SBD/Issue 112/Leagues & Governing Bodies

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  • Twelve Teams Set To Borrow Between $13-20M From NBA Credit Line

    Stern Says Money Should Not Be
    Considered A Bailout
    The NBA Thursday officially lined up a $200M credit line to "distribute to teams interested in additional cash," and NBA Commissioner David Stern said $13-20M will be available to each of the 12 teams that have expressed interest, according to Dave Skretta of the AP. However, Stern said that it should not be "construed as a bailout," because at a "time when credit markets have been frozen, investors saw the NBA as a safe bet." Stern said it is "exactly the opposite" of a bailout. Stern: "This was a show of strength in the creditworthiness of the NBA's teams." Stern added the creditors "told us there's no chance of any additional funds being raised for any sports league, and indeed, the credit facilities that had come up for other leagues were being termed out rather than renewed." Skretta noted the 12 teams expressing interest in the funds "aren't necessarily those in the worst financial shape." Stern: "Many of them are doing well." JPMorgan Chase and Bank of America, which arranged the credit line, recently "approached the league to say $150[M] might be available, a figure that eventually grew" to $200M. Stern: "It's a great sign of confidence in us and that's wonderful that the market is opening up, so we'll take it. And we turned to our teams and said, 'OK, we've got this much more to distribute under the facility for those of you who want it now'" (AP, 2/26). Fox Business' Cody Willard said, "Aren’t these teams all colluding? Why is the NBA allowed to centralize prices and the Department of Justice doesn’t ever investigate them?” (“America’s Nightly Scoreboard,” Fox Business, 2/26).

    NEED A HAND? Kings VP/Business Communications Mitch Germann Thursday confirmed that the Kings are among 12 teams set to borrow from the credit line. The team "did not detail the amount it will borrow or how it plans to use the cash." NBA Senior VP/Marketing Communications Mike Bass said that the amount each team can borrow is contingent on "previous borrowing." The NBA will not release the names of the 12 teams (SACRAMENTO BEE, 2/27). Meanwhile, NBA and Wizards sources Thursday confirmed that the team is not among the 12 franchises that will use the credit line (WASHINGTON POST, 2/27).

    COLD, HARD CASH: ESPN.com's Bill Simmons writes under the header, "Welcome To The No Benjamins Association." For once, the NBA's "problems have nothing to do with talent, drugs, racial issues and how the sport is being played," as money "hangs over everything." With the U.S. "embroiled in its worst economic crisis in 80 years, the NBA is quietly bracing for its own little D-Day ... only outsiders don't fully realize or care." Every decision teams made leading up to the February 19 trade deadline was "predicated on fear: fear of the great unknown, fear of a shrinking salary cap and a dwindling luxury tax threshold, fear of a landscape where middle-class Americans might collectively decide, 'I no longer want to buy tickets for sporting events.'" Looking forward, unless the NBPA "agrees to major concessions by the summer of 2011 -- highly doubtful because that would involve applying common sense -- the owners will happily lock out players as soon as the current CBA expires, then play the same devious waiting game" as they did during the '98 lockout. The owners would "plant their feet in the sand, grab the tug-of-war rope and dig in," and they "know they will win." Looking at the "next 15 months only, the consensus of people in the know was that multiple NBA franchises will move cities, get sold to new owners or throw themselves on the mercy of the league." The future for the league is "murky, unpredictable and not so lucrative," but "other than the NFL, the NBA will emerge from this financial quagmire in the best shape of any professional sport" (ESPN.com, 2/27).

    IT PAYS TO BE AVERAGE: ESPN.com's Ric Bucher writes for NBA teams, being an average franchise is now "more cost-effective than going a round deeper in the playoffs," which is "unhealthy." The league "shouldn't wait until the [CBA] expires to cure the situation," because "whatever problems the NBA faces, they are sure to multiply if the pursuit of a ring becomes synonymous with fiscal suicide" (ESPN.com, 2/27).

