Mets Einhorn deal on hold due to JPMorgan Chase objection

7/24/11, NY Post, Kosman, "The Mets' pending deal to sell a minority stake in the team to David Einhorn is dragging on well beyond its expected closing date because lender JPMorgan Chase is not letting the team structure the deal as a loan, making it harder to complete, The Post has learned.

"The Wilpons are having a tough time with the banks," a source close to the talks said.

Fred Wilpon's Sterling Equities, which owns the Mets, last week extended its exclusive negotiations with Einhorn after failing to reach a deal by the June 30 deadline.

Einhorn's $200 million purchase of a 33 percent stake in the money-losing Mets franchise is structured as a loan -- with the hedge-fund investor getting paid back in three years and having his stake reduced to about 16 percent.

JPMorgan Chase, which is owed about $500 million by the team, won't approve such a deal unless its loans get serviced --

• repaid or restructured -- prior to Einhorn.

In addition to objecting to the Einhorn deal, in the last few months the bank wrote a "tough" letter to Sterling telling it that the Mets had breached their loan in 13 different ways, said the source, who has seen the letter.

The bank did not put the team in default, but the letter puts it on notice so the bank could more easily pursue that course in the future, the source said.

The 43-year-old Einhorn, if he is not repaid in three years, has the option of acquiring a controlling stake in the Mets at a predetermined price.

The JPMorgan Chase-led lending group has said that the Mets cannot simply pay Einhorn back to keep its majority stake, at least if they intend to do so before June 30, 2014, when their loan matures, the source with direct knowledge said.

And Einhorn wants to be paid back by that time.

The bank group, which has the right to approve all loans to the team, wants a complete restructuring of the $500 million-plus in debt as part of any plan to pay Einhorn back.

"I'm very confident this can't be a loan," the source said. "It needs to be complete recap."

With the Mets on track to lose $60 million this year,

• the banks will likely want more of their loan paid down.

The Mets, to execute a full recap and pay back Einhorn, will likely need a new equity investor to get a deal done at that time, the source said.

Sterling, which also owns a majority stake in the profitable SportsNet New York (SNY) regional cable sport network, was planning to use free cash from that business to pay Einhorn, the source said.

"Einhorn will have to wait until later, or be part of a larger package," the source said.

Sterling likely does have enough money to fund the Mets for some time, the source said, but Major League Baseball and the lending group have put pressure on Sterling to sell a minority stake in the team after it took an

• emergency loan in November from MLB.

Lenders are becoming tougher about their troubled loans to sports teams because of losses taken last year in the Texas Rangers bankruptcy case, and that might be coming now in the Los Angeles Dodgers bankruptcy, sources said.

• "JPMorgan has been very difficult on several sports loans," another source said. "They are being supremely cautious."

"We have a very good relationship with all of our lenders and are working closely with JPMorgan, as agent for the lending syndicate, in connection with the current minority sale process," said a Mets spokesperson last night."

• 7/24/11, "JP Morgan-Chase holding up Mets-Einhorn deal," NY Post, Josh Kosman

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