In a sign that MLB is economically stable and that changes in the latest CBA should allow that prosperity to continue, Fitch Ratings has announced that it has increased Major League Baseball's Club Trust Securitization's $300 million to its senior secured credit facility 'A-'. Additionally, Fitch has affirmed the 'A-' rating on the outstanding $842 million term notes (series 1 - 7 maturing through 2021) and the outstanding senior secured credit facility ($500 million total including the $300 million increase). Fitch gave its Rating Outlook as “Stable.“

Fitch gave several reasons for the ratings increase, which bodes well for MLB’s overall economic health:

• Solid Underlying League Economics: Debt service supported by large contractual revenue streams from investment grade counterparties. A new five-year collective bargaining agreement (CBA) that includes some additional strengthened core elements that promote financial stability and competitive balance. MLB continues to maintain a stable domestic fan attendance and viewership base and growing international fan base.
• League Oversight and Governance: League's demonstrated willingness to step in and aid 'distressed' franchises. For example the league assisted the Texas Rangers and Los Angeles Dodgers during ownership issues.
• Solid Legal Covenants and a Demonstrated Bankruptcy Remote Structure: Structural provisions ensure timely debt service. The MLB Club Trust structure utilizes a bankruptcy-remote securitization of pledged revenues consisting of long-term national broadcast partners in place through 2013. Noteholders benefit from the bankruptcy remote structure, which eliminates team related risks; however, they remain subject to all the fundamental operational risks of MLB.
• Long History of Television Contracts: Current television contracts run through 2013 with ESPN (Disney; rated 'A' with a Stable Outlook by Fitch), FOX Broadcasting Company (NewsCorp.; rated 'BBB' with a Stable Outlook) and Turner Broadcasting System (TBS) (Time Warner, Inc; rated 'BBB' with a Stable Outlook).
• Refinancing Risks Expose Teams to Potentially Higher Costs: The bullet maturities associated with the notes and bank renewals associated with the revolving credit facility expose the teams to potentially higher interest costs.

Fitch cited that a ratings action that could possibly push the rating down would be “a significant decline in national television contact rights fees,” which given the current market for media rights deals would be “unlikely.”

The transaction will increase the principal amount of the existing revolving credit notes issued by MLB Trust to $500 million from $200 million under the same terms.

A key part of the ratings change means that clubs will be able to access more money through the league’s credit facility. The increase to the existing revolving facility will also increase of the maximum amount of facility debt to approximately $75 million for participating clubs that are debt service rule (DSR) compliant and approved by MLB. Currently, most of the participating clubs are limited to approximately $55 million of facility debt per club.

MLB clubs will now be subject to the aforementioned DSR based earnings before interest taxes depreciation and amortization (EBITDA) during the most recent year. Under the new agreement, the rule for leverage will now be 8 times (x) EBITDA (and 12x EBITDA for any club which has incurred stadium-related debt to finance construction of a new ballpark or major renovation in the last 10 years). Under the prior agreement MLB's debt service rule of 10x and 15x EBITDA, respectively, was viewed as high. Fitch views the lower leverage thresholds and the oversight of the Commissioner's Office to enforce compliance with the DSR favorably.

Fitch added:

MLB's performance over the last few years during the U.S.'s uncertain economic conditions is a testament to the expected stability and demand for professional baseball in the U.S. and internationally. In 2011, attendance grew approximately 0.5% to 73.4 million after attendance declines in 2008 - 2010 following MLB's record high in 2007 of 79.5 million. Overall, 2012 season-to-date attendance is tracking around 6% higher than 2011. However, Fitch notes some markets that face a combination of severely weakened local economic conditions and lackluster on field performance have seen moderate declines while other teams have performed far better.

Additionally, Fitch notes stability in television viewership over the past decade as a key rating factor. Year-to-date viewership across nationally televised games on FOX, ESPN, TBS and local media broadcasts has been mixed; however, variations are typical early in the season given changes to match-ups year-over-year. MLB's national television contracts currently come due in 2013. Given recent positive trends associated with national television contract renewals in professional sports leagues and on the local level, Fitch expects positive renewals in MLB. Fitch will continue to monitor attendance and viewership levels throughout the season.

Fitch positively views MLB's economic model and financial policies, although a wide disparity exists between the revenues generated by the largest and smaller teams. A team's reliance on local revenues, which fluctuate significantly between small and large markets, and their discretion to spend unreservedly on player salaries can result in greater financial disparity among MLB teams. This disparity has the potential to lead to a less competitive framework for MLB. However, Fitch acknowledges that this disparity is partially mitigated by a revenue sharing transfer in excess of $400 million for 2011. Additionally, Fitch recognizes MLB's long history of viability in good and bad economic times and, more recently, the diversity of MLB clubs that have participated in the postseason since 2000 as important mitigating factors. Furthermore, Fitch notes, despite the range of financial disparity among participating clubs, noteholders are insulated from team level operations given their rights to national broadcast contracts to service debt prior to distributions to teams for operations.

