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Volume 21 No. 6
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NFL ups loan-pool financing to $2.7B

The NFL in recent weeks closed on financing totaling $2.7 billion, of which $700 million is new debt, football and banking sources said.

The money funds the leaguewide credit facility, a pool of loans backed by national league revenue such as media and sponsorship money. Two years ago the league raised the amount of money a club could borrow by 25 percent, to $250 million, but had not widened the financing, which allows teams to borrow at low interest rates through the league.

A quarter to half of the league’s 32 teams had wanted to borrow more and could not, said sources who asked not to be named. If a club needed to borrow more and couldn’t from the credit facility, it could have secured the extra funds from another lending source.

The NFL had little trouble securing the new debt, in part because of the booming business of the NFL, and in part because of the easy access to debt.

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“There’s historically easy money,” said one banker who did not wish to be quoted because his bank is part of the credit facility. That means banks are eager to lend, but especially to highly creditworthy companies like the NFL.

The NFL declined to comment.

Bank of America leads the financing, but spread the risk by selling pieces of the debt to other financial institutions. It’s that spreading of the risk, called syndication, where demand was very high.

The debt is also easy to raise because, despite increasing the debt limit, the league still has the most conservative debt-to-franchise-value ratio in sports. With NFL teams worth north of a billion, and in some cases billions, of dollars, a bank is not worried about getting its money back in the rare event of a default. If a team defaults, it could be sold and the banks would be repaid from the sales proceeds.

The terms of the debt could not be determined, but based on past deals, the interest rates are likely only a few percentage points. The $2.7 billion is split between two pieces. The first is a $2.1 billion “revolver,” a type of lending instrument that allows the money to be withdrawn, repaid, and borrowed again. Previously the NFL’s revolver was $1.6 billion.

The league also borrowed $600 million from insurance companies, of which about a third represented new debt and the remainder a refinancing.

The credit facility is larger than the $2.7 billion, which finances one element of the loan pool. There is more than an additional $1 billion of other insurer financing tied to the credit facility. The league also arranges stadium financing through its G-4 program, and that amount is also well over $1 billion.

Individual teams also borrow on their own, outside the auspices of leaguewide financing. While typically leaguewide deals offer better rates, a team might borrow elsewhere for a host of reasons: relationship with a bank that is also a sponsor; ties to an owner’s non-football businesses with the lender; and borrowing that has been allowed over the team debt limit for stadium construction. And in the last several years, if the leaguewide credit facility did not have enough money to lend, that gave teams another reason to go to another lender.