Loan program offers safety net if no football

The Pac-12 is planning a mammoth loan program that would provide an escape hatch for cash-strapped athletic departments in the event the football season is canceled because of coronavirus, according to internal documents and conference sources.

Football accounts for the majority of each department’s revenue, generating in excess of $50 million dollars in ticket sales and media rights alone.

The loan program would be large enough to cover that loss for each school, if needed:

According to a series of emails obtained by the Hotline

through public records requests, the loan would provide a maximum of $83 million for each university at a rate of 3.75 percent over 10 years.

Each athletic department could decide whether it wanted to participate in the program. If all 12 opted for the maximum amount, the total would be $996 million.

“The conference is trying to be nimble and give schools some options,” a source said.

However, multiple sources indicated that not every school would make use of the loan, and some would seek substantially less than the maximum allowable. If the Pac-12 plays a full football season, the plan could be pushed aside entirely.

The idea is popular with university presidents because the loan would allow schools to bridge the coronavirus crisis without having the implement massive budget cuts that could include widespread layoffs and possibly the elimination of Olympic sports teams, which do not generate a profit.

The plan also alleviates the pressure on the universities to rescue their own departments. Many campuses are facing enormous revenue shortfalls related to reductions in enrollment and housing.

“All loan capacity is being used for things besides athletics,” a source said. “They’re trying to get the core (academic) programs through for the next three years without firing people.

“If other people have debt capacity, they should use it.”

The impact of a shuttered football season would be monumental.

Oregon State relies on the sport for 80 percent of its annual revenue (approximately $80 million).

Colorado took in $20 million from ticket sales alone last season — on top of the approximately $30 million the Buffaloes receive from media rights.

At Utah, football generated $66 million in the 2019 fiscal year — two-thirds of all revenues.

Meanwhile, several schools were carrying massive deficits before the pandemic struck. Washington State’s accumulated debt was approaching $100 million. UCLA was staring at a two

year shortfall of about $40 million. Cal has often been in the red by more than $15 million.

With campuses fully leveraged, the presidents are turning the Pac-12 into a de facto debt facility.

Thanks to the media rights contracts with Fox and ESPN that are worth $1.2 billion over the next four years, the conference has the collateral necessarily to secure a massive loan.

Even with a canceled season, the outstanding payments owed by the networks to the conference for the 2022-24 fiscal years — $917 million, according to the term sheet — would be enough to cover the loan, assuming every school did not take the maximum.

Multiple conference sources indicated the private schools, Stanford and USC, would be unlikely to participate in the program, and several of the public universities would opt for substantially less than the $83 million maximum.

Responsibility for the loan starting in 2024, when the current media rights deals expire, could shift to the universities, which at that point would be in better financial position to assume the debt.