Fitch Rates National Football League's $500MM Sr. Unsec. Notes 'A+'; Outlook Stable

Business Wire, June 30, 2008

NEW YORK -- Fitch Ratings has assigned an 'A ' rating to the National Football League's (NFL, or the league) $500 million of senior unsecured notes due 2024. The debt was issued via private placement. In addition, Fitch affirms the 'A ' rating on $635 million in parity senior unsecured notes that were issued in 2001 and 2002. Fitch also publishes an 'A' rating to the NFL's $1.5 billion secured revolving loan facility and $1.2 billion in senior secured notes. The Rating Outlook is Stable.

Proceeds of the senior unsecured notes have been used by the NFL to provide additional private funding for the construction of new football stadiums through support of the NFL's G-3 Stadium Finance Program. The secured revolving loan facility is renewed annually through the NFL's affiliate Football Funding LLC and the senior secured notes were issued via private placement in various series between 1998 and 2005 through the NFL's affiliate Football Trust and mature between 2008 and 2015. Proceeds have been used by participating NFL franchises for general corporate purposes and to provide working capital.

The 'A ' and 'A' ratings reflect the NFL's position as the most popular professional sports league in the U.S. The NFL has a strong and highly regarded economic model, which includes sizable multi-year television contracts, significant revenue sharing among member clubs, a proven track record of conservative financial policies, and its current collective bargaining agreement (CBA) with its players union which includes a 'hard' salary cap. Strong forecasted league-managed revenues, primarily national television contracts, provide the NFL with solid projected debt service coverage ratios.

In addition, the 'A ' rating on the senior unsecured notes recognizes the NFL's first-in-line access to league-managed revenues and team assessments, adequate legal provisions and covenants, and ample reserve levels. The 'A' rating on the secured revolving loan facility and notes reflects, in addition to the aforementioned league attributes, the mechanics of the lock-box account for the purposes of collecting national television revenues, which are the primary source of revenues that service the debt, prior to any distributions to individual franchises. Additionally, since each club receives an equal share of revenues, no franchise's share of the national television revenues is affected by its on-field performance. The 'A' rating also reflects the team-specific nature of the obligations and the lack of a corporate (joint and several) obligation of the NFL; however, Fitch notes the NFL's oversight and policy of supporting distressed franchises as a key mitigating factor.

The primary risk associated with the transactions is the NFL's current labor environment. As Fitch previously commented on May 20, 2008, the NFL clubs voted unanimously to exercise the option to shorten their labor agreement by two years so that the term of the CBA will extend through only the 2010 season. Fitch notes that the 2008 and 2009 season will be played with a salary cap and if there is no new agreement before the 2010 season, the 2010 season will be played without a salary cap and under the existing agreement, rules that would restrict the free agency rights of the players. The salary cap has historically been a key factor incorporated in the NFL's credit rating given that it promotes both competitive balance among franchises and cost certainty.

Fitch has often cited that a key credit factor to the long- term viability to a sports league is the competition between its clubs. There is a potential risk in the long run that without a salary cap the competitive balance of the NFL could be jeopardized. To the extent that the competition among franchises weakens as a result of large market teams and wealthy clubs opting to spend more money on player salaries as compared to small market teams and less wealthy clubs, there is the potential that the league could lose its strong historical competitive nature and furthermore, its appeal to fans, sponsors and network broadcast partners. While there is the potential for a work stoppage in the 2011 season, Fitch notes key incentives for both the NFL and NFL Players Association (NFLPA) to reach a new agreement, and the three-year window which provides a level of flexibility to negotiate. Fitch continues to actively monitor the situation and further notes that while a number of points of contention by both sides will have to be negotiated to meet an equitable new agreement, under the existing agreement play will continue, and national television contracts, which are a substantial portion of the total league revenues, are in place through the next three seasons. The NFL and the NFLPA's current labor agreement was initially negotiated in 1993 and extended several times, most recently in 2006.

Additional risks include the league's reliance on continued significantly favorable renewals of national media contracts, the potential for additional increases to league debt levels, and possible changes in the league's constitution and by-laws relating to the commissioner's assessment rights, which are unlikely at this time. As with all professional sports-related transactions, there are inherent risks including strong competition from other forms of entertainment and pressure on discretionary spending in a weak economy.