Author Topic: Lerners are Cheap - 2017  (Read 19204 times)

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Offline PowerBoater69

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Re: Lerners are Cheap - 2017
« Reply #100: February 07, 2017, 10:18:00 AM »
You see, I've always had problems with this. Team owners routinely don't count debt service as profit, despite the fact they are paying debt on a very quickly appreciating asset.

Let's put it simply - let's say the Lerners took out $600 million in debt to buy the team at 0% interest, payable in 10 annual installments of $60 million. My understanding is that those payments are taken out of operating profits for MLB purposes. So the Lerners could spend $60 million less in payroll without "taking any profits out of the team" according to MLB numbers.

Of course, after ten years they not only have the team owned debt-free, but the value of an MLB franchise likely doubles (conservatively) over ten years, so now they have a $1.2 billion asset without any debt on it, without having "taken any profits". Of course they'll be happy to take the profits when they sell the team :(

Your numbers are way off. The team was purchased for $450 million, I believe that 20% was paid in cash but that might have been less. So $360 million in debt. The team had a Forbes estimated value of $1.3 billion last year, tripling in value. (MASN used the Forbes estimate in a court filing as evidence that the Nats have not been harmed by the TV deal, the Lerners did not dispute the value.)