SBJ/April 26 - May 2, 2004/Finance

Fleet deal makes B of A a sports lending Goliath

Meet the New York Yankees of sports lending.

The new Bank of America sports group, which combines two of the top three players in the business after the bank’s conquest of Fleet Financial Group closed March 31, straddles the landscape as the 900-pound gorilla in the market.

With billions of dollars outstanding in loans and commitments to sports teams and leagues, the nine-person group has incredible power to set the bar for interest rates in sports and decide where and how much money should flow into the industry.

Like any dominant competitor in any market, it has rivals worried.

“I am concerned about the overconcentration of capital,” said MZ Sports founder Mitchell Ziets, who advises sports teams on borrowing money. “If I were to bet, maybe [another bank] will” emerge to compete for the business, Ziets said, adding, “Maybe that’s more hope.”

Jim Nash, founder of the original Bank of America sports group in 1992, acknowledges the concerns that a significant slice of the sports finance business resides under his watch.

“Certainly there is concentration, there is no doubt about that,” said Nash, a managing director in Banc of America Securities, the bank unit where sports is managed. “We have a responsibility to continue to support the industry in a responsible way.”

The bank has a self-interest to behave, Nash said. If he squeezed teams on lending terms and rates because he was almost the only game in town, he explained, that would encourage competitors to emerge, though that could occur anyway.

Bank of America is keeping four of the six bankers in Fleet’s sports group, including managing directors Pete Dorfman and Greg Clark, who ran the Boston bank’s effort. They will remain in Boston and keep their managing director titles.

Nash is the group leader and continues operating out of Charlotte, where he works with managing director Elliott McCabe, who manages the financial institution’s NFL relationship. The NFL has a nearly $2 billion credit facility with Bank of America, which also manages the league’s $550 million stadium financing program.

Fleet is best known for its relationship with Major League Baseball. The bank manages the league’s $1.5 billion team loan program and has ties with several MLB teams.

The only other major sports lender now standing is SG Cowen. After Bank of America formed its group in 1992, several banks followed suit. But with the economic downturn earlier this decade, many of those groups folded.

Even Fleet, which was scarred in the 1990s by several sports deals gone bad, has not been a major player in the business outside of baseball for the last several years. Fleet gained notoriety in 1997 by lending $80 million to Dallas businessman John Spano to buy the New York Islanders, only to find out that he had lied about his assets.

Because Fleet has had a lower profile than Bank of America, some bankers, such as CIT Group’s Bill Logan, do not see the new Bank of America group as a threat. CIT to date has largely bought pieces of sports loans led by other banks, but today wants to move up to the coveted, lead position.

Even Nash conceded there was not much significant overlap between Fleet and Bank of America.

With the emergence of the leaguewide credit facilities that suck up so much of the team lending business and the low profit margins in loans, that business no longer may be sufficient to keep alive a group of Nash’s size.

With the stadium building boom subsiding, Nash wants to expand his lending to European sports teams and colleges.

He also is eyeing a move into areas such as team acquisitions and strategic league consulting, domains of investment banks where Bank of America has not held the same sway as it does in lending. Here, however, Nash will find many more competitors, with niche players and large investment banks like Lehman Bros. already strong in that sector.

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Finance, MLB, New York Yankees, NFL

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