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Volume 23 No. 1
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League flexes muscles in securing $425M loan

Major League Soccer borrowed $425 million from a consortium of banks led by JP-Morgan and Bank of America, underscoring the quickly changing financial fortunes of the soccer league as it prepares to award lucrative expansion franchises.

MLS confirmed the loan, though not the amount, which was provided by financial and soccer sources. The money is primarily to buy out Providence Equity’s interest in Soccer United Marketing, MLS’s TV and marketing arm.

MLS Commissioner Don Garber told SportsBusiness Journal’s Dealmakers in Sports conference last week that SUM is now valued at $2 billion, and mentioned the credit facility as evidence of the league’s changing fortunes.

MLS sought to borrow in 2011 and came away with only $20 million from Bank of Montreal, a team sponsor. Fast forward to 2017, and not only was the league able to secure $425 million, but it had enough demand from banks that it could have borrowed $800 million, sources said.

“This credit facility ... is another sign of the evolution of Major League Soccer and the tremendous momentum behind our sport in the United States and Canada," MLS Commissioner Don Garber.
“This credit facility with J.P. Morgan and Bank of America Merrill Lynch is another sign of the evolution of Major League Soccer and the tremendous momentum behind our sport in the United States and Canada,” Garber wrote in an email. “It provides the opportunity for additional investment to make MLS even stronger in many areas of our business, including the development and acquisition of some of the most dynamic players in the world.”

That suggests there is enough money left over after buying out Providence to use meaningfully in other areas.

The league expects to award four new expansion franchises over the next year, with fees of $150 million a team, and recently struck a new merchandise deal with Adidas for six years and $700 million.

The league’s international TV deals expire next season, and the sport expects to renew those at a healthy increase.

Providence under the terms of its initial investment with SUM would have had to exit next year, but MLS wanted to accelerate that timetable. Providence managing partner Josh Empson said he remained bullish on MLS despite the fund’s exit.

Some in the sports industry maintain a dour outlook regarding MLS, convinced that its TV ratings and status in international soccer hurt its chances. Whatever sway those opinions once held, the lending business is now signaling it believes MLS is on a solid growth trajectory.