Frank McCourt takes out loan, I take out my calculator
Thursday, May 12, 2005
Dodger Thoughts points out an article about Dodger's Owner Frank McCourt who recently refinanced the debt that he took on to purchase the team.
According to the LA Times article, the debt indenture requires that the Dodgers continue to play in Dodger Stadium for the next 25 years, and that there will be no change in control of the team for the term of the loan.
Furthermore, the article says the loan was a 5.66% fixed loan for 25 years. Assuming that the loan requires quarterly interest payments, McCourt will need to generate $3.855 million each quarter to meet the payments, or $15.42 million per year. Then at the end of 25 years, he will need to pony up $250 million.
On the other hand, if McCourt were to treat the loan as a home mortgage, he would set aside an additional 1.065 million per quarter (4.92 M total per quarter/$19.68 M annually) so that he would have the $250 million in 25 years.
Depending on the rate of reinvestment, McCourt could ease off that number slightly. (Over the last 25 years, the S&P 500 has averaged a 10.09% annual return. Using this growth rate, McCourt would need $4.779 million per quarter or $19.1 M annually.)
Posted by Byron at May 12, 2005 11:27 PM
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