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NBA Dishes Out USD$30 Million To Each Team For 2020/21

T
he NBA has announced it will give USD$30 million (AUD$40 million) to each of its 30 teams to help protect against potential liquidity issues caused by the COVID-19 pandemic, according to the Sports Business Journal (SBJ).

The total USD$900 million fund has been raised from notes issued by the NBA in the private placement market, with the majority of the market typically including insurance companies and institutional investors.

SBJ reported the notes cover three or four years and will be paid back from general collective league sources with interest included, marking the first instance the league has entered the private placement market to fund league initiatives.

With the NBA season set to begin on December 22, teams will have the authority to spend the money as they wish, following on from the NBA’s recent decision to raise a league-wide ‘borrowing allowance’ from USD$650 million to USD$1.2 billion.

The interest rates tied to the notes were undisclosed, but the NBA hopes the funds will help fill the void left by NBA teams being unable to host fans in venues for games at least for the early months of the season, depending on local rules for attendance.

It is reported almost 40% of NBA revenue comes from gate tickets, with the NBA reporting a 10% drop in revenue for the 2019/20 season, even with being able to finish the season in the Orlando bubble.

Fitch Ratings senior director, Chad Lewis, said the move by the NBA will help protect against the unknown in the league’s return to play for the 2020/21 season.

“Like any corporation, you’re going to have a letter of credit or bank facility outstanding for rainy-day needs or strategic investment needs, things like that,” Lewis said.

“Earlier this year, they obviously expanded that when COVID hit, and now they’ve decided … to go out and access the private placement from a diversification standpoint.

“They have full discretion over how they would disburse the funds.

“Not all the teams will be facing difficulties, but they obviously want to have a strong balance sheet … to aid distressed teams, kind of this core league role in governance and all of that.

“Really strengthen their balance sheet for the unknown,” he said.