MLB is taking new loans totaling $182.15 million on behalf of unnamed clubs, according to a Fitch Ratings note this week.
The league is selling $155.7 million series 68 notes through its MLB Trust Securitization fund. A second tranche, named series 69, is being floated for an additional $6.45 million, according to information contained in Fitch’s note. The differences between the series aren’t disclosed.
A second entity, MLB Facility Fund, is selling $20 million in series 10 notes.
“The MLB Trust and MLB Facility Fund structures utilize a bankruptcy-remote securitization consisting of pledged revenues derived from long-term national broadcast contracts, and other pledged revenues including distributions from MLB [Advanced Media] and other non-media central baseball revenues,” Fitch said in its note, rating the trust debt ‘A’ and the facility debt ‘A-minus’. “The bankruptcy-remote structure eliminates team-related risks but they remain subject to all the fundamental operational risks of MLB.”
Both ‘A’ and ‘A-minus’ ratings are high-quality ratings from Fitch, meaning the risk of default is low. Its ratings scale goes from ‘AAA,’ the highest-quality debt, to ‘D,’ for defaulted bonds. Fitch rates the credit quality of corporate and government issuers as part of the debt market’s mechanism for determining the interest rate issuers should pay investors.
Fitch sounds a positive tone regarding baseball’s media trends despite the upheaval in the broadcasting structure for many of its clubs amid the Diamond Sports bankruptcy and a general trend of cable cord cutting. “The league borrowing programs are supported by large contractual revenue streams from investment-grade media counterparties including ESPN, Fox and TBS,” the agency writes, noting strong renewal track records and the shielding of the rated debt from clubs’ local media revenue variability. “Other pledged league-level revenue streams continue to demonstrate positive growth.”
Based on a May affirmation of MLB’s ratings that stated total debt then, the new loans put the sum of MLB’s Trust Securitization fund at slightly more than $1.9 billion and the facility fund debt at $537 million. Based on the amount of debt to revenue backing the bonds, MLB has the lowest debt leverage of the three major leagues Fitch rates, at 1.8 times. Debt levels for MLB Trust are set at a maximum $125 million for each of the 30 clubs and at $100 million for each franchise in the facility fund. Today, 28 franchises have borrowings through the trust fund while 12 clubs participate in the facility fund. Neither the names of the clubs nor the purpose of either fund is publicly disclosed.
In the spring, the NFL raised its debt limit for existing owner to $700 million per team, with an additional $700 million available for buyers. That gives the league a leverage ratio of 2.0; its league-wide credit facility is rate ‘A.’ The NBA raised its debt limit by $150 million per club to $475 million early this week. The NBA’s ‘A-minus’ rated league wide credit facility is projected to be about 2.7 times for 2024-25, according to Fitch.
A unique feature of MLB’s debt structure in its league-wide facilities compared to the NFL and NBA is that bond holders are isolated from team-level default risk, the agency adds.
An MLB spokesperson didn’t immediately respond to a request for comment.
