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SBJ/October 26 - November 1, 1998/No Topic Name
N.Y. Giants raise quick $25 million
Published October 26, 1998
The New York Giants quietly raised
$25 million in August in an effort to keep up with their rising payroll and other operational needs.
For the second time in as many years, the team tapped the private placement market. Companies in need of capital can sell bonds to discreet private investors, commonly insurance and pension companies, in a transaction called a private placement. The Giants sold their bonds to New York Life Insurance Co.
The Giants, like many National Football League teams, have endured a rapid escalation in salaries with the increase in the salary cap for the 1998 season and are in need of new sources of capital.
In early 1997, the team had also raised $25 million from New York Life, and this year several recent free-agent signings left the team needing capital.
"We needed the money for player contracts and other operational needs," said John Mara, the team's general counsel. "We thought the time was right to lock into favorable interest rates."
New York Life, which has now loaned the team $50 million, did not return calls seeking comment.
In the off-season, the Giants signed Gary Brown, LeShon Johnson, Marcus Buckley, Brad Daluiso and No. 1 draft pick Shaun Williams.
Notably, the team declined to tap into the NFL's new leaguewide $1.1 billion credit facility, which is offering capital to teams at favorable rates.
"The NFL credit facility, while an attractive proposal, required more guarantees and pledges of future revenue streams," Mara said. "And the interest rates were comparable."
Up to 13 teams are expected to use the new facility, up from the eight that used the old one. The new facility will offer favorable terms because of the huge amount of media revenue the NFL now enjoys.
The Giants were one of the first professional sports teams to use a private placement. Traditionally, this type of financing was reserved for corporate entities with solid credit records.
But changes in the salary-cap structure led many teams to load up on signing bonuses, which created a sudden need for large amounts of capital. Historically, teams' credit requirements had been seasonal, so a bank line of credit was sufficient.
The new salary cap "created more of a permanent borrowing need," said George Cole, a managing director with First Union Corp., which arranged the 1997 private placement. The bank played no role in the August placement.