NFL To Increase Size Of Lending Facility For Its Teams

The NFL is going to increase the amount of money available in its league-wide lending facilities from which its 32 teams can borrow, according to multiple sources.

Money borrowed by the lending facilities are guaranteed by the NFL, not the individual teams. Discussions on expanding the league’s credit facility are still in their informal stages, according to my sources. The NFL’s lending facility is currently about $6.4 billion.

The NFL just agreed to increase its debt limit for each team to $500 million from $350 million. The increase in the league’s lending facility will be used by its teams to help with cash flow needs if games are played without fans. The additional funds will be particularly useful for teams like the Las Vegas Raiders and Los Angeles Rams, who have spent a fortune on new stadiums due to open this season.

The amount by which the NFL is going to increase its credit facility in unclear at this time in part because there is still a lot of potential capacity in the current lending facility. There is one unusual caveat for teams that borrow from the new lending facility funds: the money must be used for football operations. In the past, especially in times like now when the economy is bad, owners have borrowed from the league and used the money for their non-football businesses. They will not be able to do that this time.

In January, Firth Ratings reviewed two arms of the league’s credit facility—assigning an A+ rating to the NFL Ventures, LP’s $70 million senior notes and an A rating to the NFL Trust’s approximately $707 million senior secured notes. In part, Fitch said at the time the A+ and A ratings “reflect the NFL’s position as the most popular professional sports league in the U.S. and its strong and highly regarded economic model, which includes sizeable multi-year television contracts, significant revenue sharing among its teams, a proven track record of conservative financial policies, and the current collective bargaining agreement with its players that includes a hard salary cap.”

But two days ago in a commentary Fitch cautioned, “Sports stadiums and arenas face potential delayed or non-payment of contractually obligated income from some counterparties or weakened price points for sponsorship renewals as a result of game cancellations and the economic recession due to the coronavirus pandemic…It’s becoming apparent that some Fitch-rated stadium and arena transactions will need to negotiate with lenders to waive certain debt covenants. Quarterly coverage tests and other technical debt covenants may be missed, but transactions have significant liquidity. Financial support from teams, leagues and league borrowing facilities are also available to meet near-term operating expenses and debt payments.”

The NBA and MLB have also recently increased their league-wide lending facilities.