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Major League Baseball wants to change its debt rules

Mar 25, 2011, 2:37 PM EDT

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Just a day after Forbes released a story about Major League Baseball teams in debt trouble, the New York Post reports that baseball is changing its debt rules:

Major League Baseball is working to cut how much debt its teams can carry, The Post has learned.

The move, aimed at avoiding a Mets-like cash squeeze or a Texas Rangers bankruptcy-type scenario, will be centered on widening the definition of team debt, sources close to the situation said.

For example, MLB wants teams to include holding company loans and not just what is directly on team’s books when determining total debt, a source with direct knowledge of the talks said.

This is apparently part of collective bargaining. Makes some sense given that a team’s ability to take on debt has a direct relationship to how much it can spend on stuff, salaries included. I’m sure it’s a tough balance for the union given that they want teams to be both free-spending and solvent.

Whatever happens, there isn’t much murkier in the world than the finances of professional sports teams, so it’s hard to see all of the different directions in which this kind of thing can break. But this seems like a good idea. ¬†One Tom Hicks situation is enough. And by the time this is all said and done, we may have had three of them.

  1. sdelmonte - Mar 25, 2011 at 3:07 PM

    There is much that is murkier than the world of high finance in general. When GE can earn billions in profit and not pay any taxes, anything is possible.

    • natedawg321 - Mar 26, 2011 at 1:26 AM

      Well, the GE case is a little simpler (in concept, not necessarily practice): When you write the laws you make money.

  2. bloodysock - Mar 25, 2011 at 3:10 PM

    The players have to want this too since it mitigates the risk of them being unsecured creditors in an bankruptcy.

  3. 2 Think Good - Mar 29, 2011 at 1:28 PM

    Murky is right Craig – even when the actual financial statements are leaked, there are layers to be worked through – I put the spotlight on Jeffrey Loria here – http://2thinkgood.com/2011/03/28/the-loria-years-300-million-double-double/

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