Tuesday, January 04, 2005

Just Wearing My CFO Hat

Two Carlos Beltran updates today. One is courtesy of the Chicago Tribune, the other, via the Houston Chronicle.

The Chronicle simply says that the Mets brain trust met with Beltran in Puerto Rico. It also carries a piece of negotiation from Houston owner Drayton McLane, who says he hasn’t spoken to Scott Boras since last week. The implication is that they aren’t talking and the offer the Astros have on the table is final. The reality is that Boras could very easily be talking to other members of the Astros front office.

The Trib article is much more interesting. Dave van Dyck opines that the Yankees may not bid on Beltran at all. Van Dyck suggests that the Yankees payroll is making the team pay too much of a luxury tax and that Beltran may not be affordable. The reality is that the Yankees may be approaching their debt ceiling. MLB clubs are prevented from having more than 40% of their balance sheet book value in liabilities. The big change for 2005 is that the present value of long term contracts are now counted as liabilities.

Therefore, a $120 million, 7-year contract for a player could count as $84 million in debt (at a 5% discount rate). The Yankees, with Jason Giambi, Alex Rodriguez, Derek Jeter, and Carlos Pavano may have too much in liabilities to be able to take on Beltran.

I’m beginning to think that the Yankees are really out of this. That’s good and bad for the Cubs. The extreme outcomes for the Cubs are this: Good – Cubs get Beltran; Bad – Houtson gets Beltran. Medium bad would be the Mets getting Beltran because the Mets would no longer want Sammy Sosa.

With the Yanks out, the Cubs may yet be a player. I still have my doubts, but not as many as I had yesterday.

The New York Times has more on the Yankees and Beltran. And the word is, "No." Fun graph:
To have the Yankees yank their interest, just when the Mets are heating up theirs, would be a cruel trick to play on Boras. But then some clubs say Boras has been a cruel trick that has been played on them for years.

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