Fitch Affirms NFL’s League Notes & Borrowing Programs; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- In the course of routine surveillance Fitch Ratings has affirmed the following ratings:

National Football League (NFL)

--$1.1 billion senior unsecured notes at 'A+' (G-3 Stadium Finance Program.)

Football Trust

--$2.1 billion senior secured notes at 'A'.

Football Funding LLC

--$600 million parity senior secured term loan at 'A'.

The Rating Outlook is Stable.

RATING RATIONALE:

--The NFL's prominent position as a professional sports league in the U.S.

--The NFL's strong and highly viable economic model, which includes sizable multi-year television contracts, significant revenue sharing among member clubs, a proven track record of conservative financial policies, and a history of stable collective bargaining agreements (CBA) with NFL players.

--Strong forecasted league-managed revenues, primarily national television contracts, provide the NFL with solid projected debt service coverage ratios.

--Solid security pledge and adequate legal provisions and covenants.

--Current labor environment (Additional information is available in Fitch's March 3 press release 'Prolonged Work Stoppage Would Impact NFL's Ratings', available at 'www.fitchratings.com').

--Renewal risk associated with the national media contracts

--Inherent vulnerability of sports to discretionary spending from individuals and corporations on tickets, luxury suites and sponsorships and advertising and resulting effects on underlying team financial health.

KEY RATING DRIVERS:

--Resolution of the CBA prior to a significant delay and/or missed pre-season and regular season games.

--Stadium attendance and television viewership levels consistent with historical levels.

SECURITY:

The 'A+' rated unsecured notes are a direct and general obligation of the NFL and are backed by the commissioner's assessment rights over the league's Source Revenues including national television contracts; net revenues and royalty distributions from NFL Ventures, L.P. and its subsidiaries including NFL Enterprises LLC which oversees satellite broadcasting, Internet, NFL Network and other new media ventures; NFL Productions LLC, which produces film and video programming and administers related licensing activities; NFL Properties LLC which licenses the League's and Member Clubs' names, nicknames, logos, etc., and any other NFL-affiliated for-profit entity; and portions of base ticket revenues that are pooled and distributed to the Member Clubs.

The 'A' rated secured senior secured notes and senior secured loan are secured by each participating club's pro-rata share of national television contract revenues, membership franchise rights in the NFLNFL Ventures, L.P.

CREDIT SUMMARY

Fitch continues to monitor the ongoing negotiations and legal proceedings between the NFL and NFL Players Association. Since Fitch's commentary in early March, a number of court hearings, appeals and other key events have taken place. The owners imposed a lockout on March 12, meaning that the players cannot practice at team facilities, and do not have access to health insurance, roster bonuses, workout bonuses and other compensation. On April 25, a U.S. District Court in Minnesota presided over by Judge Susan Nelson granted an injunction to the players after hearing Brady v. NFL, temporarily lifting the lockout. On Friday April 29, the 8th Circuit Court of Appeals grants the owners a temporary stay, keeping the lockout in place for the time being. This temporary stay was made permanent on May 16 and an appeal was heard on Friday, June 3. On May 12, Judge Doty heard an appeal from the NFL regarding the $4 billion in TV money that the players want put in escrow instead of being drawn down by the owners. The players, in addition to seeking from Doty the placing of these TV monies in escrow, also seek damages related to the nature of the television contracts. The players are disputing that the NFL maximized the value of the national television contracts, as required under the terms of the CBA.

Fitch is closely watching the legal proceedings to analyze potential impacts to credit quality as well as the timeline related to potential appeals. In the event Fitch foresees a meaningful loss of games or believes progress in the courts or negotiations between the NFL and NFL Players Association are unlikely to produce a new CBA in a timely manner, Fitch will place all NFL related debt and NFL facility debt on Rating Watch Negative. Fitch privately rates and maintains investment grade ratings on approximately $1.5 billion in separately secured stand-alone NFL stadium and franchise related debt. A season ending work stoppage would result in further rating action. NFL preseason training camps are scheduled to begin in late July followed by preseason games in early August. The regular season is currently scheduled to kick-off on Thursday Sept. 8th.

In the event of a work stoppage in the 2011 season, Fitch notes that bondholders at the league level are protected from a short-term interruption in debt service payments given the NFL's proactive financial measures to create reserves from prior years operating cash in an amount sufficient to meet debt payments and provide some level of financial support to franchises through other league controlled revenues. From a liquidity perspective, it is Fitch's opinion that the league ratings could potentially withstand a two-year work stoppage scenario.

Fitch's ratings associated with NFL stadiums also factor in the possibility of a work stoppage. Fitch's universe of NFL stadium ratings have a debt service reserve fund, work-stoppage reserve or internal liquidity currently funded and sized to at least one year of principal and interest. Fitch notes in some cases, a significant portion of contractually obligated income that is required to pay even in the event of a work stoppage, are present and provide additional bondholder security. However, stadiums will likely have additional downward rating pressure in the event of a work stoppage in excess of one-year given the size of reserve levels. Stadiums with contractually obligated revenues required to pay even in the event of a works stoppage may be better prepared for a work stoppage in excess of a year, although Fitch notes, rating levels will be pressured.

While Fitch believes lenders to the NFL and NFL stadiums are protected in the short term, longer-term impacts from work stoppages in professional sports have always been highlighted as a credit risk as they have the potential to alienate the fan base as witnessed by short-term attendance declines immediately after work stoppages in other U.S. professional sports leagues. Furthermore, there is the potential for lower renewal rates associated with key sponsorships and advertising agreements as well as the national television contacts. Importantly, Fitch notes the strength and demand for NFL content has continued to grow over the past two decades through both good and poor economic times, thereby fueling the expected longevity for the sport which is a further testament to bondholder security over the medium to long term. To the extent a work stoppage continues in excess of one season, which Fitch views as a highly unlikely scenario, heightened concerns related to team valuations, demand for NFL related content and further fan loss are likely to come to fruition.

The senior unsecured notes were used by the NFL to provide additional private funding for the construction of new football stadiums through support of the NFL's G-3 Stadium Finance Program. The secured term notes and secured loan have been used by participating NFL franchises for general corporate purposes and to provide working capital. The NFL is a not-for-profit unincorporated association of 32 member teams and was originally founded in 1920 with 18 franchises.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Rating Criteria for Infrastructure and Project Finance', dated Aug. 16, 2010;

--'Global Sports Rating Guidelines', dated May 9, 2007.

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548345

Global Sports Rating Guidelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=325312

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch Ratings
Primary AnalystChad Lewis, +1-212-908-0886
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary AnalystScott Zuchorski, +1-212-908-0659
Director
or
Committee ChairpersonMichael McDermott, +1-212-908-0605
Managing Director
or
Media Relations:Cindy Stoller, +1-212-908-0526
Email: [email protected]

Source: Fitch Ratings