Major League Baseball is expanding its available credit by more than $1.9 billion and is raising $102 million in senior secured notes, according to a ratings note from Fitch Ratings.
MLB Trust Securitization, a league-wide borrowing facility, is selling $102 million of senior secured notes in six pieces, ranging from $2.3 million to $32.2 million in size, according to Fitch. MLB Trust has also expanded its revolving credit facility to permit up to $2 billion in commitments. The league has $1.2 billion committed in the facility today that were due in December 2022. The expansion of credit also pushes back the payoff date to July 2026. Of MLB’s 30 franchises, 28 clubs participate in the trust facility, according to Fitch.
Baseball also expanded the MLB Facility Fund to permit up to $1.25 billion of commitments from the $146 million the league has outstanding right now, according to Fitch. Ten of the league’s teams participate in the Facility Fund. The Facility Fund is rated A-minus, while the MLB Trust is rated A by the agency, which evaluates debt as part of investors determining how much interest to demand from borrowers. Both MLB Trust and MLB Facility are backed by national media rights revenue and have the right to draw from the funds first, before being transferred to clubs. The Facility Fund is rated slightly weaker because MLB Trust has first rights to media revenue among the two.
An email seeking comment from an MLB spokesperson wasn’t immediately returned.
MLB’s 30 clubs have amassed more than $8.3 billion in debt in large part due to losses resulting from the pandemic and the shortened 60-game season in 2020. As part of MLB’s recent moves, clubs will be permitted to draw $125 million from the MLB Trust Securitization fund, up from $100 million. Among its peer pro leagues, MLB leverage is currently 2.4 times revenue for each team, which is higher than the National Football League’s 1.9 times and lower than the National Basketball Association, which is 3.3 times revenue. Baseball’s leverage will decline to about 2.0 times revenue by 2024, based on contracted increases in annual TV rights fees.
The ratings agency cited baseball’s stable domestic attendance, running at 68% capacity recently, long history of no labor disruptions and media rights as strengths. A labor dispute, with the collective bargaining agreement expiring this year, and any possible increases in per-team debt are listed as potential risks.