George S. May Business Blog

NBA to borrow $200 million

We know times are tough when pro sports teams have to borrow money.

The National Basketball Association is set to borrow $200 million to help out 15 undisclosed teams close out their operating losses. Most of the details aren’t available at this point, but we do know that no team shall receive more than $13.33 million.  

It has been suggested that the NBA did not go around looking for this new line of credit, rather they were approached by JP Morgan and Bank of America. Realizing the combination that that credit opportunities aren’t in abundance these days and there are NBA teams out there that could use the cash, the NBA jumped on it.

If you watch basketball, you know the impact of our recession has been obvious. All around the league we’ve seen games with less than half of the capacity filled. Even teams that are doing well in the standings are experiencing losses. Take the Orlando Magic. They have been within the top three seeds all year and are operating currently at over a $10 million loss. Not to mention teams not doing as well in the standings, like the Sacramento Kings, who were in line to report a loss of over $25 million before they dumped all-star Brad Miller and gave themselves some breathing room.

In my opinion there is nothing wrong with this. I know people are nervous about borrowing/lending at this point, which is well warranted after the housing market self destructed, but to me, the fact that the NBA was even able to get such a big chunk of money is encouraging. Moreover, they didn’t even go asking, the cash came to them.

I have heard talks of a labor stoppage/strike in where NBA teams push for a lower salary cap, but I seriously don’t think that will happen. I ask, has the outcome of a strike in any sport ever proved to be beneficial. No. What happens? Teams lose money and fans get frustrated right before they become apathetic and move on to a sport that is functioning, regardless of what the reason was for the strike was. It happened with baseball in the nineties, it happened in hockey a few years ago, and both sports are still trying to climb their way back into the public eye.

There is nothing wrong with borrowing money as long as you can pay it back and I do not foresee the NBA going out of business and defaulting on a loan anytime soon.

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