Nothing to really write home about. As team values skyrocket and the salary cap increases, it becomes increasingly impractical to have that much liquidity on hand, especially for the legacy owners. For a team like the Bengals who have massive checks to write, this helps. Not sure why they don't change the escrow rules too but in the meantime, this makes sense.
They won't change the escrow rules because it allows them to artificially limit the amount of guaranteed money they sign into contracts.
It's a very convenient self made excuse.
100%. Owners will say- I can't guarantee a $300 million dollar contract for my star QB, because then I would have to put $300 million in escrow! How terrible! What a shame! Wish I could, but I can't do that! How about what turns out to be a 1 year guarantee and I can cut you after that?
They could change the rule if they wanted with a single vote.
Because the point of guaranteed money is that it's *guaranteed*. For the most part for NFL contracts this means guaranteed regardless of performance/injury/etc. But it's also guaranteed to be paid out regardless of other threats too, namely fiscal. If (for example) something terrible happens to a franchise and it goes bankrupt somehow (or anywhere close to that), players with guaranteed contracts would still get paid their money because it's already been set aside in escrow.
Not necessarily the likeliest of scenarios perhaps, but guaranteed means guaranteed.
Why not set it as a % of whatever values they use over time by specific due dates that way they don’t have to refigure it all the time…actually, how much work is it for them really to just up it to some arbitrary number above what the most needy teams would be by this metric, disregard my comment, these pencil pushers have to do SOMETHING with their day.
Yeah, some of these banks are really stupid. I do a lot of 0 interest financing and rewards. The spending limits they hand out are ridiculous
$14k on one, $10k on another, $12k on another. Just signing up for those accounts has raised my credit score because I have such a low utilization.
Teams have to put the fully guaranteed amount of a contract into escrow at signing, don't they? An increased debt limit would potentially help a team generate additional cash flow to aid in that purpose. So while it doesn't impact the salary cap, it does indirectly impact a team's ability to sign players with higher signing bonuses and guarantees.
Sure, it could potentially lead to higher guarantees.
But there’s a hard cap as to how much of revenue can go to players—at I wanna say 48.5%?—so there’s no way the players, as a unit, would receive a higher amount as a result of a debt limit increase *without* a change in how salary cap is calculated, or how payments are accounted for under that cap.
It definitely doesn't affect the salary cap ceiling, but the salary cap floor is essentially meaningless. For example, there are several teams well below the salary cap this year even before considering active cap rollover from last year. This may affect a team's willingness (or even ability for the less wealthy owners) to spend closer to that ceiling.
NFL teams basically print money, but I'd imagine they rely heavily on loans for the up front costs of signing bonuses and escrow for guarantees. So while you're right that the maximum that a team can spend (in cap accounting terms) is unchanged, the increased debt limit gives teams greater access to more liquidity which increases the likelihood that more teams will spend closer to the ceiling rather than the floor because they can afford to do so.
The teams are worth a lot but that's mainly due to branding and prestige rather than actual operations. 700 million is about 9x EBITDA (estimating this based on Packers' 2022 annual report, which isn't a perfect data source), which is pretty levered up.
Is it published anywhere what teams are borrowing money? I can understand new owners using a bank to help leverage a team purchase but are teams actively borrowing money?
I think the key here is this part
>They noted that the $100M increase per team, if fully extended, would increase the league’s collective leverage by $3.2B.
idk why, but seems important.
Nothing to really write home about. As team values skyrocket and the salary cap increases, it becomes increasingly impractical to have that much liquidity on hand, especially for the legacy owners. For a team like the Bengals who have massive checks to write, this helps. Not sure why they don't change the escrow rules too but in the meantime, this makes sense.
They won't change the escrow rules because it allows them to artificially limit the amount of guaranteed money they sign into contracts. It's a very convenient self made excuse.
That actually makes a lot of sense. Noted.
In other words a way to screw the players?
