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Standard & Poor’s revisits NFL’s situation after “lockout insurance” ruling


Earlier this week, the folks at Standard & Poor’s suggested that the NFL could withstand a two-year lockout, based in part on the ongoing flow of TV money in 2011. We suggested in the wake of Judge David Doty’s ruling that the league violated the CBA by finagling so-called “lockout insurance” that S&P should revisit its assessment.

And it did.

In a press release sent to us by S&P, the rating agency concludes that, without the ongoing network payments in a work stoppage the league has “sufficient resources to fund its fixed obligations for up to one year if there are no games played in the 2011 season.” The bills would be paid, in S&P’s estimation, by “accumulated cash reserves, available lines of credit, or other forms of liquidity.”

S&P points to the fact that “income from suites, club seats, and advertising accounts for 50% to 80% of stadium revenues,” and that the contracts “typically require payment even if football games are not played,” even though the suite/seat holders may be subject to credit once games resume. S&P also says that the league has been “building a strategic reserve . . . on behalf of each team.”

Either way, S&P has slashed its assessment of the league’s viability during a lockout in half.

Also, the prediction glosses over the fact that, to keep the doors open, the league will be mortgaging future profits -- and also potentially alienating those who purchased suites, club seats, and/or advertising. The networks apparently were well aware that they were agreeing to contractual terms requiring ongoing payment in the event of a work stoppage; we’ve got a feeling that the folks who purchased suites and club seats weren’t as keenly focused on the possibility of a money-for-nothing scenario.

The assessment also omits any acknowledgment of Judge Doty’s finding that the closure of the TV money valve could trigger a default under some of the league’s loans, regardless of whether money is otherwise available to pay the debts.

Bottom line? No matter what anyone says or how anyone spins it, $4.3 billion that the league lined up for a lockout likely won’t be available, which puts a major crimp in the NFL’s plans in the event a lockout launches.