Realignment Megathread (All The Moves)
- Thread starter ISUcyclones11
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Maybe someone has already answered this. If this PE investment goes south and the Cal pension fund is on the hook, who's going to pay the bailout? I know it's a big IF. Regardless, a government entity gambling with the public's portfolio seems to be a tad illegal without specific public consent. I thought that's what bonds were for.
I would say the pension fund is on the hook. That is why the GOR is so long. This is in my mind a stupid way to spend someone’s hard earned pension money.
Disagree. They are doing a loan with interest as well as a 10% equity share in BTE.
So $2.4B out now, $200-250M back per year in P&I, plus $100M per year (probably increasing over time) back from equity distributions forever.
Is there some risk? Yes. But you can probably lean real hard on the member institutions, on the P&I at the very least. And you'd break even in like 8 years, which reduces "everything goes to pot" risk.
BTE is the one getting a crap deal here imho.
I understand the investment aspect of it. But, unfortunately, the actual 'investors' are not on the hook like in the stock exchange and being a public entity I doubt any of the decision makers are either. Which means, good or bad, they walk away scott free. This is truly monopoly money when you look at it like that.
Although technically not a bond, what I heard it was priced in a way that would return the California Pension fund higher than treasury yields, closer to investment grade bonds. If it was a bond, No way Moodys would have rated this any thing stronger than Ba1 (non-investment grade) because of the changing media landscape and the Big 10s recent history during Covid. in another words, the distribution was too large. That’s why I say this is a stupid way to run a pension fund.
I don’t like this deal for the big ten but stating the changing media landscape as a negitive (plus Covid) is kinda short sided as every major sports media deal has been significantly higher then the last.
If this deal is signed by public institutions, then essentially that state government is on the hook if the university/AD ever defaulted. Are they legally on the hook? No. However, do u ever see a state government letting their university be in default of a debt instrument? This would trigger a cross-default clause of all existing bonds. It won't happen.
For USC/Northwestern, there is no state backing. If they default, then it is up to their Foundation and/or supporters to bail them out.
For USC/Northwestern, there is no state backing. If they default, then it is up to their Foundation and/or supporters to bail them out.
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I think you are way off base if you think the next 2 Big 10 media deals stand any chance of being less than the current deal.
Streamers like Amazon, Netflix, Apple and Amazon are all poised to expand their live sports content.
And traditional media companies like Disney, Universal, Paramount and FOX are all investing in platforms and moving toward growing their subscription platforms.
I'd say the Big 10 media deal will be highly credit worthy. Payments increasing and companies making payments are some of richest companies.
That's why I question need for Big 10 to give Cal Investments equity share in BTE. IMO Big 10 could just structure it like a securitization transaction.
That’s not at all how the deal is structured as we have heard.
But again don’t think this is even happening
I didnt say that they didn’t stand a chance of being less. I am saying that from the standpoint of moody’s, any amount of uncertainty in this case can and would lower a bond rating to non-investment grade, especially depending on who has the media deal. Moody’s says there is a “large financial risk to streamers of sporting events because of the high cost of media deals and the debt.”
There is a large variance in the credit rating of the bonds of the streaming companies you listed.
Paramount’s bond rating has been lowered to speculative. Fox is investment grade, but not rated as excellent. Apple basically has the same rating as U.S. Treasuries. This wide variance causes uncertainty.
Not saying it wouldn’t be credit worthy, but there would be a pretty big difference in what should be the distribution payments whether it would be AAA, BBB or Ba1, which are the ranges in the examples you just gave.
That’s why it’s very stupid for fiduciaries to even consider this.
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You mean the same moodys that helped kick off the financial process because they weren’t rating things even remotely accurately? That moodys? Between that and your Flugar post from earlier that was immediately disproven your sourcing is wild lol
No offense to you, but I refuse to go down the rabbit hole with you.
Whens the last time a media company didn't pay their rights fees for college football?
What's the difference in interest on AAA vs. Ba1 20 year debt?
Regardless the Big 10 can structure a deal meeting investor return requirements without giving up equity in BTE.
The only caveat would be if the Big 10 is looking at the $2.4B being the first distribution from Cal Investments. Which could be because $100M won't last the Little 13 very long.
It's not a long-term answer unless the Big 10 foresees a HUGH jump in the 2030+ media deal. Or schools finds a way to drastically cut costs.
Ok. Who is legally selling 10% ownership to PE and who is on the hook for paying it back?
My understanding is BTE.
Now, who owns BTE? IDK but would assume the member universities own it, and/or shell companies owned by the universities. The distributions from BTE go TO the member universities, and that's pretty much how you define "owner".
Now its entirely possible there is a majorly tortured ownership structure that tries to shield the universities from liability. But even then, they would get sued for any kind of bond default - because they have money. And if you have money, you get sued.
