Over at Capital New York today, Howard Megdal looks at the terms of David Einhorn's reworked deal to buy a stake in the Mets, and explains why they work in his favor. See, it all has to do with the $500 million, borrowed against the team itself, which the Wilpon group owes to JPMorgan Chase. The bank, according to yesterday's Post report, "balked at the original terms of the deal because it put Einhorn on the repayment line in front of them." Now, under the reworked terms, the Wilpons have five years to repay Einhorn. The money owed to JPMorgan Chase, meanwhile, is due in June 2014, less than three years from now. (Under the new terms of the deal, $70 million of Einhorn's $200 million will go towards paying back JPMorgan Chase.)
And so here's Megdal, on why these terms are good for Einhorn if he wants a controlling stake in the team someday:
Consider that we now know the Wilpons need to come up with $430 million to pay JPMorgan Chase by June 2014, or in less than three years. That's assuming they can weather the storm of further team losses, debt payment on Citi Field, the hundreds of millions of dollars borrowed against SNY, and don't forget ... Irving Picard, the court-appointed trustee for the Bernie Madoff victims, is still seeking $1 billion from the Wilpon group.
In other words, Einhorn is betting that a judgment coming from the Picard case will be a knockout blow. If Wilpon somehow escapes from that suit unscathed — for instance, if the August 19 hearing to dismiss the case goes his way — Einhorn is still betting that another one of the massive debts coming at Sterling will force a change in ownership. And if, against all odds, they weather Picard, JPMorgan Chase and all the rest, Einhorn's hoping that coming up with another $200 million in five years to pay him off is a bridge too far.
If the Wilpons paid him back, and then were forced to sell a controlling stake in the team because of, say, the debt owed to JPMorgan Chase, Einhorn would have to get into a bidding war to up his stake. Now, as Megdal explains, "the fact that JPMorgan Chase is in a position to demand $430 million from the Wilpons before he'd get paid actually works to his advantage." After all, the team is his if they can't pay him back in five years.
It's been obvious all along, of course, that Einhorn's endgame wasn't to own a non-controlling slice of the Mets. It's why this deal, in all the versions we've heard about, has been structured the way it is. And by the sound it, Einhorn — a guy who knows a thing or two about gambling — has stacked the odds in his own favor here.