Kukla's Korner Hockey
by George Malik on 07/17/13 at 02:38 PM ET
Until the bottom fell out of the world's economy in 2009, the NHL's 30 member franchises--yes, all of them, even Florida and Phoenix--were cashing in on the second lockout's promises of every-year increases (usually by double-digit percentages) in NHL teams' equitable values.
The theory went something like this: if you're running a large business and your largest expense, player compensation, is both capped at a fixed percentage of league-wide revenues, and has nothing less than an ironclad link to a certain percentage thereof, especially with a capped limit (at 57-and-change cents on the dollar under the previous CBA), even teams that lost money on a salaries-versus-ticket-sales basis were good investments.
A couple of years ago, the New York Post's Larry Brooks duly noted that NHL teams could very easily cash in on their franchises' equitable values by starting financial consulting services, making investments in entertainment, real estate, and otherwise essentially starting side businesses that bet against the team's bank value as "collateral"...
And especially under the new CBA, where the 50-50 split of players' versus owners' compensation is seen as an ideal ratio, and especially given the world economy's rebounding, at least corporately speaking (I don't know about you, but gas prices and the ever-increasing cost of things like food, power, broadband internet and all of the cascading cost-of-living increases related to our petroleum-and-internal-combustion-engine-based economy are still hitting my family very hard in the pocketbook), should restore the NHL's "roar" as the kind of industry whose franchises' equitable values are a good banking vet.
According to the Bloomberg News's Scott Soshnick, that is in fact the case as the NHL's "credit facility"--i.e. the league's ability to take on loans and its perceived ability to fulfill its financial obligations--has increased by two hundred frickin' million dollars over the past year:
The National Hockey League increased its credit facility to $600 million, up $200 million from the previous amount, according to data compiled by Bloomberg.
The league also received a better rate on the agreement with Citigroup Inc. (C), which was completed last month. The new facility is priced at the London interbank offered rate, or Libor, plus 250 basis points. The previous facility was $400 million at Libor plus 300 basis points.
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. The NHL locked out players at the start of last season in a collective bargaining dispute and played a 48-game campaign starting in January.
NHL spokesman Frank Brown declined in an e-mail to comment on whether the league increased its credit facility. Anthony Di Santi, managing director at Citi’s sports finance and advisory group, didn’t immediately return an e-mail seeking comment on the NHL’s credit facility.
So the third owners' lockout is already "paying off," because a higher credit facility = a belief that a business and its affiliates (the NHL essentially has 30 "franchise locations") the financial clout to charge higher rates from advertisers, sponsors and other business partners as they are theoretically spending money investing in an incredibly financially sound enterprise that is guaranteed to provide you with a safe, steady and strong rate of return on one's investment.
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About Kukla's Korner Hockey
Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.
From breaking news to in-depth stories around the league, KK Hockey is updated with fresh stories all day long and will bring you the latest news as quickly as possible.
Email Paul anytime at firstname.lastname@example.org