The Canadian dollar’s precipitous drop is not a “major concern,” the NHL said last week, even as the league’s top revenue contract, its deal with Rogers Communications, has fallen 17 percent in value since the media company signed it in November 2013.
That decline is in the contract’s value in U.S. dollars.
The largest TV deal by far in NHL history — and a contract that underpins the league’s $1.5 billion lending pool — pays teams in Canadian dollars. The contract, the league said, does not carry any direct or associated currency hedges.
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NHL teams pay players in U.S. dollars, but Canadian franchises receive most local income in local currency.
Photo by: GETTY IMAGES
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“[The] Rogers deal pays in Canadian funds and there are no hedges that have been placed in connection with those payments,” NHL Deputy Commissioner Bill Daly wrote in an email.
“Currency is not a major concern for the League at this point in time, and no consideration is being given to reviving or recreating a Canadian currency assistance plan,” Daly said. “Obviously, the currency differential is a hardship to some of our Canadian Clubs, but unless or
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NHL Wrap-Around Podcast:
Finance editor Daniel Kaplan, NHL writer Ian Thomas and Alex Silverman discuss the impact of the falling Canadian dollar on the NHL’s contract with Rogers, individual teams’ businesses and next year’s salary cap.
until it becomes a longer term issue, it’s not something that we believe requires a League-wide response in addressing.”
All 30 NHL teams pay their players in U.S. dollars, with the collective-bargaining agreement dictating that management and labor roughly split revenue. For the seven NHL teams in Canada, the currency decline hits harder than just the Rogers deal. Most local income, from ticket sales to sponsorships, is paid in the local currency.
“Obviously there has been some impact, but it hasn’t been as significant as many are making it out to be,” said Scott Brown, senior director of corporate communications with the Winnipeg Jets. He declined further comment. The other six Canadian teams either declined to comment or did not respond to inquiries.
In the early 2000s, Canadian currency devaluation rocked the NHL teams north of the border, leading the league to create the assistance fund Daly referenced. Teams in the United States contributed to the fund, which helped keep the Canadian teams afloat until the currency crisis dissipated.
The lowest the Canadian dollar ever traded against the greenback came Jan. 21, 2002, when it traded at 61 cents to the U.S. dollar. By 2007, the U.S. dollar dramatically weakened, and the Canadian dollar hit an all-time high, trading 10 percent over the U.S. dollar. In other words, one American dollar equaled $1.10 in Canadian money.
By the time Rogers announced its 12-year, $5.2 billion (Canadian) contract with the NHL on Nov. 26, 2013, the Canadian dollar fetched 94 cents to a U.S. dollar. So, in U.S. dollars, the contract equaled $4.88 billion.
Late last week, the Canadian dollar was trading at 78 cents on the U.S. dollar (see chart), making the Rogers deal worth $4.05 billion in U.S. currency, or $830 million less than the day Rogers signed it. That is a difference of more than $2 million per club annually over the life of the contract (a number calculated as if the currency were to stay at its current level.)
Ironically, while Daly referred to the apparent hardships Canadian teams face taking in local revenue in Canadian currency, the leaguewide Rogers deal spreads the pain and could make a possible future solution easier to swallow for all clubs. In the early 2000s, when the Canadian clubs were struggling, the currency problem largely affected those teams because the value of the NHL’s TV deal in that country was significantly less lucrative than the one signed in 2013.
“The fact it impacts everybody will make it easier to fix,” said Bob Caporale, chairman of Game Plan, a sports merger and acquisition advisory firm. Game Plan in the early 2000s advised Bain Capital on its unsuccessful effort to buy the entire NHL. “It is right now at a point where it is cause for concern,” he said of the currency devaluation, disagreeing with Daly that it is not an issue at the moment.
And Caporale is not alone. Bankers, who requested anonymity because of lending relationships with the league, said if the currency were to stay below 80 cents on the U.S. dollar, it could force the league to keep the salary cap flat next season. The cap is projected to rise a few million dollars per club, so if the Canadian dollar were to stay even or decline, that could affect player spending.
So far the decline is not imperiling the league’s credit structures. The NHL last year became the final one of the four largest U.S. pro sports leagues to secure a leaguewide lending pool, largely on the strength of the Rogers deal.
The lending pool is safe even at the current currency levels, said Anthony Di Santi, a vice president at Citigroup, which led the loan facility. Di Santi, who manages Citigroup’s sports lending, declined to say at what level the currency would need to fall to endanger the lending pool, but he described that as a “catastrophic” circumstance.
The other leagues do not have the same concern as the NHL. The NFL has no non-U.S. teams, and the NBA and MLB each has only one. And while each of those teams, the Toronto Raptors and Toronto Blue Jays, face the same issue with local revenue as the Canadian NHL teams, they have access to far larger leaguewide revenue, shared equally among their leagues’ teams and which are paid in U.S. dollars.
Staff writer Ian Thomas contributed to this report.
