MLS strength evident in stadium lending Gatorade’s NBA D-League a boon for R&D Banks’ interest revives Raiders in Vegas Bob McNair on ... Snickers renews WrestleMania deal Fanatics-UA to field MLB jerseys in 2020 DTI Management gets $75M funding ISC revenue up, but admissions see dip Learfield’s run fuels talk of sale Warriors valued at $1.6B
SBJ/August 16 - 22, 2004/Finance
Texans reprice $200M in bonds after paying off $25M in 8 months
Published August 16, 2004
The Houston Texans repriced $200 million of bonds last month, saving the team about $1.3 million annually over the six-year life of the debt.
The team had orchestrated a $350 million refinancing in January that consolidated the debt that owner Bob McNair took on to buy the expansion franchise. Of the amount, $125 million came from an NFL lending pool and is secured against the team, and the remaining $225 million came from a group of banks and is backed by a team holding company.
In the eight months since that deal closed, the Texans were able to pay off $25 million of the holding company debt from cash flow, said Scott Schwinger, the team’s chief financial officer.
Randy Campbell, the SG Cowen banker who put the recent deal together, alluding to the rarity of a sports team being able to generate that much extra cash in so short a period, said the Texans were the most professionally managed sports franchise he had come across.
“If you could ever invest equity in a professional sports team, this would be one of them,” Campbell said.
Since coming into the NFL three seasons ago, the Texans have proved an off-the-field success, generating well in excess of $200 million in revenue every year. That has allowed McNair to rapidly pay down the $700 million he paid to buy the franchise in 1999.
SG Cowen was joined in managing the deal with J.P. Morgan Chase. Schwinger said that while the two technically co-led the deal, SG Cowen assumed the major role in the transaction.
Repricing a deal less than a year from the closing is quite unusual. Campbell said there is a lot of demand from financial institutions for high-quality debt, particularly from entities in sports because there are few instances of bankruptcies in the sector.
Because that demand made the Texans’ debt more attractive to buyers, the team could get better terms than just eight months ago.
Campbell and Schwinger declined to say what those terms were. A banking source said, however, that the rate had declined from 1.65 percent over the London Interbank Offered Rate (LIBOR) to 1 percent over LIBOR.
LIBOR is a floating rate index to which debt deals are commonly pegged. It was trading about 1.68 percent last week, meaning the repricing dropped the Texans’ rate from 3.33 percent to 2.68 percent.