CAN BALTIMORE'S BIRDS BAIL OUT THEIR OWNER?
Eli S. Jacobs is in the bottom of the ninth with two outs and a huge score against him. The financier, an eager Washington political networker with a disparate string of holdings, is trying to peddle his Baltimore Orioles in a bid to lessen the weight of his crushing debt. A bank is seizing his $2 million home in the Baltimore suburbs. Several lenders have judgments and pending suits against him, seeking $37 million in unpaid loans. And last year, he lost his controlling stakes in two troubled companies, Memorex Telex and Triangle Pacific Corp., after restructurings (table).
The 55-year-old Jacobs, who paid $70 million for his 87% of the Birds in 1989, certainly needs a sale to bail him out. Yet despite his problems, Jacobs still has the chutzpah to shoot high. He's aiming for the most lucrative baseball franchise sale in history, say sources close to the negotiations. When he first hawked the team in 1991, he wanted $200 million. The record thus far is for the Seattle Mariners, which fetched $125 million in 1992. But no one met Jacobs' steep price, and as his financial jam has worsened, he has come down to about $160 million. Various bidders are offering around $130 million. The most prominent is William O. DeWitt Jr., a Cincinnati-based investment banker who is part-owner of the Texas Rangers. Jacobs declined comment on his financial woes.
SIGNALS. The question is whether Jacobs will rake in enough to satisfy his creditors. Sports-business analysts place his debt load on the team at about $90 million. Should he sell the Orioles for only $130 million, he would clear barely enough after team debt repayment to settle the court-contested loans.
Without a doubt, the Orioles are among the 15 most valuable sports franchises in America. Orioles Park at Camden Yards, the team's new state-owned stadium, is the hottest draw since Toronto's Skydome. The O's attracted 3.6 million fans (about $40 million worth) in 1992, Camden Yards' maiden year, while overall baseball attendance declined slightly. And the stadium's lease gives the team a fat percentage of concessions and luxury-box revenues, to the tune of $6 million per annum. For baseball fans in the densely populated Baltimore-Washington-Richmond area, the Orioles are the only major-league game around. Add in, too, local television contracts that are worth about $11 million a year.
On the minus side, however, Jacobs could suffer because baseball teams aren't a hot commodity now. Reasons: The sport has no commissioner to settle intrateam squabbles, labor costs are rising at a faster rate than revenues, and labor and TV contracts expire after the coming season. Banks are said to be chary about financing team purchases. "All this sends a signal to investors that baseball is a risky business to be in," says Andrew Zimbalist, a Smith College economics professor and author of Baseball and Billions.
It's difficult to gauge the true impact of an Orioles sale on Jacobs. Information about his closely held portfolio, which he runs from his office on Manhattan's Park Avenue, is not publicly available. As a result, other than what has surfaced to date, outsiders have no way of knowing if he has any other dilemmas to deal with--or advantages, for that matter.Evidence of his financial straits, though, is abundant. A court has set a Feb. 26 public auction for his house in Owings Mills, Md., after he didn't make his mortgage payments. Creditors also have garnished his Orioles earnings. His biggest headache is a suit by Baltimore's Mercantile-Safe Deposit & Trust Co. over his alleged default on a $21.3 million personal loan. On top of that, he's in court with two New York banks that charge he has defaulted on their loans: Manufacturers & Traders Trust Co. ($4.6 million), a case he lost but is appealing, and Berkshire Bank ($490,000), which is pending.
SOURED. Jacobs' most spirited legal fight is with Banca Commerciale Italiana, an Italian bank that won a judgment for nonpayment on a $10 million loan against an investment partnership he ran. While that firm, Park Partners LP, is insolvent, the bank contends it can tap Jacobs' personal assets. In court papers, Banca Commerciale argues that Jacobs opened himself up for this action by accepting a $7.76 million personal loan from the partnership, allegedly violating covenants on the $10 million financing that barred such a borrowing. But Jacobs responds that this was actually repayment of a loan he had made to the partnership.
Jacobs' current plight seems to stem from soured investments: in Memorex, a computer-peripherals maker, in 1986, and in Triangle Pacific, a manufacturer of cabinets and hardwood flooring, in 1988. "Eli was in the wrong industries to weather a recession," says one Wall Street figure familiar with his dealings. When Memorex, a Netherlands company with its U. S. subsidiary headquartered in Irving, Tex., emerged from Chapter 11 early last year, Jacobs' 35% equity was wiped out. Last fall, an out-of-court restructuring delivered most of the 97% he held in Dallas' Triangle Pacific to bondholders. Given all that, he can only hope the Orioles sale is a grand slam.JACOBS
FEBRUARY, 1992 Loses 35% ownership of Memorex Telex in Chapter 11
AUGUST, 1992 Baltimore bank sues to attach assets after default on $21.3
million personal loan
NOVEMBER, 1992Hands over most of 97% stake in Triangle Pacific to bondholders
in out-of-court restructuring
FEB. 26, 1993 Foreclosure auction scheduled on his $2 million home outside
DATA: COURT DOCUMENTS,
Larry Light and Harris Collingwood in New York