Oct. 6 (Bloomberg) -- The National Basketball Association’s credit rating may be cut if the season is canceled over a labor dispute with players, Fitch Ratings said.
The firm, which rates about $2.3 billion in leaguewide debt, watch-listed its BBB+ ratings on the NBA’s $957 million revolving credit facility and its $1.34 billion in senior notes due through 2020, saying there’s “a strong likelihood” that the ongoing lockout will result in missed games.
“If the season is canceled, downward rating action may be warranted,” Fitch said in a report.
The NBA locked its players out on July 1 when the two sides were unable to agree on a new collective bargaining agreement.
Following failed negotiations with the National Basketball Players Association two days ago, NBA Deputy Commissioner Adam Silver announced the cancellation of the entire preseason and said the NBA would wipe out the first two weeks of the regular season if an agreement in principle wasn’t reached by Oct. 10. The season is scheduled to start on Nov. 1.
The two sides are negotiating over how to split money from a league that had about $4.3 billion in revenue last season. NBA Commissioner David Stern has said the league’s 30 teams collectively lost $300 million during that period.
Fitch also placed a negative watch on the BBB+ rating of $234 million in bonds backing Los Angeles’s Staples Center, the BBB- rating of $46.7 million in bonds paying for Denver’s Pepsi Center and various private ratings on about $500 million in other NBA arena debt.
NBA arenas have reserve funds that will pay debt service for at least one year, Fitch said, and arenas with other anchor tenants and strong local economies may not experience significant financial impacts from lost games.
“Other arenas that have fewer other events, weaker local economic conditions and less ability to generate other revenues will likely experience greater financial pressure,” the firm said.
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