Big sponsorship, seat license sales allow 49ers to refinance early
The San Francisco 49ers plan to refinance their $850 million of stadium debt obligation in the next two months, sources said, well over a year earlier than originally projected.
The team last week hosted a bank meeting at the site of the 49ers’ new Santa Clara, Calif., stadium on the same day the club announced its $220 million naming-rights deal with Levi Strauss.
Entering their final season at Candlestick Park this year, the 49ers already have $1.3 billion in contractually obligated income committed, more than the $1.2 billion stadium cost, said one key source. It’s because the team is so far ahead of internal revenue forecasts that the 49ers can refinance well before the debt’s 2015 maturity.
“There are already $200 million to $300 million of upfront payments,” said this source, meaning the club could, if it chooses, immediately pay down up to a third of the debt.
The 49ers declined to comment.
The committed income is from seat licenses, suites, ticket sales and sponsorships, such as the Levi’s deal. When the 49ers’ banks — Goldman Sachs, U.S. Bank and Bank of America — were syndicating the loan last year, they informed investors the team had already sold $500 million of seat licenses. Still, at that time, the team did not expect to refinance until it was playing in the new stadium.
Now comes the Levi’s deal, for $220 million over 20 years. The club also is considering structuring future sponsorships at a discount in exchange for large upfront payments in order to pay down debt, though there is no firm plan to do so at this time.
Already on board as founding partners at the stadium are Anheuser-Busch, Brocade, NRG Energy, SAP, Sony and Violin Memory. The team has said it intends to secure 10 such agreements. Founding partner deals at the big league level typically are valued at seven figures annually.
Greg Carey, chairman of Goldman Sachs’ public finance department, said the main reason the 49ers are looking to refinance is favorable market conditions. Goldman Sachs is leading the refinancing.
The refinancing plan comes just a year after the closing of the original loan, which is borrowed through the team and a stadium authority group for tax purposes, with the facility revenue responsible for paying off all the debt.
The team received $200 million from the NFL’s stadium funding program for the project. That amount combines with the $850 million loan to go toward the cost of the stadium.
Right now, the $850 million is a straight construction loan. What the team is considering is splitting some of that into a loan with lower interest rates, as well as selling bonds. There were several bond investors at the meeting last week in Santa Clara.
Chances are the team will do both, with the main decision now how to split debt between bonds and loan, and how much of the current loan to pay down. The key source even mentioned the possibility of being flexible with the debt structure in the event a second team chose to play at the stadium. If that were to happen, for example, that team might bring say $100 million in new NFL stadium funding with it, which could then be used to pay down more of the loan.
That team, if such a move were to happen, would almost surely be the Oakland Raiders, though no discussions have occurred between the two teams, this source said. The Raiders play in an outdated stadium in Oakland, but were the club to leave its current home, it may be more interested in moving to Los Angeles than sharing a stadium with their cross-Bay rivals.
The Niners could have waited longer to refinance, seen more upfront payments flow in, and then enjoyed a higher investment grade rating and thus secured even lower rates. But long-term interest rates are low now, and the club wanted to lock them in, the sources said.