Tuesday, August 24, 2010
Pirates prez says debt is manageable
PITTSBURGH -- The Pittsburgh Pirates aren't winners on the field, but they're apparently no longer losers to the banks.
The last-place Pirates were $120 million in debt a year ago yet were in far better financial shape than they were a few seasons ago, according to team president Frank Coonelly.
Under former owner Kevin McClatchy, the Pirates' debt-to-equity ratio exceeded Major League Baseball's standard and the club was forced to ask one of its minority partners -- Bob Nutting, now the principal owner -- for a loan to fund operations in 2003.
That season, the Pirates traded star third baseman Aramis Ramirez to the Chicago Cubs for little in return merely to shed his salary and meet the debt-to-equity formula.
According to club financial statements obtained by The Associated Press, the Pirates owed Major League Baseball's credit facility $59 million a year ago and nearly $63 million for the fiscal year ending on Oct. 21, 2008. The club also owed $61 million in revolving bank notes, up from $40 million in 2008.
Total credit available to the Pirates through the MLB facility was nearly $63 million, meaning the Pirates were close to reaching that limit. The bank loans' maximum ceiling of $70 million could be raised to as much as $100 million under certain conditions.
"Each of the last two years, we increased our debt," Coonelly told the AP in an interview last week concerning the financial statements. "That's not increased by taking out a new loan, there is an MLB credit facility we're involved in and we also have a local facility involved. We're comfortable with our debt level as it is, as are our banks. We meet with the banks on a regular basis and the banks are comfortable with our debt level."
In 2008, the last season for which full financial reports are available, the Pirates had $6,102,379 in interest expense, up from $5,5251,096 the season before. The club also made a $20,442,550 distribution to partners that season to cover $10.4 million for income taxes on the Pirates' profits and a $9.6 million payment on the 2003 loan made by the Nutting family. Part of that loan was converted into a $20 million equity stake.
The Pirates said the debt grew to fund projects such as a $5 million training academy in the Dominican Republic, $2 million in improvements to the Pirate City spring training complex in Bradenton, Fla., and the $2 million purchase of the Bradenton Marauders Class A minor league team. The club has spent $31 million signing amateur draft picks since 2008.
"It's important to remember the club should be, needs to be and is in solid financial shape," Nutting told reporters on Sunday. "That's what's allowed us to make the kinds of investments that we've made -- the development system, the Dominican, the draft signings. It's important the team not be in the kind of financial shape it was in, in 2003 and 2004, when we were struggling and making bad decisions purely driven by financial constraints and pressure."
While the Pirates are carrying considerable debt, it is believed to be only a fraction of that of some other clubs. It is common for major league teams to owe such debt because annual revenues are so substantial -- the Pirates received nearly $70 million in MLB-generated revenue alone in 2008 -- that they cover operating expenses each season. Owners aren't burdened by the debt because franchise values historically rise each year, meaning most teams could be sold for a substantial profit.
The Pirates' profits for the two most recent seasons available -- a combined $29,416,281 -- were higher than those of all but one of the five other clubs whose financial statements were revealed Monday by website Deadspin.com, a day after the AP disclosed the Pirates' finances.
Commissoner Bud Selig said his office is trying to determine how the documents were leaked.
"We share information with the union and everybody. People are going to make a lot more of this than there actually is," Selig said. "I'd like to know how it got out."
The Pirates' documents show the team made $14,408,249 in 2008 and $15,008,032 in 2007, plus $5,409,087 in 2009, according to the club's figures. A full financial statement for the 2009 season wasn't made available to the AP.
According to the teams' financial statements, the Florida Marlins' net income for 2009 and 2008 was about $33 million, including a $29.4 million profit in 2008 when the club's payroll was trimmed to $29.7 million. The Marlins have since agreed to increase payroll before moving into a new ballpark in 2012, following a players' union protest that the club wasn't fully using its revenue sharing funds.
The Los Angeles Angels' net income was $10,732,000 in 2009 and $7,088,000 in 2008. The Texas Rangers, who were recently sold, lost $11,982,000 last season and dropped $10,435,000 in 2008.
The Tampa Bay Rays' net income was $4,016,163 in 2008 and $11,066,191 in 2007. The Seattle Mariners lost $4,533,000 in 2008 but made $17,864,000 in 2007, despite a $113,242,000 payroll.