SBJ/Sept. 20-26, 2010/Finance

MLB's short-term loan pool a first for big leagues

MLB has created the first leaguewide credit facility for short-term lending, capping its clubs at $15 million apiece, according to multiple finance sources.
As of last week, about six clubs had used the credit facility, or loan pool, which closed last month and is the first of its kind across sports’ major leagues, the sources said. The pool uses collateral such as national sponsorship contracts to secure good rates.
The participating clubs could not be identified.
MLB has a much larger credit facility, in the high hundreds of millions of dollars, from which teams can borrow longer-term debt. But because of the 2008 credit crunch, that longer-term facility has amortized more quickly than originally expected, creating some seasonal cash needs among clubs, the sources said.
“The facility is meant solely to bridge the timing of revenue inflows, so the funding is meant to be repaid once ticket receipts, sponsorship payments and media distributions are received by a team,” said Rob Tilliss, a sports adviser who was aware of the deal but not involved with it.
One source said the loans would have to be repaid by the end of the year. Many distributions from leaguewide revenue streams arrive then.
MLB Chief Financial Officer Jonathan Mariner declined to comment, as did Bank of America, which is leading the new debt deal.
Seasonal funding is a long-running issue in sports. Revenue is commonly staggered throughout the year, but payroll is due during the season. Many teams have relied on the longer-term debt or individual loans at the local level to carry them through the end of a season.
In 2008 and 2009, the NBA, MLB and NFL, unable to refinance their long-term debt deals, termed out, meaning accelerated amortization clocks began to tick. The NFL and NBA have since refinanced, but MLB did not, leading to a steep reduction in its credit facility size from an amount that had been in excess of $1 billion, sources said.
Sports leagues since the credit crunch have emphasized debt reduction, but because of the drop in the long-term debt facility, MLB may have flexibility to incur more debt.
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