Finance Uncategorized

Falcons debt increase signifies NFL financial strength, future

The NFL has approved a significant debt increase for the Atlanta Falcons, signifying the strength of the league's finances.

Artist rendering of New Atlanta Stadium.
Artist rendering of New Atlanta Stadium.

The NFL has approved a record level of debt for the Atlanta Falcons, indicating the league’s confidence in its financial strength and future.

After breaking ground on New Atlanta Stadium in May 2014, the Falcons have increased the construction cost to $1.4 billion from an original estimate of $1 billion. The Falcons already received $200 million in public funding and another $200 million from the NFL, leaving the team solely responsible for the rest of the project through “StadCo,” its development entity.

(Dale Zanine-USA TODAY Sports)
(Dale Zanine-USA TODAY Sports)

The Falcons were struggling to meet the remaining $1 billion needed for the new retractable roof stadium. By releasing the Falcons from its debt rules, the league is allowing the team to take on $850 million in debt, $650 million more than the current debt limit.

As The Fields of Green previously reported, the NFL is not the only league to make recent adjustments to its debt protocols. Increasing the debt limit means current owners can inflate their team values because sales can be comprised of more debt, while buyers may be drawn by the financial opportunities of easily available debt.

Terry and Kim Pegula, the NFL's newest owners. (Timothy T. Ludwig-USA TODAY Sports)
Terry and Kim Pegula, the NFL’s newest owners. (Timothy T. Ludwig-USA TODAY Sports)

Debt flexibility also signifies the financial health of a league: Owners are comfortable allowing each other to incur more debt if the league is doing well because stable revenues reduce the risk of defaulting. Accepting more debt may also mean that the NFL is preparing for expansion, whether through new venues, revenue sources, TV/fantasy partnerships, or even teams. For example, the NFL could find it easier to launch a London expansion team or move an existing franchise to Los Angeles if potential owners are allowed to supplement their purchases and stadium developments with more debt.

Arthur Blank, owner of the Atlanta Falcons and the to-be-named Atlanta MLS expansion team. (Dale Zanine-USA TODAY Sports)
Arthur Blank, owner of the Atlanta Falcons and the to-be-named Atlanta MLS expansion team. (Dale Zanine-USA TODAY Sports)

The Falcons are expected to share their new home with an MLS expansion team. With only eight guaranteed NFL regular season games, a majority of the stadium’s events will be for the new soccer club, a risky prospect considering the uncertainty of the Atlanta soccer market. And though MLS isn’t investing any money in the stadium, it still has a vested interest in breaking into a new market — especially one that is included in U.S. World Cup bids — and through the expansion team’s owner, Arthur Blank, who is also the owner of the Falcons.

You can follow Nick on Twitter at @Nick_Zobel.

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