 and $600 million in bonds used to finance the construction of Citi Field, which will be paid off in $25 million dollar increments every six months for the foreseeable future.

The question now becomes how long can the Wilpons hold on for.  There is little relief in sight for their struggling franchise as they will effectively slash payroll by almost one third heading into 2012.  The loss of Jose Reyes, combined with a bleak outlook for next season and the overall negative aura surrounding the team won't exactly drive fans into the ballpark either.  Furthermore, the income derived from the SNY network, estimated to be as much as $300 million annually in some circles, may not be enough to offset these issues.

Ultimately, with every misstep going forward it would appear more and more likely that MLB may have to take action, as they did with the LA Dodgers, despite Sandy Alderson's accurate statement that the situations are entirely different.  They may in fact be different, but the common denominator is that the Wilpons, like the McCourts, simply do not have the funds to support a Major League franchise any longer.

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