The Memphis Grizzlies redid an innovative financing, grossing another $3.5 million by trading payments from the last 19½ years of their naming-rights deal in return for what is now an upfront lump sum of $37 million.
Last summer the Grizzlies did a two-part financing in which they sold the first seven of those 19 years to a group of investors for $21.5 million, and the rest to a company controlled by team owner Michael Heisley for $12 million.
Under the new deal, a single institutional investor is buying the rights to all the naming-rights payments.
Randy Campbell, the S.G. Cowen banker who arranged the transaction, said that with the financial markets improving since last summer, and a favorable credit rating of BBB- from Fitch Ratings, redoing the deal was possible.
"Under the right circumstance teams can utilize this type of financing selectively to provide upfront proceeds from naming-rights contracts," Campbell said.
The naming-rights deal is with FedEx Corp., parent of Federal Express, and is for 22 years and $90 million.
The Grizzlies already have gotten $20 million from FedEx for the first 21¼2 years of the deal, meaning in total the club has now received $57 million from a contract that will not expire until 2024.
Only the Montreal Canadiens have also executed this kind of deal. The hurdles are high: concern over the credit quality of the corporate naming-rights partner (Enron, anyone?); league concerns about teams pledging what can be a very lucrative asset; and banks usually wanting more than one revenue line as collateral.
In this case, belief in Federal Express' long-term viability, coupled with the Fitch rating, sealed the deal, Campbell said.
Critical to the Fitch rating were assurances from Heisley of financial support for the deal, said Dan Champeau, a managing director at the credit agency. He would not elaborate beyond this statement. One source said that referred to a long-term lease the team recently signed with the soon-to-open FedEx Forum.