While some teams are facing increased financial pressure due to weak economic conditions impacting attendance levels as well as corporate spending levels on sponsorships and advertising, those teams may be partially insulated in the near term by the high percentage of multi-year contractually obligated stadium-based income streams from luxury suites, club seats, sponsorship and advertising agreements and local broadcasting deals. Nevertheless, potentially lower renewal levels of key revenues at the league and individual team levels, should economic conditions worsen, would financially constrain the league and member teams. A key offset to softening stadium revenue growth include recently signed new and/or extended local broadcasting agreements that are expected to provide additional revenues to support underlying financial stability.

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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MLB has fired impartial arbitrator, Shyam Das

Major League Baseball has fired longtime independent arbitrator Shaym Das who had been selected to resolve certain labor issues as part of the Collective Bargaining Agreement. Das had been the impartial arbitrator for labor matters between the league and union since 1999. According to The Associated Press, MLB informed Das and the MLB Players Association of the decision last week. The CBA makes provisions for how arbitrators are part of several processes within the player/management relationship. Das ruled over several key rulings, most recently overturning the 50 game suspension of NL MVP Ryan Braun, which the league was extremely upset about going so far shortly after the ruling to leave the possibility of taking the case to Federal Court up in the air. The league opted not to do so, but the ruling set a precedence that played a role in rescinding the 100-game suspension issued to catcher Eliezer Alfonzo on September 14, 2011. As a statement from MLB on Monday said of the joint decision by MLB and the MLBPA to rescind the suspension, “Alfonzo’s grievance challenging his suspension raised issues that were nearly identical to those resolved in the Arbitration involving Ryan Braun.” The league then added that, “It is not anticipated that any other future cases will be impacted by the circumstances raised in the grievances of these two players.”

Players' union executive director Michael Weiner expressed disappointment Monday at Das's dismissal.

"Shyam Das has been served the parties with distinction and professionalism for 13 years," Weiner told USA TODAY Sports. "We think he's an excellent arbitrator.''

The process of firing of the independent arbitrator is part of the labor agreement between the league and union for the players. While the latest version of the Basic Agreement has not yet been released, the 2007-11 CBA reads:

At any time during the term of this Agreement either the Association or the [Labor Relations Department (LRD)] may terminate the appointment of the impartial arbitrator by serving written notice upon him and the other Party; provided that no such termination shall in any way impair the authority of the impartial arbitrator to render awards with respect to matters fully submitted to him. Within 30 days of any such termination, the Association and LRD shall either agree upon a successor impartial arbitrator or select a successor from an American Arbitration Association list, as set forth [in the CBA].

In terms of finding a replacement for Das, the (prior) CBA specifies the following:

“Arbitration Panel” shall mean the impartial arbitrator or, where either Party elects in advance of the opening of the hearing in a matter, a tripartite panel so empowered and composed of the impartial arbitrator and two party arbitrators, one appointed by the Association, the other appointed by the LRD. The impartial arbitrator, who shall in all instances be designated as the Panel Chair, shall be appointed by agreement of the Association and the LRD. In the event the Association and the LRD are unable to agree upon the appointment of the impartial arbitrator, they jointly shall request that the American Arbitration Association furnish them a list of prominent, professional arbitrators. Upon receipt of said list, they shall alternate in striking names from the list until only one remains. The arbitrator whose name remains shall be deemed appointed as the impartial arbitrator.

Das was involved in all cases in which a player that tested positive for performance-enhancing drugs appealed to the arbitrator, as outlined in the drug agreement. Until Braun, Das had never overruled a suspension by the league.

He was also involved in MLB’s attempt at contraction in 2001-02. Das heard testimony from the league and others in the case after the MLBPA filed a grievance to block the contraction of the Montreal Expos and the Minnesota Twins. Other cases included cutting Braves reliever John Rocker from 45 days to 14, and also cut his fine from $20,000 to $500 for scathing comments Rocker made to Sports Illustrated.

Das was not only involved in matters involving MLB and the MLBPA. Currently he is the arbitrator assigned to address the “Bountygate” case with the New Orleans Saints.

The AP provided a history of the arbitrators that have been assigned to resolve matters with MLB and the MLB Players Association as part of the story on Das’ dismissal. As reported:

Das took over as baseball's permanent arbitrator from Cornell professor Dana Eischen, who was hired in December 1997 but quit after ruling the following May against J.D. Drew's grievance seeking free agency.

Many of baseball's grievance arbitrators have had brief tenures, with the list including Lewis Gill (1970-72), Gabriel Alexander (1972-74), Peter Seitz (1974-75), Alexander Porter (1977-79), Raymond Goetz (1979-83), Richard Bloch (1983-85), Thomas Roberts (1985-86), George Nicolau (1986-95), Nicholas Zumas (1995-97) and Eischen (1997-98).

Joseph Sickles heard one case in 1976, and temporary arbitrators were used between Eischen and Das.

Seitz was fired after he ruled against owners in the Andy Messersmith-Dave McNally reserve clause case that led to free agency. Roberts was fired after deciding management colluded against free agents between the 1985 and 1986 seasons.

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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Yu Darvish will have his first US interview tonight on MLB Network

Maybe the excitement will abate at some point, but not for now. Baseball fans of every stripe are watching closely to see how Japanese pitching sensation Yu Darvish is transitioning to MLB with the Rangers.

