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The NFL is the world’s richest sports league with revenue of $20 billion per year and franchises worth $5.1 billion on average. But a potential $14.4 billion liability has a credit agency keeping tabs on the situation.
Fitch Ratings issued a note Tuesday that said it will “closely monitor the outcomes” on last week’s decision by a federal jury that found the NFL liable in the Sunday Ticket class action and awarded the plaintiffs more than $4 billion in damages. Under federal antitrust law, damages can be tripled, pushing the potential liability to $14.4 billion.
Fitch currently rates the league’s various notes as A or A+, with both meaning a low risk of default on its AAA to D scale of best-to-worst bond ratings. Fitch expects the outlook to remain stable in the near term despite the jury decision, citing that the league’s other $100 billion-plus in media contracts are not affected by the ruling.
“However, risks can emerge as any changes to the league’s debt limit rules may lead to higher leverage,” Fitch wrote.
The NFL can appeal to the U.S. District Judge Philip Gutierrez that the damages awards are excessive and unreasonable; the league can also appeal to the U.S. Court of Appeals for the Ninth Circuit and later the U.S. Supreme Court. It’s possible the league won’t need to make any payments or change its broadcasting structure for years—if ever.
If the league is on the hook to pay the full damages, Fitch thinks the funding plan would mean assessments for each team, similar to the approach for the NFL’s concussion settlement in 2015. “The size of the jury’s award is consequential, even when factoring the massive revenue strength of the NFL,” Fitch wrote.
The NFL recently raised its debt limit to $700 million per club, with an additional $700 million available for a purchase. The higher limit raised the NFL’s leverage ratio to two times national TV revenue. Debt covenants in the Football Trust program say the debt limit cannot exceed 2.5 times, which limits the league’s ability to raise the debt limit to fund the settlement, per Fitch.
The class action pertains to when Sunday Ticket was marketed by DirecTV—the current contract is with YouTube. The judge for the case is scheduled to hear post-trial motions at the end of July.
Michael McCann contributed to this story.