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O's one of nine teams in violation of MLB debt service rules

Going Underground

By Going Underground
in Orioles Talk

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Slappy Major Leaguer

Slappy

Posted
Posted

Any way you slice it, the O's are probably carrying several hundred million in debt.

Not only has the front office's baseball moves been a disaster, but apparently the operations department can't balance a budget either.

What a mess. Ownership truly is a disaster.

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Hank Scorpio Hangout Grand Counsel

Hank Scorpio

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Yes, fair enough. You probably know more about it than I do, frankly. I've litigated several cases relating to failed leveraged acquisitions and financial frauds, so I have some good background, but I don't read financial statements for a living like you do.

2009 was a blast...

I'm not sure that 10x is a red flag in that particular industry, but it's certainly nothing to do cartwheels about.

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SilentJames Hangout Veteran Council

SilentJames

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Here is a quote from the article that I think is interesting:

"To take a snapshot of the number of non-compliant clubs at a point in time can be very misleading," Manfred said. "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.

This leads me to believe that teams regularly go in and out of compliance, or if not regularly then at least it isn't as uncommon as I was initially thinking.

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hoosiers Hangout Grand Counsel

hoosiers

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More appropriately it would be classified as cash generated from operations. The D and the A are very much part of operating income.

Yes, that is correct. EBITDA is a proxy for cash flow and, in the past when I worked directly with a previous employer's lenders and perhaps today, it was not unusual for EBITDA to be the key financial number in loan covenants regarding coverage, etc. While 10X EBITDA may leave plenty of room in a coverage ratio, it is an amount used as a proxy to say - that's enough debt.

On the surface, I would say it is disappointing that the Os should be on this list. As mentioned, however, we do not know the reasons for the Orioles being on this list. As mentioned in the article, it was a point in time snapshot - so perhaps the Os had not yet collected revenues from MLB, MASN or season ticket holders to pay down debt. Or perhaps our debt amount is close to normal (or much lower), but our maybe our EBITDA is lower than in prior years. It is very likely that our 2011 EBITDA projection would be based on 2010 revenues (to be conservative) and the current year's payroll - which is much higher than last year. This would certainly result in a lower EBITDA which could cause the Os to miss the 10X requirement. Of course, an uptick in attendance or MASN viewership/payout would cause our EBITDA to increase or we might deal folks like Vlad, Hardy, Reynolds at the deadline and lower our payroll again.

This assumes our debt level is normal, but who is to say there has not been a large one-time distribution to the owners? While I expect our ownership runs the team fairly conservatively, I would not be so quick to ridicule JT and his question of whether our debt level is the result of some owner machinations.

On the surface, however, I see little reason for concern. I expect the debt level is substantially below the value of the franchise and also substantially below the net worth of our principal owner - Peter Angelos - which would imply a situation one million percent different than the one in LAD. I also expect that the Orioles are, generally, a franchise that is run quite conservatively from a financial perspective.

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pacman59 A-Ball

pacman59

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The Indians were purchased by Larry Dolan in 2000 for $323,000,000.

According to Forbes they had EBITDA of $10,000,000 in 2010.

They did not make the list.

That is a team with a lot of equity and little debt.

The question is are they worth $323,000,000 today?

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JTrea81 Hangout Grand Counsel

JTrea81

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Any way you slice it, the O's are probably carrying several hundred million in debt.

Not only has the front office's baseball moves been a disaster, but apparently the operations department can't balance a budget either.

What a mess. Ownership truly is a disaster.

And yet they are ready to be big spenders this offseason and possibly pursue Prince Fielder? Something doesn't quite add up there.

The Orioles have more money than they'd want you and others to believe. Peter Angelos is very intelligent and just knows how to make it appear like they don't IMO

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Sports Guy Hangout Grand Counsel

Sports Guy

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And yet they are ready to be big spenders this offseason and possibly pursue Prince Fielder? Something doesn't quite add up there.

The Orioles have more money than they'd want you and others to believe. Peter Angelos is very intelligent and just knows how to make it appear like they don't IMO

And yet you think AM is the issue. LOL

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Hank Scorpio Hangout Grand Counsel

Hank Scorpio

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And yet they are ready to be big spenders this offseason and possibly pursue Prince Fielder? Something doesn't quite add up there.

The Orioles have more money than they'd want you and others to believe. Peter Angelos is very intelligent and just knows how to make it appear like they don't IMO

Please, they're not pursuing Prince Fielder.

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Flosman Major Leaguer

Flosman

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Lots of businesses fix their books to make it appear they are taking a loss. I'm sure the Orioles aren't any different.

The Yankees take much more profit in than you see in those Forbes reports.

You do realize that you are claiming that alot of companies a criminals? Fixing the books is a criminal act.

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JTrea81 Hangout Grand Counsel

JTrea81

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And yet you think AM is the issue. LOL

The Orioles don't want people to think they have money, yet Angelos is willing to spend for a winner as he has those resources.

MacPhail however will never ask him to spend.

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Sports Guy Hangout Grand Counsel

Sports Guy

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The Orioles don't want people to think they have money, yet Angelos is willing to spend for a winner as he has those resources.

MacPhail however will never ask him to spend.

You are so clueless. You really have zero idea what you are talking about here.

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JTrea81 Hangout Grand Counsel

JTrea81

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You are so clueless. You really have zero idea what you are talking about here.

SG, are you still getting info from sources there that leads you to believe he isn't committed to spending anything or are you just basing your opinons on his financial commitment on the time when you worked there during the Thrift years?

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