No Minister

Nice work if you can bat it.

When I saw the following article the other day I vaguely recalled the name Bobby Bonilla.

Like many American baseball players he had played for a large number of teams in the course of a fifteen year career, but where I recalled him from was when he played for the Florida Marlins in 1997 as they won a World Series after existing for just five seasons.

That stuck in the throats of a lot of fans of other ball clubs who had won nothing in decades. But it was a one-off as the owner – Wayne Huizenga, who had made his billions from various startup companies, like Blockbuster Videos (and who remembers them now in the age of streaming) – had thrown huge amounts of cash around to grab every free-agent star he could to play just the one season.

Predictably enough, the following season saw them finish with the worst record in MLB; the greatest collapse by a World Series Champion in history.

Bonilla moved on to other clubs and retired in 2001, but aside from some good batting stats and a WS ring he also left behind another legacy, the date of July 1st that is commemorated each year by teeth-grinding fans of the New York Mets as Bobby Bonilla Day:

The calendar has turned to July 1, and that means one thing: It’s time for Mets fans everywhere to wish each other a Happy Bobby Bonilla Day! Why?

On Thursday, 58-year-old Bobby Bonilla will collect a check for $1,193,248.20 from the New York Mets, as he has and will every July 1 from 2011 through 2035.

The twenty cents is a nice touch.

Now you may assume that this is just the hangover from some long-ago contract, and you would be correct. But even after reading the details in that article and the Wiki I still don’t understand how this came to be:

In 2000, the Mets agreed to buy out the remaining $5.9 million on Bonilla’s contract.

However, instead of paying Bonilla the $5.9 million at the time, the Mets agreed to make annual payments of nearly $1.2 million for 25 years starting July 1, 2011, including a negotiated 8% interest.

I’ve done finance. I know about NPV calculations, and my calcs have him at $1.62 million per year, so perhaps he kindly agreed to a slight discount?

But I still don’t know why the Nets would turn $5.9 million into $1.2 million per year for twenty five years. Apparently the Mets had invested in Bernie Madoff’s schemes and although it does not say so I guess when those crashed, the team just could not lay their hands on $5.9 million in cash.

But still – this deal was the only alternative? For a season where he didn’t even play for them?

There are other such deals around and incredibly this guy is on the receiving end of one of those too:

Bobby Bonilla (again): A second deferred-contract plan with the Mets and Orioles pays him $500,000 a year for 25 years. Those payments began in 2004.

Written by Tom Hunter

July 7, 2021 at 4:46 pm

Posted in Business, Sport., USA

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3 Responses

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  1. Well if they were up for $5.9 M in 2001 the accumulated debt at 8% interest in 2011 when repayments started would be $12.73 M

    The annual payment for such a debt can be calculated:
    Payment = P x (r / n) x (1 + r / n)^n(t)] / (1 + r / n)^n(t) – 1

    P=principle
    r=.08
    n=1 because the payment is annual

    Put the numbers in

    And Robert’s your Mother’s Brother…

    …The answer I get is get is $1.19M per year

    Andrei

    July 7, 2021 at 9:37 pm

    • Blog comment forms are so unamenable to mathematical rigour. allow me to correct the above

      Payment = P x (r / n) x (1 + r / n)^n(t)] / {(1 + r / n)^n(t) – 1}
      P=principle
      r=.08
      n=1 because the payment is annual
      and t=25

      Andrei

      July 7, 2021 at 9:45 pm

    • Well done. I just did a crude back-of-the-envelope calc. Couldn’t be assed finding the actual equation, but thanks.

      Still can’t understand why an outfit with $169 million revenue per year in 2001 could not find $5.9 million in cash to do the payout then and there.

      Tom Hunter

      July 8, 2021 at 12:32 am


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