Darryl Strawberry's contract is striking out with financial advisers.
Indeed, advisers said they would shy away from bidding on it an
Internal Revenue Service auction next month. The remaining annuity from the deferred compensation Mr. Strawberry agreed to when he signed a six-year contract with the New York Mets almost 30 years ago is being sold, according to ESPN.com, which first reported the auction.
“There may be an opportunity there, but it seems a bit sordid and I can't imagine trying to navigate the regulatory hurdles to do it without getting into trouble,” said Rich Zito, co-founder of Flynn Zito Capital Management. “My gut reaction is that it would be like a private placement; it's not worth navigating the law and the SEC and Finra to figure out a way to do an oddball thing,” said Mr. Zito, who is a Yankees fan.
The total value of the contract, which covered his 1985 through 1990 seasons, was $7.1 million, but nearly 40% of his $1.8 million team option in 1990, or $700,000, was deferred and put into an annuity with a 5.1% annual interest rate, according to the ESPN.com report.
On Jan. 20, the IRS will auction off the right to collect what will amount to roughly $1.28 million paid by Sterling Mets LP, parent company of the Mets, in 223 monthly installments, assuming a realistic sale close date of May 1, according to the ESPN.com report. Since the sale is required through the court system, the winning bid, which cannot be less than $550,000, has to be approved by a judge before the buyer starts collecting.
Mr. Strawberry was National League Rookie of the Year in 1983 and was playing right field for the Mets in 1986 when the team last won the World Series.
The pool of Mr. Strawberry's deferred compensation has had a twisted path.
Mr. Strawberry's ex-wife, Charisse, was given a portion of the deferred money account as part of their divorce settlement; she in turn later filed for Chapter 7 bankruptcy protection, according to the report. A judge in the Northern District of Florida in September ruled that the annuity was the property of the IRS and not Mr. Strawberry's ex-wife because Mr. Strawberry still had not settled his tax debt owed for 1989, 1990, 2003 and 2004.
“It would probably be easier for a
hedge fund to figure this out, if they get the right price,” Mr. Zito said. “The payment is roughly $5,700 per month over the lifetime of the annuity, but you would be susceptible to bankruptcy by Sterling. If they go out, what happens?”
“It's not liquid and it's very convoluted,” said Beth Blecker, chief executive of Eastern Planning Inc. and a fan of the Mets. “The best person to invest in this would be someone for whom it would be a small piece of their portfolio.”
“As a Met fan it's depressing and it angers me,” she said. “The team is paying off deferred contracts, and they don't have the money to buy players today.”
