Report: Debt issues cast wider MLB net

  • ESPN.com news services | June 4, 2011

The Los Angeles Dodgers and New York Mets are widely known to be in financial hot water.

But seven other major league teams, including the Philadelphia Phillies, Chicago Cubs and Texas Rangers, are out of compliance with MLB rules regarding debt, the Los Angeles Times has reported, citing three anonymous sources familiar with a confidential briefing presented at last month's owners meetings.

The report casts a wider shadow over the financial footing of some of baseball's biggest teams even as the league rakes in a combined $7 billion annually, a revenue stream that has doubled in eight years, according to the report.

I can't say I haven't heard people in baseball talk about that, but there is a lot of deferral to Bud on this one.

-- Sports business consultant Marc Ganis, referring to commissioner Bud Selig's action toward solely the Dodgers

And with so much money rolling in, in an era commissioner Bud Selig often has referred to as a "golden age," it also calls into question how much of baseball's luster has been overleveraged.

The violations in question concern debt-service rules intended to limit a club's debt to 10 times its annual revenue, according to the Times. Other teams named in the owners' briefing were the Baltimore Orioles, Detroit Tigers, Florida Marlins and Washington Nationals.

Selig's predecessor, Fay Vincent, called the prospect of so many teams in violation of the debt rules "troublesome," the Times reported.

Selig told the Chicago Tribune on Friday the Cubs face "absolutely no" consequences because of the nature of their debt and the franchise's history.

"I have no concerns, nor does anybody in baseball and all the financial people [we deal with]," Selig told the newspaper. "Nor, for that matter, am I concerned with the overall health of the industry. It is in very good shape. You can't judge anything by looking at this snapshot in time.

"Everything we've ever asked of them, they've done it and then more," Selig told the Tribune. "I'm unhappy that a story [like this] reflects badly on the Chicago Cubs under Tom Ricketts. There is no reason anybody should have economic concerns. ... It's so unfair to Tom Ricketts and the family. I normally don't talk about our business, but I can't let this go on. This is just wrong.''

Three of the teams named are no stranger to fiscal controversy. The Mets, who recently said they were $427 million in debt and could lose $70 million this season, have fallen on hard times in the wake of the Bernie Madoff scandal; the Dodgers have been appointed an oversight trustee by Selig as owner Frank McCourt deals with a contentious divorce; and the Rangers emerged from bankruptcy court last summer before advancing to the World Series.

"You've got to be thinking, with two of the premier franchises in trouble and a major-market team that has just come out of bankruptcy, what else is out there?" a prominent sports investment banker told the Times. The banker declined to be identified because of his work within MLB, the report said.

McCourt has questioned why Selig has taken action toward the Dodgers but stopped short with any other team.

"I can't say I haven't heard people in baseball talk about that, but there is a lot of deferral to Bud on this one," Chicago-based sports business consultant Marc Ganis told the Times.

There are many gray areas in the way teams' finances are reported. For example, while a team may list its facility debt one way, another club may file it under a separate financial accounting category.

The Phillies have sold out Citizens Bank Park throughout the season. But a team's ability to fill seats does not correspond directly with its ability to turn a profit.

The debt rules aren't specific as to how the commissioner's office should enforce them, though a number of options are listed, according to the report. Among the possibilities are ordering a team to raise equity, requiring expenditures to be approved by MLB in advance and suspending a team's owner.

Rob Manfred, MLB executive vice president of labor relations, would not confirm the number or identity of teams to the Times.

"To take a snapshot of the number of non-compliant clubs at a point in time can be very misleading," he told the newspaper. "With one or two exceptions, we see how teams are going to be compliant again in the short term, so we're not worried about them.

"We are not concerned about the overall economic condition of the industry," Manfred said.

Information from ESPN The Magazine's Buster Olney was used in this report.

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