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Volume 20 No. 42

Leagues and Governing Bodies

The NFL is increasing the amount of debt its teams can borrow by one-third, to $200 million, the first significant loosening of financial restrictions in the major team sports since the 2008 economic crisis.

NFL clubs will now have the ability to tap into an additional $50 million each to use for various purposes, from player payroll to stadium construction.

“We have a very solid business model,” said New England Patriots owner Robert Kraft, a member of the league’s finance committee, on the rationale behind the increase.

Indeed, in the last year, the league struck a new labor deal that swung significant revenue to the owners and reached new TV deals with major increases. Philadelphia Eagles owner Jeffrey Lurie cited record low interest rates and strong franchise values as other factors behind the move.

“We have kept the cap the same since 2005,” he said.

In fact, two years later in 2007, the league tried to lower the debt cap to $125 million, citing turbulent financial conditions at that time. The league, however, backed away from the plan after objections from the NFL Players Association, which called it an effort to restrain player pay.

Financial experts said the league is well-positioned now for the large increase.

“The increase in the club debt level is mitigated by robust increases in the recently extended media contracts, tremendous growth in team valuations since the mid-1990s, and continued prudent financial management and oversight by the NFL,” said Chad Lewis of Fitch Ratings. “Fitch believes the average franchise sale price is between $800 million to $1 billion, which results in a conservative loan-to-value ratio.”

Owners can in some instances borrow more than $200 million, but the franchises cannot secure the additional debt. Owners can borrow more than the debt limit in acquiring their teams or building stadiums. In these instances, a holding company borrows the extra debt, with team or stadium revenue often pledged for interest repayment.

The Minnesota Vikings, for example, are committed to spending nearly half a billion dollars on a new stadium in Minnesota. The team will likely then create a stadium holding company that would borrow the excess debt. That debt is more costly because it is not secured by the franchise.

The Jacksonville Jaguars, as part of a major internal reorganization, have hired Legends Sales and Marketing to assist with ticket sales, long a tough area for the team. Legends executive Chad Johnson will work full time within the Jaguars’ offices.

Legends, which is co-owned by the Dallas Cowboys and New York Yankees, is also assisting the San Francisco 49ers with their new-stadium efforts.

In Jacksonville, Johnson will have Jaguars business cards and, from the outside at least, will function like any other member of the NFL organization. His title is vice president, ticket sales.

Before joining Legends, Johnson worked for the Miami Marlins and was involved with the opening of their new ballpark.

Jaguars owner Shahid Khan wants to say farewell to EverBank Field’s upper-deck tarps.
The Jaguars have also hired from the PGA Tour Scott Massey, who will be in charge of sponsorships and media sales. He was vice president of business development and title sponsor relations for the tour. His title at the Jaguars is senior vice president, corporate partnerships, a new position.

Mark Lamping, the Jaguars’ newly installed president, said he thought about hiring from within the NFL for the Jaguars but he wanted ideas that were outside the norm.

“We really need to be even more creative,” he said.

Mark Lamping is looking to Legends for creative answers for Jaguars ticket sales.

Jags owner Shahid Khan said in February he hoped to see the tarps that cover about 9,000 seats at EverBank Field removed. Those tarps artificially reduce the seating capacity so it is easier for the team to sell out and not have their games blacked out on local television.

Lamping last week seemed to walk Khan’s hope back a bit, pointing out that without the tarps, EverBank Stadium has a capacity of about 80,000, which would make it one of the largest venues in the NFL. Instead, he pointed to his experience in St. Louis with the MLB Cardinals in the 1990s, when at the old Busch Stadium, the team used a manual scoreboard to cover about 6,000 seats. While the Jaguars have not committed to replacing the tarps with a different covering, Lamping said the team is working hard on what he called resizing the stadium.

As part of that effort, the Jaguars have created a new department titled Fan Experience. Lamping hired Hussain Naqi to oversee that effort. Naqi, whom Lamping previously hired while at MetLife Stadium, will be in charge of the fan experience and in-stadium spending.

Macky Weaver, senior vice president of sales and marketing for the club, will now focus exclusively on ticket sales, the team’s largest source of local revenue. He had been responsible for the areas now covered by Massey and Naqi. Legends’ Johnson reports to Weaver, a nephew of the team’s former owner, Wayne Weaver.

The NFL’s Jeff Pash says the labor relationship is sound, but is this really peace?
LABOR PEACE?: A very cold peace: That’s one way to describe the apparent state of relations between the NFL and the NFL Players Association. No issue appears to go unchallenged these days, and the NFLPA filing a collusion lawsuit against the NFL last week was just the last development to underscore the fragile relationship.

NFL officials tried to downplay matters here, with Dallas Cowboys owner Jerry Jones telling reporters that conflict was the nature of the relationship and NFL chief legal counsel Jeff Pash also saying he thought the relationship was sound. Nevertheless, time and again the league and players are not seeing eye to eye just 10 months after the enactment of their new 10-year labor deal, with issues ranging from whether players should wear knee and thigh pads (NFL say yes) or paying survivor benefits to widows of pre-1993 players (the league is doing some of that now on its own). The number of issues outstanding and litany of new subjects that seem to crop up almost weekly at this point have some even wondering, only half-jokingly, whether the relationship was better during last year’s lockout.

Green Bay is adding 6,700 club seats, and fees linked to them will fund the work.
TV TALKS: Speaking of iced relationships, the NFL and Time Warner Cable appear no closer to getting a deal done for NFL Network. Asked about it, Steve Bornstein, NFL Media executive vice president, said simply there was no progress.

GREEN LIGHT FOR STADIUMS: The NFL approved club-seat waivers for stadium expansions in Pittsburgh and Green Bay. That means the fees from club seats the Steelers and Packers otherwise would have been required to pay the league can now go toward funding the expansions.

Pittsburgh is adding 3,100 seats, a new club area and a new high-def scoreboard to Heinz Field. Green Bay is adding 6,700 seats, two HD video boards and a restaurant, and is expanding its pro shop at Lambeau Field.

USA Cycling, the national governing body for bicycle racing, will take over promotional and operational duties for the United States Pro Road Race and Time Trial National Championships starting in 2013, when the event moves from Greenville, S.C., to Chattanooga, Tenn.

The annual event, which began Saturday and concludes today, awards the national championship to professional male cyclists. Previously, two regional promoters operated the event. Former Olympic cyclist David Chauner founded the event in 1985 and ran it until 2005 in Philadelphia, and Greenville-based Medalist Sports operated it from 2006 through this year.

“In the past we’ve had a model where the local [organizer] was responsible for the entire budget and assumed the risk, and we simply licensed [the championship] to them,” said USA Cycling COO Sean Petty. “This move is about us taking ownership and responsibility for it.”

A source estimated the event’s operating budget at $500,000, though the source said USA Cycling’s goal is to increase that amount.

USA Cycling oversees promotions and operations for its 17 other national championships. The move allows USA Cycling to bring its national-level sponsors to the pro road championships. This year national partners Volkswagen, United Health Care, Grape-Nuts cereal, InterContinental Hotels Group, Spy eyewear, Exergy and Gatorade all received activation space in Greenville.

The event had had a smattering of regional and national sponsors, and in its seven years in Greenville, title sponsorship was owned by the local Greenville Hospital System. During its time in Philadelphia, title sponsorship was owned by Pennsylvania banking companies CoreStates, First Union and Wachovia.

Wasserman Media Group, which began working with USA Cycling in 2011, sold the title sponsorship for the 2013-15 race to Volkswagen, which runs a plant in Chattanooga.

Fred Dreier is a writer in New York.