Banking giant UBS wants to throw its hat into the sports finance ring now that the sector has thinned so considerably.
Unlike new entries of several years ago, however, UBS does not plan a stand-alone group dedicated only to the business of financing and advising in sports. Instead, the Swiss-based bank plans to operate its effort out of its entertainment and media group, a practice common in the mid-1990s before sports finance units came into vogue on Wall Street.
"Sports is an important piece of the overall media and entertainment franchise," said Andy Sriubas, the UBS managing director who will be the point man on the sports push. "To ignore it would be foolish. ... There are good opportunities with owners and leagues to be able to get a decent business generated."
Said one sports banker of UBS' plans not to create its own group, "Many have tried that model, and doing this business as a sideline has never worked."
Sriubas has already met with various sports leagues, including the NFL.
One area he wants to explore is securitizations, the financing in which revenue lines, such as naming rights or club suite sales, are stripped away from the team, packaged into a special bond and sold by a bankruptcy-remote company created to sell the debt. In return, the team gets an up-front lump payment.
But the history of securitizations in sports has been hazy, in part because of league concerns that by taking the revenue away from teams, which would have no legal recourse to it even in the event of a bankruptcy filing, clubs that fall into financial distress would then be in worse shape. The NBA, for one, has said it is opposed to securitizations.
But Sriubas said the arguments against the financing mechanism ignore the fact that teams are able to get a lot of money up front that they might need.
Sriubas will use several bankers in the media and entertainment practice, as well as Chris Melvin in municipal finance. Melvin, once a top player in sports finance in the mid- to late 1990s at Merrill Lynch, moved to UBS two years ago. He will coordinate UBS' sports effort with the municipal bond team.
Beginning in the late 1990s, several banks created sports finance teams, with an eye on the stadium-building boom and explosion in media dollars flowing into sports. Many, however, have cut back or disbanded, in part because of the slowing of the stadium-building cycle as well as the growth in leaguewide credit facilities.
These league loan pools lend money to their teams and in essence take away business from individual banks that might otherwise have lent to those clubs.
Financial institutions with sports-finance-only groups are Lehman Bros., SG Cowen and Bank of America. The most high-profile bank to eliminate its effort was J.P. Morgan Chase.
