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Baseball does not want you to know about its debt crisis

Mar 23, 2011, 11:00 AM EDT

Tom Hicks

There is an in-depth report at Forbes today about the debt crisis facing Major League Baseball that anyone who cares about the business of the game should read.

The story focuses primarily on the well-known financial problems facing the Mets and Dodgers, with a shout-out to the Tom Hicks Rangers, but it suggests that teams taking on too much debt is a widespread problem.  The trick comes via what Forbes says is owners’ circumvention of Major League Baseball’s often-cited, but rarely enforced debt ratio rules. Put your debt in a holding company like Tom Hicks did and, voila, you’re in compliance, even as you are being crushed by debt collectors.

One would think that such a charge would meet with a strong rebuke from Bud Selig, but he leaves that to his number two guy, Rob Manfred. And Manfred’s response is a bit unsettling:

“Nobody outside the game knows what was done or not done with respect to any individual club … I don’t think anyone outside the game is in a position to make a judgment as to how the debt-service rule has been administered.”

Really? No “you’re wrong,” or “baseball ownership is healthy?” Forbes comes to you and says that it’s writing a story about how teams routinely circumvent the debt ceiling rules and are doing so at tremendous risk and peril, and you’re really going with “how would you know?”

Yikes!

  1. apbaguy - Mar 23, 2011 at 11:28 AM

    It’s always fun to bet with other people’s money, as many of the owners are doing. A lot of these guys grew up watching Trump and Ted Turner take on mountains of debt in the ’80′s, and watched as the bankers who made the loans lost their jobs and the loans were written down, or off altogether, and Turner and Trump emerged far wealthier and with reputations not just intact, but enhanced. Who’s to say if anyone would lose out today, with bailout money still sloshing around, and near-zero interest rates.

    • The Rabbit - Mar 23, 2011 at 1:52 PM

      Absolutely! Those of us educated in finance and investments were trained in the fine art of leverage when the outrageous interest rates of the early 80′s subsided. It sucked for pension plans that didn’t invest in junk bonds and/or were raided by corp execs but was great for capitalists.
      Now if only I were rich enough to form a holding company…….

  2. Old Gator - Mar 23, 2011 at 11:53 AM

    This is what happens when your so-called commissioner is really just one of the guys. Baseball under an independent commissioner would be, I suspect, in far better shape. Right now, even though it’s awash in money, the game as a whole could use the next iteration of Mountain Landis. But then, so could Congress.

    • monsieurbear - Mar 23, 2011 at 3:21 PM

      The Commissioner works at the pleasure of the owners and would no longer be the Commissioner otherwise.

    • ta192 - Mar 23, 2011 at 4:50 PM

      Agree they need a decent commissioner in MLB, but I wouldn’t wish Landis on North Korea…

  3. steve keane - Mar 23, 2011 at 12:05 PM

    The Wilpon’s claim they were “duped” by this Forbes report and are victims and they will be vindicated

  4. sportsdrenched - Mar 23, 2011 at 12:09 PM

    I’ll keep this in mind the next “Cheap ass Royals” Comment or article get’s posted on here.

    • tomemos - Mar 23, 2011 at 1:22 PM

      Why would you put an apostrophe there? Where does anyone learn that?

  5. bigtrav425 - Mar 23, 2011 at 12:14 PM

    whether its true or not i dont know but i tend to believe it is true with the economy and the way contracts are getting outrageous.If this is true then that means that,and i wont get into detail ,but the contract money needs to come down..One way or another…..iv been saying this for a few yrs..make ALL contracts incentive laden,that way when a guy doesnt perform,you save money etc etc

    • paperlions - Mar 23, 2011 at 1:38 PM

      Not really. What happened in each of these cases is that people without the financial means to buy a team, was allowed to buy one, and people that will buy something that they can’t afford that costs 100s of millions of dollars are likely to often buy things they can not afford.
      .
      This situation is akin to banks approving loans for people that can’t afford the house they are financing. That doesn’t mean that the cost of the house or cost to maintain the house must come down, it just means that the person that bought it couldn’t afford it.

    • Reflex - Mar 23, 2011 at 3:52 PM

      Last time I saw any numbers, labor costs were slightly more than half of expenditures for most teams. If you’ve ever run a business, you’d know thats right in line with expectations if not slightly below the average. People who make comments like this are people who I strongly suspect have never run a business.

  6. paperlions - Mar 23, 2011 at 1:35 PM

    After reading the full Forbes article, I am forced to conclude that they get all of their financial information related to the Mets, all of which is clearly inaccurate, from one of the nefarious and diabolical local periodicals of New York.

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