Fact: MLB teams cannot have more than 10 times their average EBITDA over the last three years, per the MLB's debt service rule, which came into effect in the 2002 collective bargaining agreement.
Thus, this means that the Cubs would have to have had average EBITDA of at least $45 million over the last three years. Stay with me here.
The best case scenario for the Cubs - PIK interest, Wrigley Field as a secured asset, is around 8% interest rate. Now, there'd probably be various tranches of debt, with a tranche secured by Wrigley Field itself probably getting less than 8% because it's backed by a hard asset, and so forth. But after talking to three different sources in private equity, 8% is the best reasonable case for an interest rate.
Based on the amortization table I've put together, that means that the Cubs would have debt service obligations of around $40 million annually. I am reliably told that the Cubs do not make $40 million in free cash flow per year. With their share of CSN Chicago, it might be doable, but it's certainly tight. As we've seen over the last few months, sports are not recession-proof, especially for the high value luxury suites, corporate sponsorships, and box seats.
So 1) the $450 million in debt is clearly in violation of MLB's debt service rule and 2) there's a pretty good chance that the Ricketts can't afford the payments on the debt on the proposed 450/450 transaction.
I submit that there's no way in hell the Ricketts family can afford the Cubs. They might be able to secure $450 million in debt, so Sam Zell will get his money, but they won't be able to service it after the sale. This will mean that MLB will have to step in - as they did for the Diamondbacks - to help with the debt obligation. That means the Ricketts would have to gut the Cubs to pay down debt. And you thought Cardinal fans were pissed at ownership.
The only way this works is if there are subsidies - from the City of Chicago or the State of Illinois. Or from MLB. In the first case, taxpayers are on the hook. And this isn't like the Yankees and the Mets getting a break to build their stadia. It would be a taxpayer subsidy for a private sale. And if it's from MLB, that's coming from the pockets of the 29 other teams, including the White Sox. I'd be disappointed if Jerry Reinsdorf was party to a giveaway to the northsiders.