Though naming rights contracts have been incorporated in several stadium finance securitizations, the revenue stream associated with them is becoming a hot topic in sports finance, with proceeds lucrative enough to back entire deals, said industry specialists.
"The dollar value of these agreements have certainly been increasing as time goes by," said Jay Eisbruck, vice president and senior credit officer at Moody's Investors Service.
SG Cowen, already a number one player in the sports finance industry, is prepping what could be the first all naming rights-backed term deal.
"You're likely to see a number of these transactions this year," said Avi Oster, a director in the asset securitization team at Cowen. "But I'd rather not comment on any specific stadiums or arenas at this time."
Oster did however say that the pending deal will be less than $100 million in size, and is associated with a multi-use arena. Both Cowen's securitization team and corporate sports finance business will work on the transaction, Oster said.
For naming rights to be securitizeable, the contract associated with the transaction must be multi-year, exclusive, and with defined payment streams, Oster said.
Though naming rights have been part of stadium finance securitizations, deals backed solely by the naming contract are looked at with a different set of criteria, from a rating perspective.
"If you're considering just a naming rights agreement, you definitely have to look more closely to the credit of the entity that's paying under the naming rights agreement," Eisbruck said. "So the rating of the securitization is going to be very closely linked to the rating of that company."
While the entity's credit plays a part in any transaction where naming rights make up a percentage of the total revenue streams, the significance is related to the percentage of total revenue the naming right contract accounts for.
For example, in the $315 million L.A. Arena Funding transaction, naming rights receivables, in this case associated with Staples, made up just 11% of the transaction's revenue stream, according to a Moody's report written by Eisbruck.
For the L.A. deal, other revenue streams included corporate sponsorships, luxury suites, premier seats, food and beverage concessions and Ticketmaster agreements.
SG Cowen, which is the section 20 investment-banking subsidiary of Societe Generale, is the third largest foreign bank in the U.S., with $52 billion in assets. Cowen runs three U.S. asset-backed commercial paper conduits, worth roughly $18 billion combined. Globally the company manages conduits with assets in excess of $25 billion.
