On Monday, Mario Gabelli, CEO of Gabelli Asset Management Company Investors, stopped by CNBC’s Squawk Box and spoke about the New York Mets and their current limited partnership challenges.
Here’s a look at this as well as some additional woes.
Gabelli began with,
“If they’re not able to close this $200 million limited partnership interest financing in terms of paying back the money and this construction, there’s got to be enough to find three more buyers of the partnership interests.”
Currently, the Mets are trying to find commitments to their $20 million ownership shares. The funding will raise capital and help the franchise pay down its debt. To date, they have seven of the 10 possible ownership commitments.
According to an AP story, limited partnership units sales can’t occur until the 10 commitments simultaneously close.
So how did the Mets rack up so much debt to seek external partners? The team is trying to pay down a $25 million loan from Major League Baseball and $40 million owed to Bank of America. This comes from last summer’s collapsed deal with David Einhorn, the hedge fund manager, to raise money.
Should the Mets fail to get the remaining $60 million from the limited partners, Gabelli has a few suggestions.
He said on CNBC,
“The crowned jewel is the broadcast rights obviously and a company like cablevision could use a baseball package as part of their program. They’ve got hockey, basketball, and you know, the ideal world would have been the Yankees but that was spun off already. The ownership group is not going to, if cablevision came in, said we’ll take the remaining $60 million, three limited partnership interests, buy them and hopefully sit down at the table and get some sort of arrangement for broadcasting.”
Another possibility? What about Russian billionaire Mikhail Prokhorov, the owner of the New Jersey Nets? Would he like to buy the Mets?
But maybe the biggest question posed to Gabelli was, “Why is the team having such a difficult time sharing the interests?”
“I’m not a broker, I’m not selling it. I have no idea. Why would you want to buy it? When the deal collapsed and I think it was almost six months ago they thought they could go out and sell these. In fact it’s been more of an inside deal. You’ve got your broadcast partners buying, you’ve got the two owners buying…The Mets can only do better. Better on the field? Better on the field and Better financially.”
Yes, the Mets could probably improve on the field. Here’s some additional franchise problems.
Since the Mets opened Citi Field in 2009, its revenues have declined more than 30 percent along with premium ticket sales dropping close to 50 percent, reported AP.
But there’s more declines. Overall attendance has fallen to 2.3 million (26 percent) along with concession revenues (28 percent) and parking (37 percent). Premium seats ticket sales (10,635 seats) dropped from 2009’s $99.3 million to $50.6 million through last season.
During this time, fans have faced tough economic times and a day at the ballpark is expensive. Back in 2009, New York Magazine estimated the cost for a family of four at $258.97.
Not helping matters is the Mets recent play. Last season the team finished under 500 and 25 games back.
The most interesting idea by Gabelli may have been this. He said,
“You got to go back to basics. You have tribal passion in dealing with sports. I grew up in the bronx, you know, kind of a die-hard yankee fan, and so if you are a Mets fan, how do you get a piece of that? Look what Green Bay is able to do. They sell you a piece of paper with nothing as wallpaper which is fabulous. That doesn’t cost $20 million. That may be the next, if they can’t close this transaction, maybe they go out and sell $1,000 limited partnership interests, if they could do something with some public spot.”
For the Green Bay Packers, this has been highly profitable for them. In their recent offering that ended Feb. 29, they saw $67 million in proceeds.
The clock is ticking for the Mets. They are set to go to trial on March 19 fo the Bernie Madoff trustee case. At issue is $83 million in “fictitious profits.”
At what point will they get their financial house in order? Or, will it spin more out of control?