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  • Economy No. 1 Topic At Meeting Between NHLPA, Player Agents

    Kelly Says Shrinking Salary Cap Means Trouble,
    But Interest Of Players Never Been Higher
    The state of the economy "was the No. 1 topic" Thursday at the annual meeting between NHLPA Exec Dir Paul Kelly and player agents in Toronto, according to David Shoalts of the GLOBE & MAIL. The group "discussed how the recession will affect NHL revenue, from this year's free-agent market to the pension plan to the salary cap in the 2010-11 season, which is expected to dip significantly" from $56.7M this season. Kelly's message was that a "shrinking salary cap means trouble," and "all concerned have to consider ways to deal with it." Kelly: "If there is a positive from this whole escrow situation it is the fact it got the players' attention. When you are taking 20[%] of their pay and putting it someplace else, it gets their attention. ... The interest of the players has never been higher and that is a good thing" (GLOBE & MAIL, 2/27). CAA Sports agent J.P. Barry said, "There was a lot of time spent on where the economy is and how the economy will affect escrow and the (salary) cap. It was a cautious message: 'We don't know what's going to happen, but if certain things happen, this is where it could go.'" The CP's Chris Johnston writes even with a "poor economy, many agents remain optimistic they'll be able to get their big clients signed to lucrative deals when free agency opens July 1." Barry noted the market for unrestricted free agents "and the general economy have never really been in sync" (CP, 2/27).

    UNION FOCUSING ON NEXT SEASON: ESPN.com's Pierre LeBrun wrote, "Obviously everyone's concern is the cap for the 2010-11 season, when diminishing revenues as the recession really hits at all levels will likely bring down the cap." But Kelly said that he and the agents "focused more on next season because anything past that is like trying 'to predict the weather.'" One concern both the union and agents shared was the "potential for NHL teams to bury some players in the minor leagues over the next few years in order to alleviate cap issues." Neither the union nor player agents "like that idea at all," but there is "nothing in the CBA that prohibits it unless the player in question has a no-movement clause." Newport Sports agent Pat Morris said, "The NHLPA is very organized. Its staff has grown in leaps and bounds over the last year and that can only lead to productive things for the players and the game. They're certainly more inclusive of our role, they know what we can do and how we can help. That's a good partnership going forward" (ESPN.com, 2/26).

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  • Honda F1 Team Will Race In '09 Season After Management Buyout

    Honda Team Principal Ross Brawn Leads
    Management Buyout Of Honda F1 Team
    The Honda F1 team "will be on the grid for the start of the 2009 season after a management buyout," according to Edward Gorman of the LONDON TIMES. The management buyout is being led by Honda Team Principal Ross Brawn and "will be funded by a combination of money from Honda itself for this year, funds from" F1 Management Chair Bernie Ecclestone and "commercial sponsorship." Recent reports also indicated that Virgin Group Chair Richard Branson "could be a backer but this was being ruled out by informed sources" Thursday. It is "not yet known under what name the team will operate or in what livery their cars will race." At Silverstone racetrack in England next Thursday, the new car is "expected to run in neutral colors." While driver Jenson Button is "confirmed in one race seat, no decision has been taken on his team-mate" (LONDON TIMES, 2/27).

    NOT SO CUT AND DRY: In London, Tom Cary reports Honda Racing F1 CEO Nick Fry, Brawn and three other directors "finally convinced Honda's board in Tokyo to hand over a sum, believed to be in excess of $100[M], to enable the new team to continue racing in 2009 at least." However, Cary notes the buyout of the Honda team is likely to mean a "pay cut of roughly" $7.5M for Button, as well as some 250-300 staffers likely to losing their jobs, "including the test team -- with those remaining taking substantial cuts in pay." But Cary notes unrest at the team headquarters "regarding the proposed takeover, with suggestions that workers may be prepared to go on strike," as "disgruntled employees called the management together [Thursday] to voice their concerns and were left anxious at the lack of answers." One "major bone of contention revolves around the redundancy packages on offer, which are less generous under the new regime than they would have been had Honda wound up the company" (London TELEGRAPH, 2/27).

    Williams F1 Owner And CEO Do Not Expect
    Team To Suffer From RBS' Negative Publicity
    WILLIAMS DOING WELL: AUTOSPORT.com's Noble & Elizalde report Williams F1 Owner Sir Frank Williams and CEO Adam Parr "do not expect their team to suffer any fallout from the spate of negative publicity surrounding sponsor" of RBS. Williams: "Most people we deal with run very large, respectable, businesses, on a vast scale compared to this business, for instance." Parr said, "The other thing is that most of our sponsors and most of their audience is not in the UK. In the UK RBS is receiving quite a lot of intense media interest and speculation, but I suspect that in any other country in the world, it would not have nearly the same resonance." Parr added, "Getting people to come into Formula One as a sponsor is very challenging. It's always been very challenging because it's not the amount of money, but that the image of the sport and the nature of what we do is that it's always a board-level decision" (AUTOSPORT.com, 2/27).

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