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Volume 22 No. 14
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League gives Falcons OK for record amount of debt

NFL owners last week approved waiving league debt rules to allow the Atlanta Falcons to incur $850 million of debt, sources said, a sum that would be a record amount of borrowing for an NFL team.

The Falcons need the money to finance their new stadium, which is scheduled to open in 2017. Earlier this month, the team increased the cost estimate for the venue by 17 percent, to $1.4 billion, an increase that followed a 20 percent bump, to $1.2 billion, last year.

{podcast}

SBJ Podcast:
NFL writer Daniel Kaplan and Executive Editor Abraham Madkour discuss the news that came out of last week's NFL owners meeting.

The team, in published reports, ascribed the latest increase to general construction costs.

The Falcons are receiving $200 million from government sources and another $200 million in NFL stadium financing. That leaves the team with a $1 billion cost, some of which will be funded directly by personal seat licenses and other contractually obligated revenue. However, to borrow $850 million, the Falcons need to set aside a lot of that revenue to service debt costs, even in a low interest rate environment. That apparently made one team nervous enough to vote against the debt waiver. The Cincinnati Bengals, sources said, voted no.

Over the years, Bengals owner Mike Brown has often been a conservative fiscal voice within the league. A team spokesman said he would check with Brown to see if he would comment but did not reply by deadline.

A Falcons official declined to comment, and the team’s chief financial officer, Greg Beadles, could not immediately be reached for comment.

The Falcons have been talking to banks, including Bank of America and SunTrust, about leading their stadium financing but have yet to choose one, sources said.

It’s unclear if the team plans to borrow the full $850 million or simply wanted the highest waiver it could get from the league to keep its options open.

How the matrix of debt and revenue breaks down also is currently undetermined. If PSL sales bring in more revenue than expected, for example, the amount of debt can be less. The team has not publicly revealed its revenue projections, though it has provided them to NFL owners. The sources declined to provide those figures.

The NFL currently caps each team at $200 million of debt but does make exceptions when teams need to borrow for stadiums.

Before the 2008 financial crisis, several teams borrowed significant sums. The New York Jets and Giants each borrowed $800 million for their shared stadium, and the Dallas Cowboys borrowed a similar amount for their new venue.

After the financial crisis, and in the buildup to the NFL lockout in 2011, the league slimmed down its debt profile. The Falcons’ debt waiver is the strongest signal yet that that era is over.

The San Francisco 49ers two years ago also committed to cover about $850 million of debt for their new stadium, but half of that debt was borrowed directly by a stadium authority. The team was also seen as an outlier at that time in its capacity to assume so much debt because of its location in mega-rich Silicon Valley.