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MLB Owners Have Cash for a Season-Long Lockout, Fitch Ratings Says

Major League Baseball owners have enough money to weather a 2022 without baseball, should their lockout of players stretch that far, according to a note from Fitch Ratings today.

“A cancellation of games would result in lost revenues for clubs and for the league overall, but player salaries and team and stadium operating costs could also be reduced,” Henry Flynn, Fitch director, said in the note. “League and stadium credits will face greater pressures if the lockout extends beyond the first month of the 2022 season.”

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A key part of MLB’s fiscal war chest is its set of national media contracts, which are structured to provide payments even if no games are played in the 2022 season. In that scenario, the league would have to repay broadcasters, but not until 2023 or even later, depending on negotiations with media partners.

Future ticket sales would provide the cashflow to make good on canceled 2022 games in that case, according to the agency, which analyzes the financial wherewithal of entities on behalf of the fixed-income market.

Right now, the league has canceled the season’s first two series—six games a team—which will have no effect on the debt ratings of the league and the publicly financed stadiums some franchises play in, according to Fitch. The cancellation of games past April likely would bring more financial pressure on MLB, since the month typically generates light attendance for most clubs. Recent history suggests the league can handle a lack of games.

“The 2020 season was in many ways the ultimate stress test, and the league was able to sustain itself primarily due to liquidity, from either ownership injections or debt financings,” said Flynn in an email to Sportico. “The 2021 season saw a lot of strong activity, in some cases back to pre-Covid levels, as part of a widespread theme of ‘pent-up demand’ that we observed across the sports world in 2021 once Covid restrictions were lifted. The league was able to collect on its national media revenue in 2021, which is always a key source of stability for the league and clubs.”

While owners can finance a lengthy lockout, Fitch in its note warns that “a prolonged work stoppage could also alienate fans and corporate sponsors, which could not only affect revenue in the current season but could drag on the growth of the sport in the longer term.”

Those long-term effects, as well as the medium-term impact of a substantial number of lost games, could lead to a downgrade of MLB debt. The MLB Trust Securitization, which the league can draw up to $2 billion from, is rated A, about middle of the investment grade scale, while the MLB Facility Fund is rated A-. It’s a separate debt-issuing entity that was amended in July to allow up to $1.25 billion to be drawn by owners.

Overall, MLB has about $2.1 billion in debt drawn on those two entities, according to previous Fitch ratings disclosures.

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