Is sports lending about to kick off?

There’s a growing buzz around investing in professional sports, and alternative lenders are looking to get in on the action.

In a recent article by Bruin Capital’s founder and  chief executive officer, George Pyne, he said sports is an increasingly attractive area in which to lend due to recurring revenues, multi-generational fan loyalty and thriving adjacent markets such as sports betting. All this acts to insulate professional sports from macroeconomic issues impacting other parts of the economy.

There are also substantial sums involved. In March, the NFL issued $1.27 billion of 2023 term notes under a league-wide credit facility, and the NBA sold $271 million of new debt in June.

Pyne said there is now a major mismatch between supply of capital for professional sports and demand.

“Unlike in the broader public markets, where risk aversion and banking’s retreat from commercial lending have put more negotiating power in the hands of credit providers, much of the power in sports rests with the borrower,” he writes.

Borrowers in sports are also looking for expertise in this niche, which has a number of unique features that make it different from conventional corporate lending. In the US, municipalities have historically been major funders of stadium projects, but are now cutting back. This means sports leagues are looking for lender partners with strong third-party relationships that can add value, such as construction.

“Other areas where sports properties might seek help are navigating land acquisition processes in a certain market, sourcing proprietary intelligence regarding consumer behaviours in a specific region, and/or securing vendors who can help monetise a stadium or arena upon its completion (for example, a best-in-class hospitality company),” Pyne wrote.

Sports lending can also offer a significant ESG impact. A recent NFL term-loan facility sought lenders with track records in serving diverse communities, eventually settling on a mix of institutions focused on minority and women-focused banks.

While private markets investing in sports has historically been focused on the US, there is also growing demand for alternative financing among sports teams in Europe. In May this year, Private Debt Investor’s sister title Private Equity International reported that Arctos, a private equity investor specialising in sports, had opened a London office to help expand its business internationally. In March, UK-based firms Fasanara Capital and Tifosy Capital & Advisory teamed up to launch a credit fund focused on sports receivables, focusing on the top professional football teams in Europe.

At a time when corporate lending is somewhat under the cosh, sports investing could offer an open goal for firms that have the right expertise to fully exploit the sector and meet the complex needs of borrowers.

Write to the author at john.b@pei.group