ARLINGTON, Tex. — Despite selling more tickets this season than all but one Major League Baseball team, the San Diego Padres took out a loan for about $50 million in September to address short-term cash flow issues and meet their obligations, including player payroll, people briefed on the team’s finances told The Athletic.
MLB teams commonly tap into lines of credit to pay their bills, prompting some officials in the sport to suggest any concern should be tempered because the Padres were ultimately creditworthy enough to draw the loan. But other officials briefed on the team’s finances who were not authorized to speak publicly viewed the Padres’ situation as worrisome.
“The Padres organization continues to have access to all the resources, financial and otherwise, it needs to field a championship caliber team for the fans of San Diego,” Padres CEO Erik Greupner said in a statement. “We established a capital plan for 2023 with our ownership group and lender partners and are operating our business in accordance with that plan.”
The Padres started the season with a payroll of about $250 million, third-most in baseball, and an outlier among teams that play in a similar bottom-third media market. The investment generated excitement and income: the club set a franchise record with 3.3 million tickets sold, and per a team spokesperson, finished in the top six in the sport for regular-season ticket revenue.
But in September, the Padres had a third-party lender willing to loan the club $100 million. The team asked MLB for permission to receive close to the full $100 million, according to people briefed on the team’s finances. MLB gave the team permission to draw roughly $50 million, which the league deemed a sufficient amount for the team to cover its expenses.
“If the question is, despite all that revenue growth, why would we need to be borrowing more money? I mean, you can connect those dots,” said a Padres official who was not authorized to speak publicly. “The levels of payroll that we’ve been at have probably reasonably been in excess of what we could have supported, but it was part of the larger plan.”
https://theathletic.com/5021659/2023/11/01/padres-payroll-loan/Owners can borrow as they see fit when doing so in their own name, but the league has standards and an approval process when loans are taken out in a team’s name. The greater a club’s pre-existing debt, the more difficult it can be to receive permission, people briefed on the process said. The Padres were carrying enough debt relative to their revenues that MLB was more cautious than it might have been in other situations.
But what is unclear is exactly what happened, or did not happen, to produce the Padres’ end-of-season shortfall, which caught some officials in the sport by surprise.
More at the link..
I wonder if this is the beginning signs of a fire sale for the Padres this offseason