Would You Work For This Guy?

I didn't think so.

Meet Jeff Wilpon, COO of the New York Mets and the son of Mets pricipal owner Fred Wilpon. On Monday, the father/son duo called for a press conference and explained to the media why they relieved Omar Minaya of his General Manager duties and fired Manager Jerry Manuel after their second straight losing season. "We failed," said Fred Wilpon. The two sat there and answered the media for about an hour. Fred seemed sincere while Jeff came off as agitated and a bit overwhelmed. Jeff's role is what worries me the most.

These moves of course were expected. Manuel's contract expired this year. Minaya, on the other hand, is under contract through 2012 (owed about $2 million). The owners say that the new GM will decide if he wants Minaya back in a diminished role and will pick the new manager.

The media focused on the issue that there is a perception around the league that the Wilpons are micro-managers and get involved in baseball decisions. The Wilpons recognize this perception and insist that a new GM will have "full autonomy" and that "the old general manager had that." This is why I'm most concerned about Jeff Wilpon's relationship with this team. There's a major problem with your franchise if the best people in the business wouldn't be interested in working for a team in the country's largest market. Check out Joel Smerman's excellent article in the NY Post that describes Wilpon's reputation as "short-tempered, tone deaf, a credit seeker, an accountability deflector, a micro-manager, a second-guesser, a less-than-deep thinker, and bad at self-awareness." Sounds like the ideal boss, right? This new hire will be one of the most imporant decisions for ownership in its 30-year tenure at the helm of this franchise. They have to clear the air as they interview candidates and make it resonate that they will live up to their promise of autonomy. As Fred Wilpon said, "we're not qualified to pick baseball players." So set the budget and keep your hands off!

There's also significant speculation that the Mets are facing financial meltdown. It was revealed last year that Fred Wilpon was a long-time client of Bernard Madoff. The bankruptcy trustee revealed that Mets LP, a team affiliate, actually withdrew close to $50 million more than it had invested. This briefly abated conjecture that the Wilpons would be forced to sell the team. In July, however, a complaint was filed in Manhattan federal court saying Sterling Equities (the Mets are an affiliate of Sterling Equities) invested $16.2 million of its 401(k) plan's $17.6 million of assets with Madoff. This reignited media speculation surrounding the health of the Wilpon empire.

The Mets received $695.4 million in tax-free bonds to finance the construction of Citi Field. In February, this municipal debt was downgraded by Standard & Poor's to BB+, its highest non-investment grade rating. This downgrade was also a result of Ambac's rolw of insuring the bonds; their credit rating is CC. This June, the Mets refinanced $375 million of debt and had to put up more guarantees in the process since one of their Madoff investments was in the collateral pool. This may suggest the team's finances are rather healthy since they were able to maintain the same level of loan proceeds. Of course there isn't enough public information to confirm this assertion.

SportsNet New York, the New York Mets-controlled regional sports network, was launched in 2006 with Comcast and Time Warner as minority partners. SNY recently borrowed $450 million to refinance its existing debt and to make dividend distributions to investors. According to sources, the network has cash flow of about $100 million. This revenue stream is more inelastic since it is tied to cable subscribership. Fred Wilpon told the media at his press conference that the network is performing very well - for whatever that's worth.

The ongoing theme here is that the Mets have a significant amount of debt - albeit at low rates since some of this debt floats over Libor and the tax-free financing is at a very low rate. Their attendance, however, was down 600,000 gate receipts, a 17.2% drop from the inaugural season at Citi Field. Will attendance continue to sour with a losing product on the field? I would think so. Besides, ownership admits that the Mets are in a rebuilding phase. Look back at my post from August which lays out the $120 million of payroll commitments for 2011. If they are able to shed KRod, that number could come down $11.5 million, but it still seems unlikely that they can play a role in the free agency market for someone like Cliff Lee. Ownership must be losing quite a lot of money each year as the revenue line shrinks and any net income is swallowed up by their massive debt service amounts.

Fred Wilpon said the last four years have been the hardest of his 30 years of ownership. I certainly share that sentiment. Sadly, I am worried it will take just as long to turn things around.