SBJ/Dec. 16-22, 2013/Finance

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  • Lender signs with teams to finance broker purchases

    A Connecticut-based lender has struck partnerships with three NHL teams and one NBA team to help finance broker purchases of season-ticket packages.

    Entertainment Financial, a sister company of established secondary-ticket market player TicketNetwork, has positioned itself as a preferred ticketing financier of the four undisclosed teams in the new partnerships. In the deals, Entertainment Financial makes short-term loans to ticket brokers, with a minimum loan of $10,000 and an average loan size of about $80,000. Interest rates to the brokers are about 12 percent annually, far less than many credit cards and other financing structures, and teams pay a merchant fee of 2.5 percent, comparable to credit card merchant fees.

    Teams will present Entertainment Financial loans as an option to brokers looking to buy or renew ticket packages. The loans allow teams to keep season-ticket sales up, lessen the risk of chargebacks, and help fill gaps in their seating manifests. Brokers gain another option to buy tickets without needing to pay all costs upfront.

    The partnerships are another maturation point of the secondary ticket industry. A decade ago, most teams openly combated the secondary market. Now it has been embraced to the point where brokers are relied upon in many markets to help teams absorb the financial risk of shifting fan demand. Selling tickets directly to brokers, however, remains a delicate topic in terms of appearances and public relations, which is why Don Vaccaro, co-founder of both Entertainment Financial and TicketNetwork, has not been authorized to publicly disclose the identity of the teams with which he is working.

    “We think this makes a lot of sense,” Vaccaro said. “Teams and event producers are now well aware of the important role brokers play in the overall ticketing landscape, and a product like this makes it easier for the brokers to manage the risk of their purchase.”

    Entertainment Financial formed three years ago making loans for commercial development and residential housing rehabilitation projects, and now has expanded into funding sports and entertainment ticketing.

    “This is another way to help accommodate some of your key accounts,” said an NHL team executive familiar with the broker loan program but not authorized to speak publicly about it because of the sensitivity of the matter. “There is definitely some utility here where you can offload some of your financial risk and not be chasing payments all year.”

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  • Inner Circle closes loop on team deals

    Cliff Viner had no luck after hiring a brand-name Wall Street firm to find a buyer for his NHL team, the Florida Panthers. Then he got introduced to Inner Circle Sports, a boutique sports advisory firm that has a lot to celebrate this holiday season.

    Rob Tilliss founded Inner Circle in 2002.
    Photo by: COURTESY OF INNER CIRCLE SPORTS
    Viner dropped Citibank and hired Inner Circle, which brokered the $250 million sale earlier this year, a figure that surprised many given the Panthers’ financial and market challenges.

    “They had a better read on how to vet and who is a serious prospect,” Viner said.

    For Inner Circle, it was the latest in a run of high-profile transactions. Rob Tilliss, after several years of running JPMorgan Chase’s sports lending and advisory practice, founded Inner Circle in 2002.

    While the firm has been a player in the advisory field since then — having advised the Boston Red Sox’s owners in 2010, for example, on the purchase of Liverpool FC — it’s the quality and the size of the recent deals that stand out, Tilliss said.

    Unlike many large finance firms that use sports mergers and acquisition advisory as a value-added service for existing clients or as an extension of a lending business, smaller outfits like Inner Circle, which has eight employees, must combine an intricate knowledge of sports leagues while forging new relationships.

    “We were looking for sports expertise, and I don’t think a lot of the [big] firms have that,” said Josh Harris, who used Inner Circle as an adviser on his purchase of the 76ers in 2011 and, this year, his purchase of the New Jersey Devils. “Rob’s expertise lays in analyzing the franchise and his relationships with the league and other parties.”

    Founder, CEO: Rob Tilliss
    Headquarters: New York City
    Founded: 2002
    Transactions in 2013 (role):
      Sale of Florida Panthers (seller’s adviser)
      Sale of New Jersey Devils (buyer’s adviser)
      Sale of Phoenix Coyotes (adviser to lender for buyer)
      Sale of Columbus Crew (seller’s adviser)
      Sale of Inter Milan (buyer’s adviser)

    Source: Inner Circle

    Those relationships are key in sports, where knowing a commissioner, a crucial owner, and the history of transactions are critical in assessing whether a given deal is possible.

    “They are well-connected,” said Anthony Precourt, who bought the Columbus Crew for $68 million from Hunt Sports Group, which Inner Circle advised. “They helped make some introductions for me that really helped in terms of getting my feet wet. We spent nine to 12 months talking to people in the industry, and they facilitated those [discussions].”

    Inner Circle is expanding overseas, as well. In addition to advising Fenway Sports Group on its Liverpool FC purchase, the firm this year represented Indonesian businessman Erick Thohir for his $480 million purchase of Inter Milan.

    Thohir, who also owns D.C. United, credited Tilliss and his Inner Circle colleague Steve Horowitz with being frank with him about what he could and could not do as part of the deal. While not elaborating, Thohir said, “They are fair to both parties.”

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