Projo Sports Blog

By Aaron Kuriloff
Bloomberg

The National Football League will consider reducing the amount each team can borrow following turmoil in the global capital markets.

Commissioner Roger Goodell said the league had "an obligation" to examine its debt level each year and the current financial crisis only increased that obligation.

NFL owners voted in October 2007 to cut the amount each team could borrow by $30 million, to $120 million, before abandoning the move after a complaint from the players' union.

"Every other company is evaluating their debt levels and we're no different than that," Goodell said today at a league meeting in St. Petersburg, Florida. "We're all concerned about debt in this kind of environment -- you can see what it can do."

Asked if the union might again move to block a reduction in the league's debt ceiling, Goodell said "they very well might." NFL Players Association spokesman Carl Francis didn't immediately return a telephone message seeking comment.

The NFL and its 32 teams have become "very reliant" on cheap, available credit to maintain cash flow, expand business and pay players, said Marc Ganis, president of the Chicago-based industry consulting firm Sportscorp Ltd.

Along with about $1.1 billion in unsecured debt issued to help teams build stadiums, the NFL has access to a $1.5 billion secured revolving loan facility and $1.2 billion in senior secured notes "for general corporate purposes and to provide working capital," Fitch Ratings said in a June report.

Ganis said the credit crunch is a "game-changer" and its consequences could include spending cuts and tougher negotiations with the players' union.

Scoreboards, Suites

"It affects their margins," Ganis said. "It affects their cash cushions. And when it affects that, it affects signing bonuses. It affects how much you invest to put up new scoreboards or to renovate suites or to expand the stadium."

About one-third of the league's teams -- including four of the last five Super Bowl champions -- play or will play in stadiums financed by bonds that have spiked as much as fivefold since the beginning of the year.

At least four teams -- the New York Giants and Jets, the New England Patriots and the Dallas Cowboys -- financed new stadiums with auction-rate securities, long-term bonds with interest rates that reset weekly or monthly. Interest rates on the bonds reached as high as 22 percent after investors fled the market and Wall Street banks stopped stepping in to buy the securities.

Patriots Lawsuit

The Patriots said in a lawsuit against bond insurer Ambac Assurance Corporation that the team spent an extra $6 million this year in debt service after Ambac's credit rating was downgraded and the team's interest rates reached as high as 20 percent.

The club also paid Ambac $19 million in premiums since 2000 for insurance that turned out to be valueless, court papers said, and spent "well in excess" of $2 million refinancing the bonds.

Interest rates on adjustable-rate bonds for at least eight publicly financed NFL stadiums have also spiked as much as fivefold in states including Indiana, Texas, Louisiana, Maryland and California. Louisiana officials on Oct. 4 voted to retain about $226.5 million in auction-rate bonds issued to repair the hurricane-damaged Superdome, home of the New Orleans Saints, in an effort to prevent a failure in demand that would send interest rates to 12 percent.

Debt Delay

Arlington, Texas, last week delayed refinancing $164.3 million in bonds sold to pay for some of the public's share of the Cowboys' new stadium because of high interest rates and market turmoil. Interest rates on the outstanding variable-rate bonds rose to 9.7 percent last week from 2 percent in June.

Such examples "make it much more difficult to get public- sector participation in stadium finance or renovation," Ganis said.

Goodell said the cost of stadium debt is one issue the owners were raising with players as the league prepares to negotiate a new labor contract. Owners voted unanimously in May to opt out of the agreement with players after the 2010 season.

"We have to be able to run our business just like everybody else," he said. "Managing your debt is a big part of that."

 Tags  economy National Football League New England Patriots

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