Major League Baseball, which recently approved a $40-million bridge loan and extended a $25-million loan to the Mets last year, is content with the way the team is handling its financial situation, a person familiar with the situation said Wednesday.
In addition to the loans and mounting debt, general manager Sandy Alderson said the team lost $70 million in 2011, star shortstop Jose Reyes left town via free agency and the ownership is facing a $386 million lawsuit from the trustees in the Bernard Madoff Ponzi scheme.
As for the team's prospects in 2012, it will be without Reyes, the National League batting champion, who signed with the Marlins without receiving an offer from the Mets. The payroll for 2012 is not expected to top $100 million, meaning the Mets may not be bringing in any significant reinforcements. There also is some doubt about the availability of pitching ace Johan Santana, who might need more time to rehabilitate his left shoulder.
The bridge loan appears to be a financial relief valve until an estimated $200 million is raised by selling units of the team to at least 10 investors. That money would help pay for 2011 and potential 2012 losses, according to a source. Alderson said on Tuesday the monetary problems likely would extend beyond this year.
Another source said that while the projected cash infusion from investors would stabilize the team's finances through 2012, ownership would have to earn revenue by drawing a larger fan base starting in 2013 or face more severe financial consequences.
The bridge loan, which a source said came from Bank of America, usually comes with steep fees and interest, said Joseph G. Perri, president and CEO of Gold Coast Bank, which makes business and individual loans to clients on Long Island.
"The problem with bridge loans, if the payoff goes bad they [banks] are stuck with the loan," Perri said, "so they give themselves all sorts of outs and collateral. It's usually pretty steep in terms of fees and interest rates. There's no standard [fee rate] on it, I could see [Bank of America] doing this for a one percent fee, plus an interest rate in the five to six percent range. If they're not doing it at that, they've giving it away."
Bridge loans have a defined payback date, Perri said. "By definition the bridge means interim," Perri said, "so normally it's not more than six months and that's high. Normally, 90 to 120 days, that's standard."