Tuesday, March 20, 2012
Mets morning briefing 3.20.12
By Adam Rubin
After an eventful off-day, much of the narrative about the Mets' looming financial ruin is due to take a backseat for the near future.
First, at the U.S. District Courthouse in lower Manhattan on Monday morning, the parties in the Bernard Madoff-related lawsuit against Fred Wilpon and family announced they had settled the case for $162 million. In reality, the Wilpons ultimately will be responsible for repaying far less than that sum, since trustee Irving Picard will allow the family to claim losses of $178 million from other Madoff investments. The Wilpons won't be reimbursed that entire $178 million sum, but the fraction to which they are entitled to recoup after Picard collects money from net winners in the Ponzi scheme will be deducted from the $162 million they owe in the settlement. Also relevant: The Wilpons will not have to pay Picard whatever they ultimately owe until 2016 and 2017.
Secondly, word came that the Wilpons successfully had received a $240 million equity infusion from minority investors, allowing them to pay off a $25 million emergency loan from Major League Baseball and a $40 million bridge loan from Bank of America. The investment -- albeit with at least half coming from SportsNet New York, Jeff Wilpon and Saul Katz -- should allow the Wilpons to withstand any 2012 operating losses and meet immediate debt obligations without jeopardizing their ownership of the team in the near term.
Still, this does not mean the days of payroll austerity have ended for the Mets.
More may come Tuesday when the Wilpons are expected to be at Mets camp in Port St. Lucie, Fla.
Tuesday's news reports:
• Although the consensus is the Wilpons fared very well with the settlement, both sides had compelling reasons to reach a compromise, which was brokered by former New York Governor Mario Cuomo. Even if the Wilpons felt they did not act in bad faith in their investments with Madoff, a jury could have found otherwise and awarded Picard an additional $303 million aside from the up to $83.3 million to which Judge Jed S. Rakoff already had decided the trustee would be entitled. On the other side, by settling for $162 million -- the Wilpons' profits from certain funds in the six years before Madoff's arrest -- Picard restored that six-year clawback period as the appropriate standard. Rakoff had ruled that Picard could only go back two years, which would have capped the amount Picard could have recovered at $83.3 million -- unless the trustee could have demonstrated to a jury that the Wilpons acted "willfully blind" to Madoff's Ponzi scheme. The Wilpons, as part of the settlement, are free and clear of any bad-faith accusations.
Wrote Anthony M. Destefano and Steven Marcus in Newsday regarding Cuomo's role as mediator:
About 10 days ago, he called Wilpon and Katz again into his office at Willkie Farr & Gallagher in Manhattan for a frank talk. "They came. I spoke to them, I simply made the pitch. 'This is your last chance,' " recalled Cuomo. Then, in the past week lawyers for Picard, Wilpon and [Saul] Katz started to hunker down for some serious deal making. Each knew a trial had risks. "Number one, they may lose. Number two, they may win and then face an appeal. Number three, in either case it's going to cost a fortune," Cuomo said. Lawyers for Picard and the Mets owners swapped proposals and counterproposals through Cuomo, his partner Brian E. O'Connor and firm associate Emma J. James. At times, opposing lawyers talked directly by phone. What solidified the deal for Wilpon and Katz was Picard's willingness to drop his claim they were willfully blind to Madoff's fraud, an allegation that stung them deeply -- and could have cost them $303 million in damages if it stuck.
Read more settlement coverage in the Journal, Times, Daily News, Post, Star-Ledger and Newsday.
• The $240 million equity infusion -- which comes in $20 million blocks each worth 4 percent of the team -- averts any short-term danger of the Wilpons being unable to meet their debt obligations. The only known investor without existing ties to the Mets is Steve Cohen, who is a finalist to purchase the majority share of the Los Angeles Dodgers, which would force him to divest his new share of the Mets.
In addition to paying back the $25 million to MLB and $40 million to Bank of America with the newly infused funds, Josh Kosman in the Post reports, $100 million of the money immediately went to pay down roughly $430 million in team debt. Kosman wrote:
The Mets have not refinanced their remaining loans, but have bought the team goodwill. Last year, team lender JPMorgan wrote a letter warning that the team had breached its debt covenants. The owners first must prove they can come close to hitting their budget after missing it badly the last two years, one source said. In 2011, the Mets lost roughly $70 million. After big payroll cuts in the off-season, the team could break even this year.
Marc Ganis, the president of a prominent sports consulting firm, told Newsday: "This is a good day for the Wilpons, but their financial troubles with the Mets are still very significant. It's really a situation that needs a lot of work before Mets fans can start feeling like a corner has turned."
Read more on the minority ownership sale in the Journal and Daily News.
• Columnist Bob Klapsich believes Mets fans are losers in the settlement. Writes Klapisch:
So it’s fair for Mets fans to ask the Wilpons what’s in store, other than years and years of debt pay-down. The family owes $430 million in principal of a loan against the team, due in 2014. They owe $450 million in principal of a loan against SNY, back in 2015. They owe an estimated $600 million, due in $25 million increments every six months, on the ballpark. These are the fiscal realities that figure to keep the Mets locked in a nasty catch-22. They haven’t had enough extra cash to upgrade the roster, but without enough on-field talent to compete with, say, the Phillies and Marlins, let alone the Braves and Nationals, how are the Wilpons going to generate ticket-sales that would fund a renaissance?
ESPNNewYork.com columnist Ian O'Connor has similar concerns about the Wilpons as owners. Writes O'Connor:
The Mets are a big-market joke with small-market bottom lines, and Wilpon's dreadful decisions in business and baseball are to blame. His fan base wants him out, and even the Mets' loyal, good-natured customers were hoping for some outcome before a judge and jury that left them with a new rich guy in charge. So when Mario Cuomo, the Kissinger of this case, told reporters outside federal court in Manhattan that this resolution would allow Mets owners to "return to normalcy," no season-ticket holder was seen popping open a bottle of chilled champagne. For Mets fans, normalcy is a team in the world's biggest, noisiest marketplace that slashes payroll by more than $50 million.
• Anthony McCarron in the Daily News got brief reaction to the settlement. "As players, we’ve never been preoccupied with Madoff, but we understand it’s a huge burden lifted off the shoulders of Fred Wilpon and Saul Katz,” R. A. Dickey told McCarron. Said Terry Collins: "I’m glad this episode is in the past now."
• The Mets return to action Tuesday at 6 p.m. against the Washington Nationals after a team day off. They are winless in their past nine Grapefruit League games and have the worst exhibition record in baseball at 3-11-1. On a positive note, Daniel Murphy and Ruben Tejada are expected to start against the Nats in the middle infield. The two have logged only six innings together in Grapefruit League play because Tejada has nursed a groin injury for the past week. Read more in Newsday.
• Andrew Keh in the Times wonders what the settlement means for the future of David Wright. Writes Keh:
The theory was that the Mets, if they found themselves buried in the standings this summer, would be tempted to trade Wright to a contender before the July 31 trading deadline and receive prospects in exchange. But that was before Monday’s settlement did away with the financial threat the trustee posed. Whether Wilpon might now feel more tempted to try to keep Wright for the long term remains to be seen. But he might, if for no other reason than to send a signal to the team’s discontented fan base that he is willing to make at least one investment in the team’s future at some point this season. Jose Reyes was let go this winter without a fight; letting fans know that Wright might be staying put might soothe some wounds.
TRIVIA: Who led the Triple-A Buffalo Bisons in steals last season?
(Monday's answer: The trial was due to begin Monday in the Daniel Patrick Moynihan U.S. Courthouse on Pearl Street in lower Manhattan, which was named for the late U.S. Senator from New York.)