saul katz

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.”

Article source: http://feeds.nytimes.com/click.phdo?i=a8acd010de80fad4ec5155f1edbcd595

Mets Ruling May Reduce Payout to Madoff Victims

A ruling this week in a case the trustee for victims of Bernard L. Madoff’s Ponzi scheme had filed against the owners of the New York Mets could wind up cutting the amount available to pay all victim claims by up to $11 billion, a lawyer for the trustee said on Wednesday.

The lawyer, David J. Sheehan, said the ruling in the Mets case also would require the trustee, Irving H. Picard, to delay an initial cash payment to eligible victims, scheduled for later this week, until he can determine the ruling’s impact on the amounts owed to other victims of the epic fraud.

Mr. Sheehan’s warnings underscored how potentially damaging the Mets ruling could be for the trustee’s broader effort to recover cash from all of the so-called net winners in the case — those, like the Mets owners, who took more cash from their Madoff accounts than they put in. Those recoveries are the primary source of cash available to the trustee to compensate the net losers, those who took less from their Madoff accounts than they put in.

On Tuesday, United States District Judge Jed S. Rakoff threw out all but two of the 11 claims filed by the trustee and ruled that he could seek no more than $386 million in fictitious profits that Mr. Madoff paid out to the Mets owners, Fred Wilpon and Saul Katz. That figure was based on the sum the men invested in the two years before the fraud was discovered in December 2008, the recovery window set by federal bankruptcy law. The trustee had been seeking $1 billion in fictitious profits and principal paid out in the last six years of the fraud, as permitted under New York State law.

But if Mr. Picard is limited to the two-year federal window in all of the nearly 1,000 lawsuits he has filed against other net winners, his potential recovery would be cut by a total of $5.9 billion, according to Mr. Sheehan. Another element of the ruling could erase another $5.5 billion he is seeking in court, he said.

The enormous scam took in thousands of investors and generated paper losses of almost $65 billion and cash losses of about $18 billion. To date, the trustee has raised about $10.6 billion to cover the cash losses, primarily through out-of-court settlements.

Tuesday’s ruling, consequently, could significantly reduce the amount of money the trustee could seek through lawsuits to compensate the net losers in the fraud.

“This does have real ramifications,” Mr. Sheehan said.

The elimination of the six-year recovery window in the Mets case was cheered by lawyers for other net winners who have been sued, most of whom said their clients would owe far less under the two-year standard.

“This is the first victory for the Madoff net winners,” said Barry Lax, a lawyer for a number of net winners. “Nine of the 11 claims were dismissed and since the Wilpons and Katzes were net winners, other net winners will benefit from the ruling.”

A second element of the ruling is less clear-cut but potentially just as damaging to the trustee. Among the claims thrown out by Judge Rakoff was an attempt by the trustee to recover cash the Mets owners had withdrawn from their Madoff accounts in the final 90 days of the fraud, so-called preference claims.

For the Mets owners, that figure added up to $14.2 million. But if all the 90-day preference claims asserted in all the lawsuits filed by Mr. Picard were eliminated, it would reduce his potential recovery by another $5.5 billion, according to Mr. Sheehan.

Because of the ruling’s broad impact, Mr. Sheehan in a hearing Wednesday asked Judge Rakoff to allow the trustee to seek an expedited appellate review of the decision. “I want clarity from the courts,” Mr. Sheehan said.

Judge Rakoff has set March 19 as the trial date for the two claims remaining in the trustee’s case against the Mets owners, and the trustee has already indicated he will seek a jury trial in the case.

Mr. Sheehan said he would continue to prepare for trial even as he sought an expedited appeal, adding: “If he gets reversed, the whole trial will be different,”

Article source: http://feeds.nytimes.com/click.phdo?i=0890dabcfd75cb64c9d98cba9cbeb521

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

Mets Ruling May Reduce Payout to Madoff Victims

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