MLB Rumors: Padres Took out $50M Loan to Handle Cash Flow Issues, Player Payroll

The San Diego Padres took out a $50 million loan in September "to address short-term cash flow issues and meet their obligations, including player payroll," according to The Athletic's Evan Drellich, Dennis Lin and Ken Rosenthal.

"MLB teams commonly tap into lines of credit to pay their bills, prompting some officials in the sport to suggest any concern should be tempered because the Padres were ultimately creditworthy enough to draw the loan," The Athletic wrote. "But other officials briefed on the team's finances who were not authorized to speak publicly viewed the Padres' situation as worrisome."

The Padres had a third-party lender willing to approve the club for a $100 million loan in September, but Major League Baseball only gave San Diego permission to take out a $50 million loan because it believed that would be enough for the team to cover its expenses, per The Athletic.

"If the question is, despite all that revenue growth, why would we need to be borrowing more money? I mean, you can connect those dots," a Padres official not authorized to speak publicly 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."

The Padres began the 2023 campaign with the third-highest payroll in baseball at around $250 million and San Diego's luxury-tax number was at around $296 million after the club signed several players to large contracts ahead of the season.

Shortstop Xander Bogaerts was signed to an 11-year, $280 million deal, pitcher Yu Darvish agreed to a six-year, $108 million extension and slugger Manny Machado signed an 11-year, $350 million contract.

The spending is a strong signal that San Diego ownership is serious about winning a World Series title, and fans bought into the excitement surrounding the team in 2023 as the club sold $3.3 million in tickets, the second-most in MLB.

However, the club doesn't generate nearly enough revenue from the media market.

The Padres broke free of a television rights contract with Diamond Sports Group earlier this year with the company navigating bankruptcy proceedings and MLB eventually took over the team's broadcasts.

Despite being big spenders, San Diego finished the 2023 season with an 82-80 record and missed the postseason for the second time in three years. Had the team reached the postseason, it could have have generated more revenue from ticket sales.

Entering 2024, it's clear the Padres need to lower their payroll, and there are questions about whether the club will hand out a long-term extension to Juan Soto, who is set to become a free agent following the 2024 campaign.

According to The Athletic, the Padres are expecting payroll to be closer to $200 million next season, and to accomplish that goal they may have to trade Soto, who should net a significant amount of money in his final year of arbitration before free agency.