XM MLB Chat: Wilpon and Katz used Madoff accounts to get loans to buy out Doubleday- NY Times

2/22/11, "All sorts of hypothetical sales packages are being floated by executives in the sports investment industry, who declined to speak on the record because did not want to jeopardize their relationship with the Mets. They include:

¶The Mets sell 51 percent over several years, which would be similar to the phased-in, five-year sale of the San Diego Padres by John Moores to a group led by Jeff Moorad.

¶The Mets sell only 25 percent of the team but throw in 15 percent of SNY, the team’s profitable cable network.

¶The Mets sell 25 percent of the team but insist on getting a put option from the buyer that allows them to sell another 26 percent to the new investors at an agreed-upon price anytime over the next three years. The option gives the buyer the possibility of future control, but the decision to trigger the option would rest with Wilpon and Katz.

By showing the trustee, Irving H. Picard, that they could raise additional cash by exercising their put option, Wilpon and Katz may be able to persuade the trustee to give them time to try raising money from other assets, like their real estate holdings.

Wilpon has some experience with put options because he and Nelson Doubleday each had one in their agreement to become 50-50 owners of the Mets in 1986. In late 2001, Doubleday exercised his option to have Wilpon buy him out at a price established by an independent appraisal of the team’s value.

But Doubleday argued that the appraisal was too low and that he had been the victim of a “sham process” by Major League Baseball to reduce team values.

Wilpon sued Doubleday to force him to accept the appraisal and Doubleday did,

receiving about $135 million from Wilpon in August 2002. Two years later, Wilpon and Katz used their investment accounts with Madoff to persuade lenders to refinance certain loans that let them buy out Doubleday,

according to Picard’s lawsuit.

Potential buyers could also ask for a call option, which would give them the right to buy a larger stake. But it is unlikely that Wilpon would give the buyer of a minority stake the leverage to buy control of the team."...