By Barry Janoff
October 5, 2015: The NFL has been under siege regarding concussion lawsuits from former players and other health-related issues, off-field situations regarding domestic violence and child abuse, the possibility of one or two franchises looking to relocate to Los Angeles and an on-going theater of the absurd drama called "Deflate-Gate."
But that hasn't stopped the league from compiling massive TV numbers, signing new and building current marketing deals and seeing its franchises increase in value. The Dallas Cowboys at $4 billion atop a list that has all 32 teams valued at more than $1.4 billion according to Forbes.
Which has led credit ratings and financial firm Fitch from assigning an "A" rating to the NFL's $106.1 million senior secured notes due 2024 (add-on), issued through Football Trust.
According to Fitch, the "A" ratings reflect the NFL's position as the "most popular professional sports league in the U.S."
The rating comes during a season in which the NFL is celebrating its golden Super Bowl 50.
"The NFL has a strong and highly regarded economic model, which includes sizable multi-year television contracts, significant revenue sharing among member clubs, a proven track record of conservative financial policies, and its current collective bargaining agreement (CBA) with its players union, which includes a 'hard' salary cap," Fitch Ratings wrote in a report released on Oct. 1. "Strong forecasted league-managed revenues, primarily national television contracts provide the league-wide borrowing program debt with solid projected debt service coverage ratios and low leverage."
Although taking note of such issues as health and concussion awareness, along with higher concussion-related costs, Fitch says that the NFL's "A" rating is a reflection of its "key ratings drivers."
"The NFL is the most popular professional sports league in the U.S. . . . (and )continues to be among the most highly coveted sports programming and content."
"The NFL structure promotes financial stability and competitive balance through a high percentage of revenue sharing and through supplemental revenue sharing," wrote Fitch. "The NFL maintains a robust and stable domestic fan attendance and viewership base. The collective bargaining agreement extends through the 2020 season and includes a 'hard salary' cap aiming to provide underlying team cost certainty."
Fitch also was highly motivated by the NFL's strong showing among TV viewers.
NBC's Sunday Night Football has established itself as the No. 1 show on TV, ESPN's Monday Night Football is the No. 1 show on cable and Thursday Night Football, seen on both CBS and NFL Network, is averaging about 19 million viewers, up 20% from last season, according to the NFL.
As related in the report by Fitch, NFL TV contracts run through 2022 with Fox, CBS and NBC; and through 2021 with ESPN. The NFL also has an agreement in place with DirecTV to broadcast "out-of-market" games on Sunday through 2022.
In addition, NFL Network will broadcast 16 games this season.
Also of major importance to Fitch is the NFL's international strategy, where Fitch noted, "The league continues to positively promote the game domestically and internationally, where two games were played in 2013, three in 2014 and three are planned at Wembley Stadium for the 2015 season."
The NFL will continue its London march and is also planning a long-term series of games in Mexico City.
Among other factors that motivated Fitch to assign an "A" rating:
• The NFL's salary cap on player expenses has similar characteristics of the NHL but different than the NBA and MLB where player salaries have some restrictions but owners can elect to go above predetermined levels by paying a "tax."
• In addition to the per club debt limit and other financial policies, the league has demonstrated willingness to step in and aid 'distressed' franchises. The NFL product continues to be among the most highly coveted sports programming and content. However, the sports sector is inherently vulnerable to discretionary spending from individuals and corporations.
• Growth in key league level sponsorship and advertising contracts further support the strength for NFL related content.
• The 'A' rating further reflects the mechanics of the lock-box account for the purposes of collecting national television revenues, which are the primary source of revenues that service the debt, prior to any distributions to individual franchises. Additionally, since each club receives an equal share of revenues, no franchise's share of the national television revenues is affected by its on-field performance.
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