The NBA sold two notes last week totaling $108 million through its Hardwood Funding entity, which is believed to be a vehicle through which individual teams raise cash. Even while doing so, it appears the league has slashed its total debt by 19% over the past two years, based on Sportico data.
Fitch Ratings, which evaluates the debt of the league, published a ratings note Monday that disclosed the latest sale. Fitch rates the new debt as A-, meaning a low risk of default on its AAA to D scale of best-to-worst bond ratings.
On June 7, the NBA sold one note to raise $70 million and another to raise $38 million; at the same time, it upsized an existing secured senior revolving credit line by $21 million. According to Fitch, that puts the league debt at $6 billion, of which $4.3 billion is through Hardwood Funding and $1.7 billion is the revolving credit line through an entity named Basketball Funding.
Based on previous disclosures, the league debt has declined by $1.4 billion over the past two years from what was likely a peak of $7.4 billion in 2022. While it is possible the league has debt that isn’t rated by Fitch, bonds and notes are typically weighed by third party agencies, such as Fitch, to help secure better interest rates in the marketplace and meet the quality-of-issuer requirements of some institutional investment funds. The NBA declined to comment.
“The NBA’s business model and financial profile are consistent with the other ‘A’ category ratings for the National Football League (NFL) and Major League Baseball (MLB),” Fitch said in the note. “In terms of league business model, the NBA has demonstrated perhaps the strongest global growth in popularity in recent years, and renewal risk for its broadcast contracts is similar to that of peer leagues.”
The agency also cited the soft salary cap and the relatively modest amount of debt teams are allowed to take on as positives for the NBA. The maximum debt allowed on any of the NBA’s 30 franchise is $275 million, which is light compared to the average team value of $4 billion. The NBA overall is worth $120 billion, according to Sportico. The Hardwood Funding vehicle is believed to be one through which teams conduct financing as a part of their normal operational needs. Its debt is secured by cash flows that direct national broadcast revenue into an account for debt service before any distributions to the teams.