SBD/March 20, 2012/Franchises

Mets Owners Win Big With Madoff Settlement; Reportedly Sell Minority Shares, Repay Loans

Settlement calls for Katz (l) and Wilpon to pay Irving Picard $162M
Mets Owners Fred Wilpon and Saul Katz scored a "major legal victory -- one that might well preserve their control of the team" -- thanks to a settlement reached Friday and announced yesterday with Irving Picard, trustee for the Bernie Madoff fraud victims, according to a front-page piece by Sandomir & Belson of the N.Y. TIMES. The settlement calls for Wilpon and Katz to pay Picard $162M, but that figure "is likely to be reduced or wiped out altogether as the complex bankruptcy litigation involving Mr. Madoff’s investment operation plays out." The settlement -- under which the owners "may not have to pay the trustee anything out of their pockets -- makes clear that it was the trustee who blinked at the 11th hour." If Picard had prevailed at trial, he could have "recouped as much as $303 million, in addition to the $83 million the Mets’ owners were already ordered to pay." His decision to settle for much less "was regarded by a number of experts as a kind of surrender on the explosive assertions that were central to the case." However, the Mets, as a baseball operation, "still face significant financial trouble." The club has "lost some $120 million over the past two years," but the "resolution of the lawsuit, and on such favorable terms, ends an enormous financial threat" (N.Y. TIMES, 3/20). On Long Island, Anthony DeStefano notes the agreement was brokered Friday night by former New York Gov. Mario Cuomo, "who served as a mediator in the case for the past year." Mixing "persuasion and hard realism, Cuomo painted for both sides a stark picture of the unpredictable nature of trials and the years of expensive appeals that could follow." Cuomo said, "The principal force was proximity to trial. As the parties got closer to trial, they got closer to the realities of trial" (NEWSDAY, 3/20). SportsNet N.Y.'s Steve Kallas said, “They both had a lot to lose going to trial. I think at the eleventh hour and with Mario Cuomo’s help, I think they decided it was best for both parties to end it now. I think certainly that was the correct decision for both parties because again, you don’t know what the jury is going to do” ("Daily News Live," SportsNet N.Y., 3/19).

A GOOD DAY FOR WILPONS, KATZ: In N.Y. Kevin Kernan writes the Wilpons "came up huge winners yesterday." They still have "their Mets and they may not have to part with a lot of money" as a result of the settlement. However, in the court of public opinion there is "only one way to win, and that is to become a respectable team on the field." If they "do that, they will win the fans back." If they "don’t, and the fans stay away, they will not be able to climb out of the financial hole they have dug for themselves" (N.Y. POST, 3/20). MLB Network's Ken Rosenthal said, "By and large, considering all the Mets were up against here, the potential, they did very well” ("MLB Tonight Live," MLB Network, 3/19). ESPN N.Y.'s Adam Rubin wrote under the header, "Mets End Madoff Mess With A Win" (ESPNNY.com, 3/19). In N.Y., Mike Lupica writes Wilpon and Katz "finally won something Monday, not just in the financial terms of the deal they made, but because they are allowed to look forward again instead of back at what Madoff did to them." Lupica: "After all the talk, so much of it empty talk, about a trustee who you were supposed to believe would get a billion dollars off Wilpon and Katz, the issue now becomes one of trust between the Mets owners and their fans." It will be a "much harder case to win, and [it] starts now" (N.Y. DAILY NEWS, 3/20).

A WIN IS A WIN? Forbes sports business writer Patrick Rishe said that it "could have been much worse for the Mets." Rishe added the settlement "is good news for Mets owners, bad news for Mets fans." USA TODAY's Michael McCarthy notes either way, the Mets "can move on; the trial was scheduled to last three weeks." Rishe: "Having something like this in your rearview mirror is better than staring it in the face" (USA TODAY, 3/20). ESPN N.Y.'s Ian O'Connor wrote Wilpon is "still a net loser in every conceivable way." 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" (ESPNNY.com, 3/19). YAHOO SPORTS' Tim Brown wrote there was a time "when what was best for the Wilpons was best for the Mets." Brown: "I'm not so sure about that anymore" (SPORTS.YAHOO.com, 3/19). In N.Y., Joe Nocera writes Wilpon and Katz, in effect, "switched sides." They agreed to settle for $162M and at "first glance, it is a very good deal for the Mets’ owners." But look "again: it still adds up to six years’ worth of Madoff profits -- exactly what the trustee has been demanding of all the other Madoff net winners." Katz and Wilpon also agreed to "end their role in the litigation over whether Picard can claw back from the net winners." That litigation "is doomed anyway." In other words, instead of "letting their anger carry the day, the owners of the Mets did what they had to do, which included, essentially, agreeing with the trustee’s legal view of the Madoff bankruptcy" (N.Y. TIMES, 3/20).

COULD METS INCREASE PAYROLL NOW? In N.Y., Mike Puma cites a source as saying that the new "relative financial certainty" of the Wilpon and Katz' situation might lead to the owners "opening their wallets to help improve the team." An MLB exec predicted that the Mets' payroll "would increase next season." The exec said, "It’s tough to make any (financial) commitment when you don’t know what any costs are" (N.Y. POST, 3/20). Also in N.Y., Whitehouse & Bennett note if the Mets "do fork over their whole $162 million share and collect the $178 million they’re claiming as victims -- they can actually make" as much as $16M. However, the settlement does not mean the Mets' finances "are back in shape." The team is "now looking to refinance the rest of the money owed, staving off" a '14 deadline. In addition, the $600M Citi Field construction "costs the team $50 million a year" (N.Y. POST, 3/20). Meanwhile, in N.Y., Andrew Keh noted what Wilpon could "conceivably do in the short term ... is send some positive signals over the future status of David Wright, who at 29 remains the face of the franchise." Wright will earn $15M this season, with the Mets "holding a $16 million option" for '13. 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." Marlins SS Jose Reyes was "let go this winter without a fight; letting fans know that Wright might be staying put might soothe some wounds" (NYTIMES.com, 3/19).

DEBT REDUCTION
: The N.Y. TIMES' Belson cites sources as saying that the Mets appear to have "sold all 12 minority stakes in the club for $20 million each, money they are expected to use as soon as tomorrow to repay the MLB and Bank of America loans." Finances have been "so tight that in November, the Mets laid off nearly 10 percent of their 180 front office employees." Those money pressures "are not likely to disappear overnight." Attendance fell again in '11, "even though the Mets have cut ticket prices several times in recent years." And in a bit of "unfortunate timing, the three-year contracts for some of the luxury suites at Citi Field are up for renewal amid the negative environment in which the Mets have been forced to operate." Those suites go for "as much as $500,000 a season, significant money for the Mets, but what the renewal rate is at this point is not known" (N.Y. TIMES, 3/20). In N.Y., Josh Kosman notes the minority share sale and loan repayments give the team "breathing room with its lenders and -- combined with yesterday's Picard settlement -- appears to have saved the franchise." The minority stake sales allowed Wilpon and Katz to pay off MLB and Bank of America, and sources said that the partners also paid "at least $100 million towards $430 million of team debt" (N.Y. POST, 3/20). The Mets owners are "expected to use the $240 million raised from the sale to help cover operating costs" during the '12 season (N.Y. DAILY NEWS, 3/20). 
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