The NBA has to “bail out” 15 teams.
By Bill Smith
The Sports Business Journal (SBJ) reported that a private placement deal to borrow 175 million dollars was arranged for the N.B.A. by JPMorgan Chase and Bank of America. The charged interest rates are reported to be as high at 8.27 percent. The influx of cash will augment the 1.7 billion dollar league-wide credit facility that uses the NBA’s media contracts as collateral to secure loans for the clubs.
The money is necessary to provide cash to 15 NBA teams to cover payroll and other expenses. Those teams, unnamed by the league, have struggled with salaries, capital improvements, and to cover losses sustained over the last few years.
“In this economic environment, it’s tremendous that the league can place such a facility,” Alex Martins, chief operating officer of the Orlando Magic told the SBJ, which plans to borrow from the new debt. “It certainly helps us bridge the time period between now and when we move into our new events center in 2010. We’ve been operating at a $15 [million] to $20 million [annual] loss over the past half-dozen years, so it helps us” Martins told the SBJ.
The NBA has been suffering with guaranteed contracts for years without any hard salary cap like the NFL has. The GMs have been granting maximum deals to any player that can dribble a ball. Teams have spent their way into trouble with very little regard for total team cost or making a profit in much the same way that the US Congress has. The difference is that the NBA can’t just print money.
Similar financing programs in the NFL and MLB have been terminated by banks as part of their retrenching due to the credit crisis. Although the NBA placement is rated as BBB, there is little likelihood that the 1 billion dollar credit program which is financed by short term loans rolling over annually will be extended beyond the end of this season.
All sports leagues have to realize that the era of cheap money is over. Therefore the new contracts can not require guaranteed contracts over extended periods of time. Both the NFL and the NBA are facing master contract negotiations with their respective player unions in the next couple of years. The owners must be more open with the players. The players must realize that the very existence of the league is dependent on a fair and reasonable contract with the owners.
Sports leagues generate a great deal of money. The NFL and the NBA have to get deals that are fair to the players but allows the owners to survive. Otherwise, everyone including the fans lose.
That’s what I think. Tell me what you think.
Bill Smith is a former coach of several semi-pro teams, has officiated both football and basketball, done color on radio for college football and basketball and has scouted talent. He is a senior writer for and edits https://fryingpansports.com. He has also published several novels on and edits .
My email is [email protected]