The Chicago Tribune reported that the Cubs are among nine teams in violation of MLB’s debt service rules according to sources not authorized to disclose the information. The article suggests that the noncompliance relates to rules which limit debt to 10 times of an organization’s earnings. This report does not mean the Cubs cannot pay their payroll, does not mean the Ricketts family is cheap, and does not necessarily mean the Cubs are in dire financial condition. More than likely, what this means is that the Cubs are in violation of a financial covenant of the MLB at a point in time. More simply, if you took the Cubs earnings at the point in time referenced by the sources divided by debt outstanding, the result is less than 10%. It is not a coincidence that the Dodgers (taken over by MLB in 2011), Rangers (purchased in 2010) and the Nationals (purchased in 2006) also appear on the list of nine teams as all are in big markets and were purchased at high prices in recent years. On the contrary, the Braves (purchased in 2007) and the Padres (2009) do not appear on the list although these are smaller market teams. For the teams purchased in recent years, debt was required to finance the transaction and debt is repaid over a number of years, meaning it is more difficult to achieve compliance with the MLB covenant in the years immediately after the purchase.
The Ricketts paid approximately $845 million for the Cubs, Wrigley Field, and a 25% stake in a regional sports network. When the Ricketts family “purchased” the Cubs, it does not mean they wrote a check for approximately $845 million. MLB organizations are like companies in that they are financed with equity and debt. The Ricketts, like all other organiziations, utilized debt to finance a portion of their purchase of the Cubs. MLB has covenants in place to limit debt levels to prevent situations like the Dodgers. The Cubs are not in the Dodgers situation or anywhere near it.
The Ricketts earned their money from their interest in TD Ameritrade. Joe Ricketts alone has over $1 billion in interest in the Company as of today and that does not count the ownership interest of his children in the company. Without having access to the Cubs financial information, it is not possible to fully assess their financial situation. Based upon an assessment of the facts, they may be in violation of the parameters of a simple calculation. However, given the financial strength of the family and the qualitative consideration that this is a new ownership group, this likely is not a concern of Cubs fans. The fans can continue to worry about the poor performance on the field and not worry about the financial situation of the team.
Now on to the Ramblings …
(Note: This week’s ramblings was written prior to the debt service news that surfaced Thursday night/Friday morning)
Hello. Good day.
First off, I will start by apologizing. Yes, I am sorry. Sorry to anyone I have offended, upset, or disagreed with on this fantastic site. Also, I am sorry to everyone I will most likely continue to disagree with. (Yes, I hate that the sentence ends in a preposition as well.)
However, disagreement and arguments are unavoidable as Cubs fans, or fans of any team, for that matter.
As we move forward with this absolutely abysmal season, please remember this when commenting. No one is right 100 percent of the time. And almost no one is wrong 100 percent of the time. All we ask here at the CCO is that you be respectful of one another. If that is not feasible, then look somewhere else to post.
- Man, a lot of people sure have bailed on Marmol rather quickly. He hasn’t had a great start to the season, but let’s slow our role on this one. He is not a disaster yet.
- Granted this could change, but I think it is nearsighted to call his new contract a waste or a bad decision.
- I mean, there are plenty of things to call out this management for, let’s focus on those if we are going to complain.
- The negativity is completely understandable, but it is really starting to grate on me. Am I the only one? I am trying to stay positive.
- And by positive, I do not mean that I have any grand delusions of this team, but that I would rather focus on positives for the future.
- For everyone, and I know there are plenty, that wanted the youth movement to begin, we are almost there.
- Here is something I think we can all agree on: What the flying F is Blake DeWitt doing playing left field?
- I am with everyone on that one. This appears to be Hendry trying to save face and hope DeWitt explodes.
- On Memorial Day, in reference to D.J. LeMahieu during the Bleacher broadcast, Ricketts said, “I hope he gets a lot of playing time.”
- So, it appears Tom is in favor of the youngsters. So, let’s see how this works out.
- Soon enough, it will become very clear who is calling the shots. And if Tom is the one doing so … Jimmy H. can kiss his job goodbye.
- Ricketts has been in control for about two years, which is a good amount of time to learn the business and figure out what he has. I expect to see changes very soon.
- Maybe not the big changes every wants yesterday, but small ones that will eventually lead to the big, and more important, necessary ones.
- If you don’t like Ricketts, fine. That is your prerogative. If you do, that is fine as well.
- However, I honestly feel that Tom should not truly be judged until he cleans house and rebuilds his management team. At that point, it will be fair, in my opinion.
- Yes, I fully expect to get RIPPED for that opinion. But that is all it is, an opinion. There is no right or wrong here.
- If you expected quick and rash decisions from the Ricketts family, then I am sure you are disappointed.
- And while I don’t disagree with the crux of the idea, he handled the luxury tax deal horribly from a PR perspective. Just horribly. And he has admitted that.
- At least there is Castro and Barney. Take look at the column Neil put up yesterday in regards to our very own “Double Trouble.”
- Tony Campana is faster than I thought. I will admit I am surprised. He got thrown out at a very high rate in AA, so I did not expect to see him translate well. I was dead wrong about his speed.
- Here’s hoping he can keep hitting and maintain an impressive, or, at least, an above-average slash line. If he keeps it up, and as Neil says, I like my crow salty.
- And while I am at, and he will try to stop me from this, but let’s hear it for Neil and all his hard work. As bad as the Cubs are, it is still nice to come to a place and vent with fellow fans. We would not have the CCO without Neil’s dedication.
- Thanks, stud!
- And thanks to all of you who come here day-in day-out to share your thoughts.
So, as it gets tougher and tougher to watch this team, please remember that there has to be a diamond in the rough. It is funny, but being a Cubs fan has shown me how important optimism can be. If you are not familiar with, I suggest you try it some time.
And before any of you go there, yes, I do believe there is a difference between optimism and naiveté!
And to all of the faithful …
Stay Classy Cubs Fans!!!