Coleman: Happy New Year, Mets Fans
By Ed Coleman
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If one were to grant New Year's wishes to the Mets, it might take a while. There's a lot that they need. A healthy Johan Santana. A healthy Ike Davis. A healthy Daniel Murphy. A more productive David Wright. A Jason Bay that resembles Jason Bay. More pitching. A few more position players. You get the idea.
But no matter how the team is constructed at the beginning of the 2012 season, what the Mets really need is a fast start. Not the 8-13 beginning to last season that Terry Collins and his crew eventually turned around. That club surprised even themselves, riding an incredible first-half performance by the now-departed Jose Reyes until injuries, a pair of mid-season trades and a bullpen collapse did them in. No, this team needs a quick getaway, early wins to win over a disaffected fan base, wins that can push bodies through turnstiles to try and ease the cash-flow problems that are seemingly choking this franchise, and enable it to get out from under the mountain of debt that is weighing it down.
Just last week, credit rating agency Standard & Poor's changed the outlook on the $695 million in bonds - issued on behalf of Queens Ballpark Co. to build Citi Field - from stable to negative. The reasons given were decreasing attendance, the recession, and local competition for club seats and luxury boxes.
The action usually serves as an indicator of a future cut in the bond rating.
Citi Field's revenue fell 12% in 2011. The biggest drop off was a 22% decline in club seat revenue dedicated to repay the bonds. Merchandise and food + beverage revenue fell 20% last season. And attendance at Citi Field fell off again - 27% to 2.3 million fans last year. It's dropped 42% since opening in 2009, and cash flow has declined each year as well.
Season tickets, which make up about 40% of total revenue, also declined - down 22% as previously mentioned. But Standard & Poor's called "aggressive" a Citi Field projection that attendance will rise to 2.5 million this upcoming season - stating that attendance is likely to keep falling and that 1/3 of the luxury suites are up for renewal in 2012.
44% of Citi Field revenue is secured by contract - luxury suites, club seats and advertising - and that's a smaller percentage than other stadiums. Thus Citi Field is more dependent than other stadiums on the renewal of premium season tickets and advertising, and because of that reliance on game-day revenue, it can lead to cash-flow volatility - and with attendance dropping, cash flow has declined each year since Citi Field opened in 2009.
Debt and too little cash flow can be toxic. Debt forced the Texas Rangers into bankruptcy. Not enough cash sent the Los Angeles Dodgers to the same fate last June. The Mets' debt is steep. At the recent Winter Meetings, GM Sandy Alderson said the Mets lost $70 million after debt payments in 2011. They have to pay over $40 million a year in bond payments ($43.7 - up from 19 million) from stadium revenue. They have close to $900 million of debt on the team and SportsNet New York (SNY) - $430 million on the team due in 2014, $450 million on SNY due in 2015 - coming due.
The Mets still owe MLB $25 million from a loan last year - repayment has been extended. And they just recently secured a $40 million loan from Bank of America. The team is trying to seek 10 minority stakes to outside investors at $20 million per to raise additional capital. And the Wilpon family is being sued by the trustee for Bernie Madoff victims with a trial set for this March.
As Standard & Poor's said last week - "The key issue going forward is that any unfavorable changes in team financing operations may hurt team performance and reduce attendance and revenue." Something the Mets simply can't afford - short-term or long-term.
Happy New Year, Mets fans!
If they win, will you come?
C U soon
Eddie C.
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