NHL Finance Update – A New Fat Credit Facility

nhl credit
One of the investment that I follow, Citigroup, had a quick quiet small press release this morning at 8:00 am:
Citi Extends $1.4 billion Credit Facility to NHL

Certainly not splashing news but I know the that NHL is pretty secretive about its finance. We know or heard through various reports that only a few teams are generating the bulk of money for the NHL. One of the stat you hear the most is that the Toronto Maple Leafs, Montreal Canadiens, and the NY Rangers are responsible for 80% of the league’s revenue. I haven’t verified or can’t confirm the accuracy of this stat, but it does pass the common sense test.

What’s interesting about this new line of credit, orchestrated by Citi Sports Finance & Advisory, is that by reading the press release it provides you with some hint about the league’s finance.

First let’s break it down. Thanks to a new long-term labor agreement and a fat Canadian TV deal, the NHL can guarantee a certain future revenue stream. This minimize uncertainty. Fourteen teams have access to the credit line and they get $100 million each. But the press release doesn’t say much other than feel good stuff from the NHL.
Does this indicate that there’s only fourteen that are profitable?
Or these are the teams profitable enough to cover the interest payment?
We don’t know what the terms are and the rate they are paying.

We don’t have the name of the teams that have access to the credit line, but I’m pretty sure it’s the half that makes money vs the teams on life support such as Pheonix or Florida. What banker would loan money to these two teams.

“This is a state-of-the-art facility, well-structured, and attractively priced — leading to exceptionally high interest by all of our investors, including strong participation from both the bank and bond market,” said Craig Harnett, NHL Senior Executive Vice President and Chief Financial Officer.

Other than this press release there’s no comments from either side. Is it one rate for all fourteen teams? It would make sense that having the stamp of 14 teams and the NHL on the contract that you would get better terms than what an individual team would get at its local bank. Professional sports leagues create loan pools by using collateral such as national broadcast contracts to secure credit at better terms than most teams could individually.

But Bloomberg News has more on the topic with this article: NHL Said to More Than Double Credit to $1.4 Billion

According to anonymous sources, 11 teams have access to the credit facility and there’s 3 spots available. The LA Kings, the Chicago Blackhawks, and the NJ Devils are the two teams listed to have taped the credit line. So this indicates that it’s not only teams with healthy finance have access to credit since the Devils have been flirting with bankruptcy speculations. The Devils had problem covering interest payments on their loan, so it’s a good thing that the credit line is backed by TV rights revenue.

How does this compare to other leagues? According to the SportsBusiness Journal, the NFL has the largest credit facility with access to “only” $3.5 billion. Again I don’t have the terms and this is an estimate. It looks relatively small compared to the NHL, but one can make the argument that the NFL doesn’t need to borrow as much money. It’s TV rights deal are the largest in sports and is more than enough to cover yearly payrolls. According to ESPN, from 2014 to 2022, the same networks will pay $39.6 billion for the same broadcast rights. We know that the amount of the credit facility are largely based on the TV rights contract, so I assume that if the NFL wanted a bigger one, they wouldn’t have any problem finding a lender.

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