Mets, Struggling for Cash, Receive $40 Million Bank Loan

The team described the arrangement as a bridge loan, meant to aid the team as it tries to raise money through the sale of minority stakes in the club.

The loan marks the second time in a year that the Mets have received an infusion of cash. A year ago, the team’s owners, Fred Wilpon and Saul Katz, received a $25 million loan from Major League Baseball, but they have not been able to repay it. Meanwhile, Sandy Alderson, the club’s general manager, said last week that the organization had lost $70 million in 2011 alone.

Earlier this year, the team’s owners appeared to have a plan to address their financial problems: selling a roughly $200 million stake in the team to the hedge fund tycoon David Einhorn. But after months of negotiations, the owners called off the deal in September, in part because they did not want to give Einhorn a path to becoming the team’s majority owner.

At the time, Wilpon and Katz said that “ownership has provided additional capital to cover all 2011 losses and is moving forward with the necessary resources to continue to operate the franchise.”

And the owners said they were confident they could easily raise the $200 million they needed by selling 10 minority shares in the team for $20 million each.

The $200 million was going to be used, they said, to pay off debts to their banks and to Major League Baseball, and to finance team operations.

The recent $40 million loan suggests that the effort to sell minority shares in the team was not generating the cash that the owners needed in the near term. The owners, through a spokesman, said the loan had been approved by Major League Baseball and the other banks to which they are already indebted. Bank of America was the source of the $40 million loan, according to a person with knowledge of the deal.

This month the club lost the free-agent shortstop Jose Reyes, widely considered its best player, to the Miami Marlins, and its extremely modest player acquisitions in recent weeks suggest the team is not operating like a big-market, marquee team.

The implications of the team’s latest outside financing are not easy to forecast. But two people with knowledge of the team’s finances said that if a full lineup of minority stake investors was not in place by next spring, and cash not in hand, Wilpon and Katz might have to confront the prospect of selling the team entirely.

The men first had to face that possibility last December when they learned they were the target of $1 billion lawsuit brought by the trustee representing the victims of Bernard L. Madoff’s fraud. The trustee has accused the men of having turned a blind eye to the possibility that Madoff was a fraud while they enriched themselves with his steady, outsize investment returns.

Wilpon and Katz are facing a possible jury trial this spring at which they could be forced to explain themselves, and their years of investing with Madoff. Their potential liability could be hundreds of millions of dollars.

People familiar with the team’s situation have said the owners had firm commitments from at least seven investors interested in buying a small share of the team for $20 million apiece. Still, until all are sold, none of the investors have had to turn over cash. Vince Gennaro, a consultant to several major league teams, said that the $40 million loan “says to me that their finances continue to be tight, that there is a cash pinch.”

He added: “The team underperformed, and this tides them over until they get their money. They need cash flow.”

Now, Gennaro said, between the bridge loan and the $25 million owed to baseball, “the first $65 million has to go out the door” should the owners sell an adequate number of shares in the team.

Joseph Ravitch, a veteran sports banker who is a partner in the Raine Group, said the ability of the team’s owners to secure another $40 million in loans established that the team was still considered a valuable holding.

But, Ravitch added, a bridge loan usually carries a high interest rate, and he said that bridge loans were very clear “about their ability to recover the loan against an asset.”

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