Padres reportedly took out $50M loan to cover 'cash flow issues'

The Padres took out a $50M loan in September to address “short-term cash flow issues” and cover their player payroll, among other expenses, according to Evan Drellich, Dennis Lin and Ken Rosenthal of The Athletic. That $50M figure is particularly interesting, considering a previous report from Kevin Acee of The San Diego Union-Tribune that the team is hoping to reduce payroll by about $50M in 2024. 

The Padres ran a top-five payroll in the sport for a second straight season in 2023, yet they failed to make the playoffs, finishing two games back of a wild-card berth. Evidently, strong ticket sales (only the Dodgers had higher attendance) weren’t enough to convince ownership to double down in hopes of better results next year. The fact that the team needed to take out a sizeable loan — and that they missed out on postseason revenue — might explain why.

Ultimately, however, it’s hard to say whether this news is an indication of trouble for the Padres or simply a standard practice of running a baseball team. The reporters from The Athletic note that MLB teams “commonly” take out lines of credit, and it could be seen as a good sign that the Padres were deemed suitable for such a sizeable loan in the first place. To that point, the lender was reportedly willing to provide as much as $100M.

Then again, it’s concerning that the team needed such a large sum of money so late in the season; it’s hard not to read into that as a sign of poor financial planning. Indeed, the news of the loan is said to have taken some MLB officials by surprise.

For what it’s worth, it was the league’s head office that prevented the Padres from taking all $100M they were offered by their lender. That could be a sign that the team is in real financial trouble — the commissioner doesn’t generally allow teams to take on more debt than they can afford — but it could also be a broader indication that other owners simply don’t approve of San Diego running such a high payroll. After all, the Padres took many by surprise with their aggressive spending over the past few years, showing that a so-called “smaller market” team can indeed compete with the financial giants from New York and L.A. As the reporters from The Athletic point out, some owners consider the Padres’ spending to be reckless — and commissioner Rob Manfred has implied he feels the same way.

Nonetheless, several team officials repeated the idea that this loan was nothing more than business as usual, whether speaking on behalf of the team or not. Padres CEO Erik Greupner said in a statement that the team “established a capital plan for 2023” and that they operated “in accordance with that plan.” On a similar note, an anonymous team official told Drellich, Lin, and Rosenthal, “We anticipated we may need [the loan] at some point this year. We’re not in crisis.”

Another anonymous official told The Athletic, “The levels of payroll that we’ve been at have probably reasonably been in excess of what we could have supported, but it was part of the larger plan.”

Still, the Padres’ financial situation is something to monitor going forward. If temporarily spending more than they could afford on player payroll was always part of the team’s master plan, then it remains to be seen how the rest of the plan will play out. This past season certainly didn’t go as expected, and several of the team’s top contributors could become free agents in the coming days. It will be challenging to fill those holes while significantly reducing payroll.

In other words, it’s hard to imagine the on-field product improving next season without suitable replacements for Blake Snell, Josh Hader, and Seth Lugo (pending his opt-out decision) — and even more so if the team trades Juan Soto. Unfortunately, that might be the only way they can reduce payroll by such a large amount. Per roster resource, the team already has an estimated 2024 payroll of $190M and an estimated luxury-tax payroll of $242.9M. Soto alone is projected to make $33M in arbitration, per MLBTR’s Matt Swartz.