Is The High End Sports Team Debt Burden A Feature Of Private Equity?
Posted by David Zaring
Consider the seemingly modal example of the modern big deal sports team owner: Tom Hicks - a private equity man - has left Liverpool FC groaning under debt; he is looking to sell his stakes in the Texas Rangers and Montreal Canadiens to service said debt (he's hanging on to his Dallas hockey team, though). Or take Malcolm Glazer, a deals guy, if not quite a private equity maven (but he's pretty close), who loaded up Manchester United with debt as well.
And plenty of other examples exist, as Americans continue to buy up the English Premier League, as concern grows that debt financing in high end soccer (Real Madrid, AC Barcelona are almost as debt ridden, Arsenal isn't far behind) is reaching unsustainable levels. I'll note that the most indebted teams are the ones who have been playing in the Champion's League finals, of late, and the least indebted ones - those would be the non-private equity owned German teams (often owned by their fans, in fact) - are not. But that too, smacks of the risk-or-insolvency strategy that, fair or not, is almost as associated with private equity strategy as is a love of debt.
And one can go further. The Celtics are owned by financiers, and they have mortgaged the future for the present. The Red Sox, Golden State Warriors, San Jose Sharks ....look at the owners of these teams. It's armchair empiricism at best, but if I were in major league baseball, the one American sport without a salary cap, I would worry about selling another franchise to a private equity firm.
And I'll let the truth in the market guys tell you whether that would be an antitrust violation.