The Wilpons and Madoff trustee Irving Picard reached a settlement today. Though both sides might try to spin the case as a win, it’s the Wilpons that should be happier about how this case came to an end.
Irving Picard might choose to focus on the fact that the settlement required of the Wilpons that they pay $162 million to his clients, those that lost money in Bernie Madoff’s Ponzy scheme. It’s true that this $162 million number is impressive in some ways. It’s almost twice the $83 million that Judge Jed Rakoff basically guaranteed the trustee in his first landmark ruling in the case. It also represents the profits that the Wilpons’ many Madoff accounts made in a six-year window — settling the debate about two- and six-year windows that has been prevalent in this clawback case.
But it’s still an almost un-mitigated win for the Wilpons.
For one, they don’t have to begin paying the settlement for three years. That’s important to an ownership that has massive debt on the team, stadium, and television station coming to term in the next two years. They get a little grace period, and a little breather room that they can spend convincing investors that their ownership is sound.
More important, however, is the revelation that the Wilpons can now join the line of Madoff claimants. Not only did they make $162 million in net-winner accounts with the Madoffs, but they are also claiming $178 in losses on their net-loser accounts.
Why didn’t the Wilpons and the trustee just offset those two numbers to begin with? Well, because it’s been Picard’s stance that you have to pay for net winner accounts first and then get in line for net loser accounts. That publicly held stance has been cemented by this settlement, which will help Picard with future negotations, but it also means that the Mets’ owners could end up cancelling out much of their debt to the trustee’s fund.
How much? According to bankruptcy expert Douglas Furth, probably more than half. In my conversation with Furth today, the partner at a bankruptcy specialist expounded on the possible future return on the Wilpons’ $178 debt claim:
[Furth] points out that “net loser claims today are trending somewhat north of 50 cents on the dollar” in public markets — which means that “people who have studied this closer think that this is a good investment.” Someone paying more than fifty cents on the dollar for a Wilpon claim in 2012 believes that, by the time he is able to cash in that claim, that debt will return him enough money to make an investment of present-day cash make sense.
If the Mets’ owners do indeed get more than half of their losses returned to them, they might manage to lose less than nine figures in the Madoff mess. They still have massive debts coming to term on the ballpark, team and television network over the next three years. Mets ownership is not out of the woods yet.
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