Darvish talks with MLB Network's Tom Verducci about playing baseball in the United States today in an exclusive interview on MLB Tonight at 6:00 p.m. ET. In his first one-on-one TV interview with a national U.S. network this season, Darvish talks about the adjustment of playing in Major League Baseball compared with playing in his native Japan. Darvish also discusses his ability to throw all of his pitches left-handed, the difference of the feel of the ball in the U.S., his relationship with teammate Josh Hamilton, and his taste for American food.

Highlights from the interview that was taped Wednesday at Baltimore’s Oriole Park at Camden Yards are available below via MLB Network. Following MLB Tonight, the interview will be available for viewing at www.MLBNetwork.com.

Yu Darvish on how the attention he receives in the United States compares to the attention he received in Japan:

“I think in Japan, all of the attention that I received over there, also being Japanese, I understood it.  It was natural.  But over here, it’s a different culture, different country.  They’re saying ‘Yu Darvish.’  The way they ask for autographs, the way they cheer my name like, ‘Yuuu,’ those are a little bit different, but I’m thankful for those and I enjoy it.”

Darvish on the hitters in MLB:

“The power is a little bit different.  More power hitters over here, whereas in Japan, there are more contact hitters.  Over there, you might have players who will see a lot of pitches and put the ball in play.  Whereas over here, I have to be careful of not making too many mistakes.  Everyone has the strength to hit for power.”

Darvish on his walk rate and strikeout rate being higher in the U.S. than in Japan:

“The higher rate of walks [means] I’m still not completely adapted to this baseball here.  I think the higher rate of strikeouts, maybe the hitters over here, they’re not used to or they haven’t seen a pitcher like me where I have several secondary pitches and still can throw in the mid-90’s.  On top of that, they haven’t seen me at all.  It’s the first time around.  So I think all of that [combined] maybe is resulting in a higher strikeout rate.”

Darvish on Josh Hamilton:

“Just one word: amazing.  Actually being there and watching [his four-home run game], I don’t think I’ve ever seen a three-home run game.  And the fact that he’s such a nice person, a great teammate, he’s one of the many guys who actually helped me out, I was more happy to see him accomplish that.  Since he’s such a nice guy and we get along very well, I believe he’s going to hit five home runs for me next time I pitch.”
Source: MLB Network

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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Don Knauss has likely killed any remote chance the A's had of relocating

Remember how Lew Wolff and John Fisher were pushing to get a vote on allowing the Athletics to relocate to San Jose at the next MLB owners meetings? They can certainly push to take the vote, but chances seem all but dead that the votes are there. If that wasn’t the case before, it certainly is now the case. A group of Oakland business leaders made sure of that last week.

Ultimately, the San Francisco Giants are the biggest reason the A’s won’t move, but they got plenty of ammo from Clorox CEO Don Knauss who organized the meeting last week pushing to keep the A’s right where they are.

"We want the Athletics to stay in this town," said Knauss, who was flanked by a dozen Oakland area businesses supporting the effort including large brands such as Kaiser Permanente, Safeway, Pandora Internet Radio, Cost Plus World Market and Signature Development.

The collective thud you heard was not only Wolff and Fisher’s heads, but the city of San Jose as their heads hit the table.

The reason is simple: if a discussion does come up at the owners meetings on the relocation of the A’s, the Giants—and other clubs looking to ensure protection of their territory—can point to Knauss and say, “Why should we give up what is ours when the A’s have the ability to make it happen in Oakland?”

But, what seemed like a way to fish or cut bait for Wolff and the current owners of the A’s seems to run deeper. While you could make the case that having the issue of the A’s relocation sitting on the backburner since 2009 would force any owner to finally say, “Enough is enough. Let’s vote so we can either relocate, or sell,” the latter doesn’t appear to be in the cards. When Wolff was approached by the Oakland Tribune about the possibility of selling the A’s to the group of investors assembled that are willing to keep the club in Oakland, Wolff threw a curve ball.

"We are not sellers," he said by phone Thursday to the Tribune, adding that the intention is to own the team for at least another generation, preferably in the Bay Area.

If Selig says no to San Jose, "We have no plan B," Wolff said. "But it can't be in Oakland."

This is where the move to San Jose moves from being one of practicality to what seems as personal for Wolff. If the A’s aren’t moving south, then he intends on holding the club in a sort of hostage while those that seem to have a vested interest in making a new ballpark in Oakland occur. These civic leaders seem, well… invested in the A’s in Oakland, not ones sitting on the clubs waiting till the moon and stars align, or an asteroid strikes AT&T Park. Wolff, who seemed a sympathetic figure in all of this before Knauss held his meeting, now comes off as one that wants the A’s in San Jose and if that can’t happen, he’s willing to hold the club in continued purgatory.

The bottom line is, Knauss provides those owners opposed to the relocation of the A’s with an added talking point on why the move shouldn’t happen. The A’s are in Oakland now; maybe for eternity. You can either thank or hate Don Knauss for that.

Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He writes for Baseball Prospectus and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).

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