Moores should not be able to place Petco...

[AztecBill]

Moores should not be able to place Petco debt into the Padres sale.

Rolling Petco Park debt into the sale artificially lowered the price of the Padres. I can see that as being why the owners balked at the sale (at the last moment). What owner would want a franchise to sell below market?

Whoever buys the Padres needs to add an extra few hundred million into the deal (the true value of the Padres without the debt) so Moores can pay off the Petco debt out of Escrow. This will insure the new owner can use ALL the Padres revenue into operating the team.

[Deleted]

I don't take anything you say about the Padres, on or off the field, seriously anymore.

[AztecBill]

Apr 10, 2012 15:29:39 GMT -8 @tecpride00 said:

I don't take anything you say about the Padres, on or off the field, seriously anymore.

That response, to this post, makes no sense.

Do you think the Petco debt should be allowed to be rolled into the package that is bought by the new owner of the Padres? I think I now fully understand better what that means and am glad it wasn't allowed via the Moorad sale. For the sake of the Padres fans, I hope the owners won't allow any future sale to do that either. The new ownership should begin unencumbered by the debt that plagued Moores since Petco opened.

[01aztecgrad]

Apr 10, 2012 16:08:43 GMT -8 AztecBill said:

Do you think the Petco debt should be allowed to be rolled into the package that is bought by the new owner of the Padres? I think I now fully understand better what that means and am glad it wasn't allowed via the Moorad sale. For the sake of the Padres fans, I hope the owners won't allow any future sale to do that either. The new ownership should begin unencumbered by the debt that plagued Moores since Petco opened.

I don't think you understand anything about how assumption of debt is thought of in business. It doesn't artificially lower the price, it is included in the overall calculation of the price of a company (or team) at the nominal amount of debt, so in effect it's already priced at the net present value of the stream of future payments.

Do you realize that the $2b price paid for the Dodgers was actually $1.6b in cash and $400m in assumed debt, or that the $590m paid for the Rangers was actually $385m in cash and $205m in assumed debt?

It's pretty clear based on even recent history that the other owners don't have a problem with a prospective owner assuming existing debt when purchasing a team, they have a problem with owners who leverage themselves to the hilt just to buy the team taking on additional leverage, which is what happened with the McCourt purchase.

Moorad couldn't afford to buy the team, so he brought in a bunch of investors who MLB apparently thought he was going to pay off with the teams operating revenue. That has nothing to do with the teams debt, that has to do with Moorads lack of money, or assets that could be converted to money.

[Deleted]

Apr 11, 2012 16:23:16 GMT -8 01aztecgrad said:

Apr 10, 2012 16:08:43 GMT -8 AztecBill said:

Do you think the Petco debt should be allowed to be rolled into the package that is bought by the new owner of the Padres? I think I now fully understand better what that means and am glad it wasn't allowed via the Moorad sale. For the sake of the Padres fans, I hope the owners won't allow any future sale to do that either. The new ownership should begin unencumbered by the debt that plagued Moores since Petco opened.

I don't think you understand anything about how assumption of debt is thought of in business. It doesn't artificially lower the price, it is included in the overall calculation of the price of a company (or team) at the nominal amount of debt, so in effect it's already priced at the net present value of the stream of future payments.

Do you realize that the $2b price paid for the Dodgers was actually $1.6b in cash and $400m in assumed debt, or that the $590m paid for the Rangers was actually $385m in cash and $205m in assumed debt?

It's pretty clear based on even recent history that the other owners don't have a problem with a prospective owner assuming existing debt when purchasing a team, they have a problem with owners who leverage themselves to the hilt just to buy the team taking on additional leverage, which is what happened with the McCourt purchase.

Moorad couldn't afford to buy the team, so he brought in a bunch of investors who MLB apparently thought he was going to pay off with the teams operating revenue. That has nothing to do with the teams debt, that has to do with Moorads lack of money, or assets that could be converted to money.

Thank You for a clear and intelligent post. Watch Bill morph into bull$#!+ mode now though.

[AztecBill]

Apr 11, 2012 16:23:16 GMT -8 01aztecgrad said:

Apr 10, 2012 16:08:43 GMT -8 AztecBill said:

Do you think the Petco debt should be allowed to be rolled into the package that is bought by the new owner of the Padres? I think I now fully understand better what that means and am glad it wasn't allowed via the Moorad sale. For the sake of the Padres fans, I hope the owners won't allow any future sale to do that either. The new ownership should begin unencumbered by the debt that plagued Moores since Petco opened.

I don't think you understand anything about how assumption of debt is thought of in business. It doesn't artificially lower the price, it is included in the overall calculation of the price of a company (or team) at the nominal amount of debt, so in effect it's already priced at the net present value of the stream of future payments.

Do you realize that the $2b price paid for the Dodgers was actually $1.6b in cash and $400m in assumed debt, or that the $590m paid for the Rangers was actually $385m in cash and $205m in assumed debt?

It's pretty clear based on even recent history that the other owners don't have a problem with a prospective owner assuming existing debt when purchasing a team, they have a problem with owners who leverage themselves to the hilt just to buy the team taking on additional leverage, which is what happened with the McCourt purchase.

Moorad couldn't afford to buy the team, so he brought in a bunch of investors who MLB apparently thought he was going to pay off with the teams operating revenue. That has nothing to do with the teams debt, that has to do with Moorads lack of money, or assets that could be converted to money.

I didn't realize that. If the price for the Padres included the debt than I can see why the owners don't care. But Padres fans should.

The new owner(s) should have to come up with the full value and the debt should be eliminated. The Padres can't compete if part of their revenues are used to service the debt.

I did a search on it and found:

Padres still owe $170 million. The Padres’ interest rate on the Petco Park debt is 8.5 percent. 14 years remaining on the loan. There is a prepayment penalty is $50 million. The 8.5% interest makes the $50M penalty not so bad. If your expected ROI is sufficiently below 8.5% (4.15%) it is a wash. The New Padres owners need the $21M per year they now pay in debt service for other things.