What Does the Dodgers' Sale Mean for the Mets?

The Dodgers sold for more than two billion dollars, you may have heard. The Mets have some money troubles, you may have heard. Are these two items linked? And how?

Of course there are implications for the Mets that stem from the Dodgers' sale -- after all, a rising tide raises all ships -- but there may be fewer implications than many would have you think. With separate $400+ million loans coming to term against the team and the ballpark in the next two years, the Mets' current owners are not out of the woods based on the valuation of a team in Los Angeles.

First, what does the Dodger's sale mean for the valuation of the Mets exactly? Forbes pegged the team at $714 million before the sale, and that didn't include separate entities SNY and CitiField. Business consultant Marc Ganis told Adam Rubin that he felt that the Mets were now worth over a billion dollars at least.

How much over a billion is important, though. If the team has about $400 million in debt against $1 billion in valuation, they've only just come in line with Major League Baseball's traditional 40% debt-to-asset ratio requirement. If they are worth more, they might be able to refinance as easily as has been suggested. Maybe.

Ganis pushed his version of the number to $1.5 billion, but did admit that the Mets' and Dodgers' situations are different, primarily because of the difference when it comes to the media deals. While the Dodgers have an impending media rights deal that sweetened the pot, the Mets are locked into their deal with SNY:

"The Dodgers being open for bidding, they can try to set the higher bar than the Mets set with SNY," Ganis said. "That’s why the Dodgers (now) would still probably be worth more than the Mets. But the Mets’ value does go up relative to the Dodgers.

"If you had the Mets in the same situation as the Dodgers, in a bankruptcy situation where Wilpon would be able to sell the team to the highest bidder without too much interference from Major League Baseball, the Mets would have gone for the same number if not higher than the Dodgers.

"If the Mets had the same (bankruptcy) thing, had they rejected the SNY contract and there could have been a fresh broadcasting deal, I suspect the Mets would have went for more than the $2 billion the Dodgers went for. If they kept the SNY deal, probably $1.5 billion or so would be the value."

Calling them a $1.5b team without the rest of their assets seems like a bit of hyperbole at first.

The Dodgers sold for $2+ billion because the package included a portion of the real estate, the park, the team, and the media rights. Are we saying that their park, real estate, and media rights were only worth $500 million? That the Dodgers, as a team and only a team, were worth at least $1.5 billion? It seems like the media rights, which should reach into the nine figures yearly if the Angels deal is any guide, plus even a fading park, and that downtown Los Angeles real estate, would have to equal more than half a billion.

There's another side to this though. The stadium in Chavez Ravine is old and might not be worth a lot. The real estate around the stadium wasn't sold in total, there's a partial package deal there that allows Frank McCourt to walk away with some control. Really, it's mostly the pending television rights that separate the Dodgers and the Mets.

If the actual valuation was much closer to one billion than one and half, it might not matter that much in the end. Either number would still assure that the Wilpons would be fine -- if they sold.

But then there's the fact that the Wilpons don't want to sell the Mets. They want to keep the team.

According to bankruptcy expert Douglas Furth, partner and bankruptcy specialist at Golenbock, Eiseman, Assor, Bell & Peskoe LLP, "the valuation is much less important" to the refinancing process than the team's cash flow situation. Lenders don't want to lend money to someone that can't afford it "even if the collateral is attractive." Furth used the analogy that no bank would lend him the money for a $10 million house even if they thought the house was worth that much. They'd have no use for a house.

So, in one sense, the Wilpons can breath easy. At the very least, they'll come away from their time with the team smiling like Frank McCourt -- pocketing hundreds of millions of dollars in profit. The "new" valuation of the Mets assures that they will be fine, personally.

But in another sense, their battle for keeping the Mets is not over. Our information about the team's cash flow situation is incomplete. We know that they lost $40 million last year, and we also know that $40 million has now been struck from the player payroll. We know that the on-field product has been getting worse, and that fewer fans are coming every year. Which will probably mean fewer gate receipts next year. Which will probably mean continued losses despite the stingier payroll. But we don't know exactly how much SNY pays the Mets for the current broadcast rights, nor do we know the specifics of any of this. We do know the team needs to make more money than they did last year.

Will the team need to spend more to get better in time for the Wilpons' to refinance? How quickly can Sandy Alderson turn the team around on the smaller budget? If the Wilpons can't sink short-term money into the team like they used to, how will the team increase payroll in order to get more fans to come to the park so that the owners can refinance? And if the owners can't sink short-term money into the team, why would a lender think they were solvent enough to make a refinancing a good idea?

It's a fascinating time for a team projected to finish at the bottom of the National League East. It's clear that the fans -- and their willingness to spend money on the Mets -- will have a lot to say in the Wilpon's ability to stay at the helm. At least as much as the mammoth price tag on a team in Los Angeles.

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