NBA Borrows $175M for 15 Teams ($11.66M Each)


Professional sports are not immune to the economic downturn.We saw the Arena Football League close indefinitely. MLB free agents are signing shorter, smaller deals (except for Mark Teixeira and CC Sabathia). And several NBA teams are shopping star players to save money (ie the Phoenix Suns and New Orleans Hornets.

Now word comes out that the NBA has secured $175,000,000 to help support 15 teams who apparently need the assistance. It will be interesting to see how this affects the trade deadline (expect lots of major contracts to move) and this summer's free agency. The financing comes at over 8% interest - so it is clear that this was a needed move... and considering the NBA's health as compared to Major League Baseball - I wonder what will happen when (not if) MLB attendance and advertising falls... big names and contracts will move quickly and at pennies on the dollar.

The NBA is set to borrow $175 million Feb. 26, marking one of the first league financings since the implosion of the credit markets last fall. The money, which will be available to 15 teams, supplements an existing $1.7 billion leaguewide credit facility that uses the NBA's media contracts as collateral to secure loans for the clubs. The NBA surveyed its teams, and 15 responded they would like to tap into the new borrowing.

While the league said it is pleased to borrow in an extremely illiquid credit market, the deal came at a cost, with interest rates up to 8.27 percent, hammering home the notion that the era of cheap money in sports is over. The 15 teams can use the money for any purpose, but covering operating losses may be high on the list.

Each of the 15 teams can borrow a maximum of $11.66 million from the debt proceeds. -- Sports Business Journal