Mets received $25 million loan from Major League Baseball to cover "liquidity issue"

Kevin McGuire's picture

The New York Mets confirmed on Friday the team received a $25 million loan from Major League Baseball in November to cover operating expenses.

"We said in October that we expected to have a short-term liquidity issue," the team said in a statement. "To address this, we did receive a loan from Major League Baseball in November. Beyond that, we will not discuss the matter any further." Reports by the New York Times and New York Post calculated that the total loan amount was $25 million.

For Major League Baseball and commissioner Bud Selig to step in and provide financial aid to the National League franchise shows how much trouble the owners of the Mets are in. Mets owner Fred Wilpon and team president Saul Kratz are some of the key names related to Sterling Equities in the midst of a lawsuit seeking $1 billion in replacement funds after Bernard Madoff's Ponzi scheme swindled funds from investors. The lawsuit states that Wilpon and Katz were aware of the scheme and should have known about the alleged fraud. An estimated $20 billion had been lost in the Madoff Ponzi scheme.

According to reports the Mets ownership has $400 -$430 million in debt on the team and the team had exhausted the standard bank line of credit allowed by MLB, upward of tens of millions of dollars provided by the league offices and other teams for any team in a certain financial situation. The team lost about $50 million last year alone when including interest payments on that debt, and bonds paid to New York City for Citi Field. The $25 million loan, done in secret in November with Selig, may have been necessary to keep the Mets organization functioning somewhat properly.

The decision to loan the Mets, with a payroll of $140 million, may be a concern for other teams in the league, who may wonder why their funds are being used to bail out a team with one of the league's higher payrolls. Last year the Texas Rangers received similar support from the league with a $40 million loan coming from Selig as the ownership situation was undergoing a transition.

“The fact that the loan is coming from baseball would be a jarring event because, as with the Texas Rangers, the league is effectively a lender of last resort,” said Marc Ganis, a sports industry consultant. “It would indicate the team cannot get loans from normal commercial sources, which could be taken as a sign of very significant problems.”

Both Wilpon and Katz have stated that they are open to the idea of selling up to a quarter of the Mets franchise to any interested buyers. Forbes values the Mets at a total of $858 million. Wilpon and Katz have also said they would consider selling a larger percentage of the team but neither is prepared to give up majority ownership of the Mets. The concern is that the Mets will be forced to declare bankruptcy, which is one of the possible reasons Selig has stepped in. Selig's powers allow him to authorize such loans for teams he fears are on the verge of bankruptcy, effectively keeping a struggling franchise on life support. By loaning the Mets as much money as Selig has, if the Mets are to declare bankruptcy Major League Baseball will be first on the list of those who will be repaid. The league would be repaid before banks, which may come as alarming news for banks that have lent the club funds in the past.

For Major League Baseball, this would appear to be a win-win situation as they can keep the Mets functioning in a major market and are protected by being the first to be repaid in the event the Mets organization goes bankrupt.

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