Scottsdale, Ariz. - Chief Financial Officer of the Denver Broncos, J. Allen Fears, sat on a panel last week led by John Molloy, of Fleet Securities, entitled Rights-Backed Securitization for Sports, Entertainment & Media at Strategic Research Institutes' Asset Securitization 2002 Symposium.
Three days later the Broncos closed a $180 million securitization structured by Fleet, backed by rights and contracts associated with the team's brand new stadium, INVESCO Field at Mile High. In what's called a "Public/Private" partnership, the stadium is actually owned in part by several counties in the greater Denver area, who in turn lease the stadium back to the Broncos at a nominal amount per annum. The sponsorship fees paid by INVESCO are split between the counties and the stadium, although, it is understood these fees do not flow into the transaction.
The deal is backed by about 4,000 stadium-related contracts, such as luxury box seats, club seats, a portion of concession fees and other cashflows. Fleet is financing the deal in its ABCP conduit, Eagle Funding, and Ambac is wrapping the transaction to a triple-A.
As to why the Broncos chose securitization, "The biggest single reason is flexibility," Fears said during the panel discussion. "The numbers are big enough now where doing a transaction like this makes sense... We can pretty much run the business the same way than if we hadn't [done this transaction]."
According to Fears, for the past several years the Broncos have been purposefully writing the terms of their stadium-related contracts to be conducive to securitization. Still, despite a perfect cashflow and all the right prep work, a true sale opinion is not possible in financings conforming to the National Football League's guidelines. The NFL's financial committee does not approve transactions where the assets are transferred into a bankruptcy remote special purpose vehicle, so the Broncos deal, conforming to the league, is not a true-sale.
Fears said that Fleet used creative structuring techniques to allow the Broncos to employ the securitization structure. Standard & Poor's and Moody's Investors Service both rated the transaction investment grade before obtaining the Ambac wrap.
In the first year of the stadium's existence, the Broncos finished 8-8, third place in the AFC West division, and missed the playoffs. Of the eight wins, six came at home. Denver ended the 2001 season ranked 10th in total offense and eighth in total defense. Meanwhile, the stadium has been sold out for 32 years straight.
In late December, Fleet also closed a $180 million stadium financing for the Philadelphia Eagles, whose stadium is being built for next year's season.