[新聞] NBA securing $175M for clubs
NBA securing $175M for clubs
Print This Story By DANIEL KAPLAN and JOHN LOMBARDO
Staff writers
The NBA is set to borrow $175 million Feb. 26, marking one of the first
league financings since the implosion of the credit markets last fall.
The money, which will be available to 15 teams, supplements an existing $1.7
billion leaguewide credit facility that uses the NBA’s media contracts as
collateral to secure loans for the clubs. The NBA surveyed its teams, and 15
responded they would like to tap into the new borrowing.
While the league said it is pleased to borrow in an extremely illiquid credit
market, the deal came at a cost, with interest rates up to 8.27 percent,
hammering home the notion that the era of cheap money in sports is over. The
15 teams can use the money for any purpose, but covering operating losses may
be high on the list.
“In this economic environment, it’s tremendous that the league can place
such a facility,” said Alex Martins, chief operating officer of the Orlando
Magic, which plans to borrow from the new debt. “It certainly helps us
bridge the time period between now and when we move into our new events
center in 2010. We’ve been operating at a $15 [million] to $20 million
[annual] loss over the past half-dozen years, so it helps us.”
New NBA Debt
Amount Rate Term
$100 million 8.27 percent Seven years
$75 million 7.45 percent Five years
Each of the 15 teams can borrow a maximum of $11.66 million from the debt
proceeds.
The private-placement deal was arranged by JPMorgan Chase and Bank of
America. In a private placement, non-banking lenders such as pension funds
and insurers extend the cash, commonly at fixed rates for five- to seven-year
terms and at rates higher than what banks offer for floating-rate loans.
Harvey Benjamin, the NBA’s executive counsel for business and finance, said
it’s important not to compare the rates with what the NBA had been paying
before the credit market collapse — about 200 to 300 interest points less
for similar debt, sources said — but rather, what borrowers of similar
standing are paying in today’s environment. In that light, he said, the 8.27
percent the NBA will pay on $100 million of the debt, and the 7.45 percent on
the remaining $75 million, is favorable.
“It shows how the NBA is viewed by the credit markets,” he said.
Rob Tilliss, a former JPMorgan Chase sports banker who runs his own sports
boutique, Inner Circle Sports, agreed that given the market conditions, the
NBA’s rates are hardly extreme.
“That is an outstanding execution,” he said.
The NBA was not looking to borrow at this time, Benjamin said, but JPMorgan
and Bank of America came to the league several weeks ago to say there was an
opportunity to do so. The league, after polling its teams and finding a need,
agreed to the deal in part because of the lack of borrowing opportunities
since the fall. Benjamin would not reveal which teams plan to borrow from the
placement.
Tilliss said that over the last few weeks there has been a slight opening in
the credit market for investment-grade borrowers like the NBA.
The NBA deal comes in the context of a changing landscape for the leaguewide
credit facilities. Once cheap sources of loans, the banks that manage the
loan pools have soured on them and have been unwilling to renew at the old
terms. The NFL and MLB were both unable to renew their deals late last year
and termed out. That means the debt automatically converted into a fixed-rate
loan and triggered amortization and slightly higher rates.
Benjamin declined to say if the NBA would term out of its credit facility in
May when some of it matures, but he conceded that the league is in
discussions with its banks to develop alternatives.
Of the NBA’s $1.7 billion facility, $1 billion is from short-term loans that
renew annually. This would be the segment that would term out if the league
were to go in that direction. The remainder, like the pending deal, consists
of private placements.
The new private placement is rated BBB-plus by Fitch Ratings, the NBA said.
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