Happy Bobby Bonilla Day for 2022!
Huzzah for 8% annuities! Based on Bernie Madoff promises... uh....
It’s July 1, which means it’s Bobby Bonilla Day!
Let ESPN put you some knowledge:
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 Friday, 59-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.
….
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.
At the time, Mets ownership was invested in a Bernie Madoff account that promised double-digit returns, and the Mets were poised to make a significant profit if the Madoff account delivered -- but that did not work out.
That is an understatement.
Mind you, Bobby Bonilla actually didn’t get the sweetest buy-out deal, in terms of the guaranteed interest rate and over what period.
Bruce Sutter with the Atlanta Braves got a 12.3% interest rate over a 35/36 year period. Guaranteed. Evidently, it was interest-only and he got/will get a balloon payment this year.
I did a video on this back in 2018:
And here is a spreadsheet checking that they indeed bought him out at 8%.
As for how the agent was able to swing the deal, there is a Madoff connection, and the Mets just have a long history of bad finance:
Prior Bobby Bonilla posts:
2016: Happy Bobby Bonilla Day! and more Americana
2018: Mornings with Meep: Happy Bobby Bonilla (and Bruce Sutter) Day!
2020: Classic STUMP: Happy Bobby Bonilla Day! And Independence Day!
2021:
As I noted, Bobby Bonilla is getting a much higher payment because his agent got it valued at 8% (considered a deal to the Mets, who thought they had a guaranteed 12% through their investments with Madoff), instead of the risk-free 5.9% which was the 30-year Treasury rate at the time, as the promise was for 35 years (and we don’t have a longer tenor Treasury rate)
Guaranteed interest rates, especially at those levels, are very valuable.
Let’s hear it for the agents who negotiated these deals for their players!