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Volume 22 No. 34
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Crane's $220M loan from BofA to finance purchase of Astros has 'recession-era structure'

Jim Crane (right) is buying the Houston Astros from Drayton McLane.
Incoming Houston Astros owner Jim Crane is borrowing $220 million from Bank of America to finance his nearly $700 million pending acquisition of the franchise, according to sources familiar with the deal.

With the NBA and NFL in the midst of labor strife, few stadiums being built, and few teams being sold in other leagues, sports financings have been relatively slow in the past year. As a result, the Crane deal serves as one of the first tests of sports in the financing markets in some time.

On the plus side, for observers seeking favorable markets, the deal came together quickly, and banks that wanted to lend money into the deal had to be turned away, sources said. The loan, however, is conservatively structured, with covenants, for example, requiring Crane to pre-fund expected losses. Some of the loan also is set aside for interest reserves, the sources said.

Astros lender Bank of America could not immediately be reached for comment, while representatives for Crane declined to comment.

“It’s a recession-era structure,” said one source. That is notable given that the Astros, notwithstanding their tepid on-field performance, are attractive financially for several reasons.

The team’s new regional sports channel with Comcast begins in two years, with what one source described as a very significant first-year payment to the team. The Houston metro area is the sixth-largest market in the country by population and is seen as being healthy financially.

The club also has been paring payroll in the last two years. Its reported total of roughly $70 million this year is in the lower half among MLB clubs and down from more than $100 million in 2009. Revenue this year is projected to hit $170 million, said a source who read the lending prospectus.

Crane himself is considered wealthy — he’s the CEO of Crane Capital and the founder of Crane Worldwide Logistics, reportedly projecting to do $1 billion in business by 2014 — so for the deal to demand conservative lending structures indicates that for less-well-situated clubs, the financing markets could be challenging.

“In the current financial environment, these are the types of structures you need,” said Gordon Saint-Denis, president of advisory firm Major League Sports Consulting. “Banks need to be prudent structuring in the sports financing world.”

That is true especially in baseball, which just last year suffered through the Texas Rangers’ bankruptcy auction. Crane was a losing bidder.

The interest rate on the deal is 275 points over the London Interbank Offered Rate, or LIBOR, a floating rate index.

The Astros already have about $55 million of debt, borrowed from the MLB credit facility. Total debt of $275 million on a $700 million valuation is a fair deal, Saint-Denis said.

The sources expect the sale to close next month. However, the sale price will be reduced by whatever the projected loss is for the rest of the season, one source said.