Inside Baseball’s Debt Disaster

[marmar]

By Monte Burke and Nathan Vardi


As the U.S. economy and financial markets strengthened last fall, investors across the island of Manhattan breathed a welcome sigh of relief. But a short subway ride away in Queens it was a different story. Inside the offices of the New York Mets at Citi Field—the team’s plush new $800 million stadium—things looked grim.

The Mets had just finished a woeful season, losing more than half of their games and drawing 600,000 fewer fans than the season before. Despite the new ballpark, the team’s revenues had fallen by some 13%, resulting in an estimated $6.2 million in operating losses before interest, taxes, depreciation and amortization. The Mets did not have enough cash left over to meet a mountain of bills, including an upcoming league revenue-sharing payment that small-market teams were counting on. The banks that had once been so willing to lend liberally to the Mets were no longer in the mood to extend more credit.

In the past the team’s owners, Fred Wilpon and Saul Katz, had drawn on the Mets’ 16 accounts at Bernard Madoff’s investment firm when the team needed cash. But those funds disappeared when the Ponzi scheme collapsed. In an act of desperation, the Mets were forced to turn to Major League Baseball Commissioner Allan H. “Bud” Selig, who through the league made an emergency $25 million loan to the Mets, eerily similar to the too-big-to-fail bailouts taxpayers gave Wall Street to keep the banking system afloat.

It wasn’t the only meltdown Selig faced. Another one of baseball’s marquee franchises, 2,400 miles away to the west, was in deep trouble, too. The Los Angeles Dodgers had become the prized bauble up for grabs in the contentious divorce proceedings between owner Frank McCourt and his wife, Jamie. Court documents revealed that from 2004 to 2009 the McCourts—using the Dodgers and related assets as collateral—had racked up a staggering $459 million in debt, much of which was used personally. FORBES estimates that almost all of the team’s profits were being used to pay down just the interest. As was the case with the Mets, Selig was again asked for help by a desperate team. This time he turned down the cash-starved Dodgers’ attempt to borrow $200 million from their cable broadcaster, Fox. ..............(more)

The complete piece is at: http://blogs.forbes.com/monteburke/2011/03/23/special-report-inside-baseballs-debt-disaster/

[Confusious]

1. If they ran MLB like football

They probably wouldn't be having these problems.

As an aside, any group that has a government sponsored monopoly like baseball, football and basketball do should be force to be non-profit, or have no monopoly.

[Johonny]

3. IDK

Seems like football owners can run into money problems too. See the Rams (more than once), the Colts, the Cardinals, Browns, the current Jacksonville team etc... They have (had) more revenue sharing and a salary cap, but there isn't anything to prevent football owners from ultra-leveraging his team. I believe over the last 30 years baseball actually has much more franchise stability than football.

[villager]

2. Thanks for posting!

Good read... for this Giants fan living in Dodgers' territory! ;-)

[WCGreen]

These "moguls" shouldn't be given tax cuts, publicly fund stadiums

and economic development funds.

They simply can't run a real business.

It's ridiculous that cities continue to ante up precious public money for these grifters.

[WCGreen]

4. These "moguls" shouldn't be given tax cuts, publicly fund stadiums

and economic development funds.

They simply can't run a real business.

It's ridiculous that cities continue to ante up precious public money for these grifters.

[rndmprsn]

5. great read....thanks

I didn't realize the dodgers were in such bad financial shape because of the divorce, crazy