Fitch Ratings affirms the 'A' rating assigned to Major League Baseball's (MLB's) $1.4 billion league-wide revenue-backed securitization facility. The Rating Outlook is Stable. The facility, Major League Baseball Trust, currently consists of the following:
--$853 million variable funding notes,
--$389 million series-1 term notes;
--$125 million series-2 term notes.
On Dec. 15, 2008, $125 million of series-2 term notes were issued and rated 'A'. The series-2 term note proceeds were used to partially pay down the outstanding $978 million variable funding notes resulting with the overall leverage of the Trust remaining unchanged. The ratings on the existing series-1 term notes and the variable funding notes were affirmed at 'A'.
All the notes in the Trust rank pari-passu and are secured by, among other things, rights to receive certain payments shared among MLB clubs, including, primarily, telecast and radio broadcast revenues from national and international media contracts, and, to a lesser degree, revenues under licensing and sponsorship contracts entered into by Major League Baseball Enterprises, Inc.
Fitch's affirmation reflects continued trust performance within expectations as broadcast agreements with FOX Broadcasting Company, Turner Broadcasting System, and ESPN provide contractual revenue through the 2013 season. (Editor's Note: In 2007, MLB negotiated national broadcast deals with both Fox and TBS. Those deals, which run through 2013, will see Fox pay baseball approximately $257 million annually, while Turner will chip in $104 million per year. ESPN's deal was brokered in 2005. All told, MLB willl receive nearly $660 million from their national broadcast partners in '09).The rating affirmation also reflects the collective bargaining agreement (CBA) enacted in December 2006 between MLB's club owners and the Major League Baseball Players Association, which ensures no work stoppage through the 2011 season. Fitch notes that the CBA promotes financial stability among MLB clubs through continued oversight of club level financial activities by the Commissioner's Office, enhanced revenue sharing, and the competitive balance tax. Fitch also notes improving league level economics, as reflected in part by strong park attendance figures in 2008 and continued stable television ratings.
Fitch's Outlook reflects the strong attendance and league revenues during the 2008 season and expectations for 2009; however, current national and global economic conditions indicate heightened risks for MLB, as well as all of Fitch's sports ratings, as there will likely be increased pressure on individual and corporate discretionary spending levels and renewals of key sponsorship and advertising agreements. This is partially mitigated in the short term by MLB's multi-year national television agreements with its network providers which currently run through 2013 and provide strong collateral for the transactions and to MLB franchises for operations. MLB has historically had positive renewals of its national broadcast contracts.
Over the remaining term of the securitization facility, Fitch will continually monitor MLB's economic model, future collective bargaining agreements, the terms and conditions of media contract renewals, and the credit quality of current and future media contract counterparties. Any material change in Fitch's assessment of these factors could affect the rating of the facility.
Fitch's highest rating is 'AAA'. An 'A' rating is slightly below the highest rating provided by Fitch.
Source: Fitch Ratings, Business of Sports Network research
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 is contributor to Baseball Prospectus, and 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.
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