Just four years ago, New York Mets owner Fred Wilpon had a middling baseball team, couldn’t fill his stadium, and owed more than $600 million in debt. Wilpon and his co-owner and brother-in-law Saul Katz attempted to sell a 49% stake in the team for $200 million to make a dent in that debt, but a deal with financier David Einhorn fell apart.
That’s not to mention the Mets’ Madoff nightmare. The owners had invested some $500 million with Bernard Madoff, whose Ponzi scheme collapsed in 2008. After everything unraveled, Mets ownership didn’t even get the benefit of being considered “victims” because they had made more in fictitious gains than they had lost. By 2011, Wilpon and Katz were facing a $1 billion lawsuit from Irving Picard, trustee for the liquidation of Madoff Investment Securities, which accused Wilpon and his partners of being reasonably aware of Madoff’s scam while investing more money into it.
Wilpon himself told Sports Illustrated that year that the Mets were “bleeding cash” to the tune of $70 million a year.
What a difference a few years makes. The Mets are now headed to the World Series, the Wilpon family’s burden to the Madoff liquidation trust is down to some $60 million, and Fred Wilpon has likely had his first happy summer since 2008.
How did Mets management turn things around? By making savvy financial decisions, often galling but necessary, in the wake of the Madoff disaster.
First, in early 2012, Wilpon and Katz quietly managed to sell some 12 minority stakes in the team—4% ownership each for $20 million apiece. (One of the buyers was hedge-fund titan Steven Cohen, who had reportedly considered the original 49% stake.) That brought the owners more than the $200 million they had hoped for from the 49% stake that no one wanted. It also allowed them to repay their $40 million loan from Bank of America and $25 million loan from Major League Baseball.
In March of the same year, the Mets owners scored a major legal victory when Irving Picard agreed to a settlement that Wilpon and Katz could pay the trustee just $162 million, a fraction of the $1 billion he was seeking. In the end, the Mets owners will be liable for far less than that figure because it has been gradually offset by their losses and Picard continues to recoup funds for Madoff fraud victims.
Indeed, this week Picard announced the coming allocation of another $1.5 billion to victims, bringing the total payout to $9.13 billion, or about 57 cents on every dollar that victims lost in the fraud. As ESPN reported, this is more good news for Wilpon and Katz: They can deduct 57% of their Madoff losses ($178 million) from the $162 million in gains they owe the trustee, bringing their new debt to the trustee to $60.56 million, payable in two installments in 2016 and 2017.
That figure will likely go down again before the Mets owners need to make the first payment, though there is a floor: Wilpon and Katz agreed to pay a guaranteed minimum of $29 million.
The actual team’s finances have also improved. The Mets generated an operating income of $25 million last year—a sign the franchise’s dark days are behind it. Wilpon and Katz refinanced $700 million of debt this summer (owed by the team and cable network SNY) into more manageable pieces.
And the Mets made smart roster decisions to improve the club’s fortunes on the field. Under GM Sandy Alderson (hired in 2010 to reduce the Mets payroll from $132.7 million that year), the team brought on ex-Yankee Curtis Granderson and pitcher Bartolo Colon in 2014, added veteran Michael Cuddyer this past offseason, and this season traded for utility player Juan Uribe, reliever Tyler Clippard, and slugger Yoenis Cespedes. (The latter has been floated by some pundits as an MVP candidate after barely 50 games with the Mets.)
“We’re happy to be in the World Series,” Alderson told reporters on Saturday at a Mets workout day press conference. “We’re happy to be there, however torturous the route.”
Attendance at Mets games is up more than 7% (after it fell in 2013 and 2014) and the surging team is preparing to host the World Series at Citi Field. It’s the first time the team has hosted World Series games since 2000, and ticket prices are surging to an average $1,587.
None of this suggests that Wilpon should win any money-management awards. (Then again, this year MLB made Wilpon chairman of its finance committee.) The team and the cable network still carry a lot of debt, even as the owners’ debt to the Madoff trustee shrinks. As recently as last year, Saul Katz was reportedly considering selling his entire stake in the team. And the Mets still owe money to two players that haven’t played for the Mets in 20 years: Bobby Bonilla, who has $1.2 million coming to him every year until 2036, and Bret Saberhagen, who is owed $250,000 each year until 2029.
But a World Series trophy would probably help ease the pain of the last few years.
This story was updated with statements made by Alderson on Saturday afternoon.
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