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  • PWC

Sports Franchises Reap Benefits Of Private Equity Injections

Private equity investment in sports franchises, media rights, and stadiums is growing as many leagues began loosening their bylaws to allow this form of capital in 2019, says a DBRS Morningstar report. Since then, private equity firms have seized this opportunity to deploy record levels of dry powder because sports properties have historically strong returns and diversification benefits, despite the lack of board powers or representation and potential difficulties with exiting the investment. This has resulted in several benefits to sports debt issuers' credit profiles. It provides a new source of liquidity for sports franchises in addition to internally generated cash flow, owner injections, league distributions, or debt financing. This is particularly helpful for owners who have a large portion of their net worth invested in the franchise and may not have available capital when needed. As well, there are areas of expertise or relationships that private equity firms bring to the table in the form of stadium operations, media rights experience, or brand building, which can help sports issuers maximize revenues and increase returns. Finally, private equity firms' ability to invest in sports franchises results in higher franchise valuations and reduced loan-to-value ratios for sports issuers.

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