As if one needed more proof as to whether or not the economic recession is affecting sports, the NBA announced that they will be borrowing $175M, in a private placement deal, to help “bailout” some of the teams in the league.
The NBA is set to borrow $175 million on Feb. 26, marking one of the first league financings since the crash of the credit markets last fall.
“In general, the NBA has a league-wide credit facility, just like the other leagues do. The league had already utilized the major portion of that,” Martins said. “The league went out to the 30 teams and asked if they were able to get another line of credit, would we be interested? We said, ‘Yes.’ “
The league surveyed its 30 teams, and 15 were interested in acquiring a loan. Each of the 15 teams can borrow a maximum of $11.7 million from the debt proceeds.
The private-placement deal was arranged by JPMorgan Chase and Bank of America. In a private placement, non-banking lenders such as pension funds and insurers extend the cash, commonly at fixed rates for five- to seven-year terms and at rates higher than what banks offer for floating-rate loans.
Harvey Benjamin, the NBA’s executive counsel for business and finance, said it’s important not to compare the rates with what the NBA had been paying before the credit market collapse — about 200 to 300 interest points less for similar debt, sources said — but rather, what borrowers of similar standing are paying in today’s environment. In that light, he said, the 8.27 percent the NBA will pay on $100 million of the debt, and the 7.45 percent on the remaining $75 million, is favorable.
