(Bloomberg) -- Buying a National Football League team may get a whole lot easier.
The NFL is considering drastically increasing the amount of money prospective owners are allowed to borrow, according to two people familiar with the plans. The move could expand the pool of potential buyers the next time one of the league’s multibillion-dollar franchises comes up for sale.
Until recently, would-be owners were only allowed to take on a maximum of $350 million in debt when they made their acquisition, a relatively low loan-to-value ratio given the league’s soaring valuations. The NFL’s finance committee has discussed increasing the cap to about $1 billion, according to the people, who asked not to be identified because the talks are private.
The change could make a big difference. Consider someone looking to buy an NFL team for $3 billion, roughly the league’s average valuation. Under previous rules, a buyer would only be allowed to finance 12% of that purchase in debt. Under the proposed change, that jumps to 33%.
Jacksonville Jaguars owner Shad Khan, who sits on the finance committee, made passing reference to the idea in an interview Friday with Bloomberg Television. “There are a number of other ways to make it possible to have a bigger pool of potential buyers if a club goes up for sale in the future,” Khan said.
Other U.S. leagues are exploring ways to solve the same problem. Last month, the NBA sent a memo to owners saying the league was considering a “new capital vehicle” that could purchase passive, minority stakes in its teams. The league said the goal was to provide additional liquidity for the sale of ownership stakes and possibly open the opportunity to a new pool of investors.
Khan said that while the NFL had also discussed a similar investment vehicle, it wasn’t ready to take that step. The league did recently loosen its restrictions on cross-league ownership. Prior to that change, the owner of an NBA, NHL or MLB franchise couldn’t purchase an NFL team in another city.
NFL owners will gather next week in Florida for the league’s annual fall meetings. But the debt changes aren’t expected to be voted on at those meetings, one of the people said.
NFL franchise valuations have soared in recent years, boosted by changes in the national media landscape that have made live sports -- and especially live football games -- an increasingly prized commodity. The average NFL team is now worth $2.86 billion, according to Forbes Magazine. That’s an 11% increase over last year and a 175% jump from the $1.04 billion average 10 years ago.
NFL guidelines also require that the principal owner put up at least 30% of the purchase price in cash, another rule that has limited the pool of possible buyers.
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