SNY Bails Wilpons Out of Financial Mess

Since the Madoff mess, it has been pretty obvious that the Mets plan was financial survival, plain and simple. Cut costs, hang in there, pay the creditors and hope they can make it to a time where new money would come from someplace. This is hardly a novel approach: distressed businesses do this all the time as a last resort. It mostly fails because the lack of new investment results in a bad product and a decrease in revenues, and a vicious cycle begins. The Mets organization has been stuck in this very cycle. However, every once in a while, the strategy can work.  As long as you hang in there, you have the puncher’s chance that something will change. Well, things have changed, and I am telling you that like it or not, the Wilpon family is not going anywhere.  They did one very smart thing in the last ten years by starting up SNY, and that is what is going to bail them out.

If you haven’t kept up with the latest TV sports changes, the value of sports on TV is exploding. The money is going up, and not just a little. Reports are the Dodgers are working on a rights deal that could bring them $240 million a year in revenue. And the Yankees are selling a 49% stake in YES, which is now valued at $3.4 billion. Last but not least for us as Mets fans, Rutgers University is joining the Big Ten as the Big Ten wants a piece of the New York television market. The combination of these last two events, the Yankees YES sale and the Rutgers move, cements it for me. Just like that, the Mets are flush again. Let’s look at a few numbers and one comparison to prove this.

YES currently generates $571 million a year in revenue. SNY has $469 million a year in revenue, which is equal to 82% of the revenue YES has. So playing along with this line of thinking, SNY would be worth $2.8 billion (82% of $3.4 billion). There had been $450 million in debt for SNY ,and it was recently increased by $200 million. That still leaves over $2 billion in equity in the company of which the Wilpon family owns 65%, or well over a billion dollars in new money.

Now you may be thinking wait, there is more to it than that. The Dodgers and Yankees are iconic franchises. SNY, featuring the Mets, will not be nearly as valuable.

To that I say – Rutgers University!

You cannot be any less iconic than Rutgers University sports. Rutgers has been in their current league, the Big East, for 20 years and has never won the football championship of the league. The basketball team is worse. Forget a league championship, the basketball team has never even made it to the NCAA tournament, even in years when the Big East has sent ten teams. Yet the big and powerful Big Ten wants Rutgers. Why? The New York television market. The Big Ten Network has become big business, and they see all the eyeballs we have jammed in this metropolitan area. So they want Rutgers, and they don’t care how crappy their teams have been.

This bodes very well for Fred, Saul, and Jeff. Just like that, there has been a major change in the landscape and they now own a very valuable franchise in SNY. They have held on, and they have won. They can raise plenty of money through a sale of their stake, or just raise more cash by increasing the debt on their SNY holdings. Money is no longer going to be a huge issue.

So sign Wright, sign Dickey, and get us a catcher too!

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10 comments

  1. Dan says:

    Absolutely right. Along this line, I have wondered why the Wilpon’s partners (Time Warner)haven’t put more pressure on teh Mets to put a better product on the field. You would think a better product translate to better ratings and increased value. Just asking.

  2. CharlieH says:

    How long is Rutgers tied to SNY? This might be merely a shiny object if Rutgers is able to bolt for YES or MSG.

  3. Frank Dunne says:

    Mike… One difference between a “regular” business that is in the survival mode and the Mets (any major sports franchise for that matter) is they still have incredible value. According to Forbes, if the Mets were to go up for sale today, they would bring in a cool $719,000,000 even though they lose money- on paper. Now I realize that is a drop in the bucket compared to the rivals in the Bronx. They are valued at (are you sitting down) $1,850,000,000.

    If my business were in the financial mode- Survival, the Mets are in, I couldn’t sell my biz for a six pack of Yoo-Hoo and a new Schwinn.

    • Michael Geus says:

      Frank, excellent comments, and I agree. Expect Forbes to move those numbers higher now that TV rights fees are rising. The Mets are programming content and in the age of DVRs, baseball is becoming more valuable to advertisers who want their commercials viewed and not skipped.

  4. [...] today that the Wilpons refinanced $450 million in loans related to their SNY interests. As I posted on November 28, SNY has clearly appreciated in market value. We also know that in general, interest rates are [...]

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