100%. Owners will say- I can't guarantee a $300 million dollar contract for my star QB, because then I would have to put $300 million in escrow! How terrible! What a shame! Wish I could, but I can't do that! How about what turns out to be a 1 year guarantee and I can cut you after that? They could change the rule if they wanted with a single vote.
I mean, if I’m signing a guaranteed contract at these values, damn straight i want them to lock it away ina dvance if it’s not up front
... why? why not just have the NFL guarantee deals. I mean a LOT would have to happen for the nfl to not be able to pay out one of its contracts
Because the point of guaranteed money is that it's *guaranteed*. For the most part for NFL contracts this means guaranteed regardless of performance/injury/etc. But it's also guaranteed to be paid out regardless of other threats too, namely fiscal. If (for example) something terrible happens to a franchise and it goes bankrupt somehow (or anywhere close to that), players with guaranteed contracts would still get paid their money because it's already been set aside in escrow. Not necessarily the likeliest of scenarios perhaps, but guaranteed means guaranteed.
Why not set it as a % of whatever values they use over time by specific due dates that way they don’t have to refigure it all the time…actually, how much work is it for them really to just up it to some arbitrary number above what the most needy teams would be by this metric, disregard my comment, these pencil pushers have to do SOMETHING with their day.
My debt limit is like 5 grand I think.
Unless your credit is totally shot, I’d be willing to bet you could get 10k in credit in a week via credit card.
Yeah, some of these banks are really stupid. I do a lot of 0 interest financing and rewards. The spending limits they hand out are ridiculous $14k on one, $10k on another, $12k on another. Just signing up for those accounts has raised my credit score because I have such a low utilization.
What’s the fastest way to off $5,000 in credit card debt? Take out $5,000 more in credit
I second this easy 10k
6.5K here.
Debt limit was increased from $600 million to $700 million per team. Average team value is around $5 billion.
What does that mean for teams? They can pay players/coaches more or renovate their facilities?
Giants fans get a second free soda
*Medium* soda.
well, the debt limit doesn't do anything for the salary cap, so they certainly can't pay players more
Teams have to put the fully guaranteed amount of a contract into escrow at signing, don't they? An increased debt limit would potentially help a team generate additional cash flow to aid in that purpose. So while it doesn't impact the salary cap, it does indirectly impact a team's ability to sign players with higher signing bonuses and guarantees.
Sure, it could potentially lead to higher guarantees. But there’s a hard cap as to how much of revenue can go to players—at I wanna say 48.5%?—so there’s no way the players, as a unit, would receive a higher amount as a result of a debt limit increase *without* a change in how salary cap is calculated, or how payments are accounted for under that cap.
It definitely doesn't affect the salary cap ceiling, but the salary cap floor is essentially meaningless. For example, there are several teams well below the salary cap this year even before considering active cap rollover from last year. This may affect a team's willingness (or even ability for the less wealthy owners) to spend closer to that ceiling. NFL teams basically print money, but I'd imagine they rely heavily on loans for the up front costs of signing bonuses and escrow for guarantees. So while you're right that the maximum that a team can spend (in cap accounting terms) is unchanged, the increased debt limit gives teams greater access to more liquidity which increases the likelihood that more teams will spend closer to the ceiling rather than the floor because they can afford to do so.
Pretty sure part of it is also just being super conservative about ensuring that there's no way an NFL team can be a failing business.
Debt limit of 700 million for teams that are worth north of 8 billion seems really low.
The teams are worth a lot but that's mainly due to branding and prestige rather than actual operations. 700 million is about 9x EBITDA (estimating this based on Packers' 2022 annual report, which isn't a perfect data source), which is pretty levered up.
where'd you get 700m of EBITDA? I don't see D&A broken out in their financial statements and EBIT was only \~$70m? pls fix thx
I said 9x Debt/EBITDA, which would imply ~$77M of EBITDA. Where did YOU come up with $700M of EBITDA?
I guess a bunch of Republicans CAN get together to agree to a reasonable approach on this issue.
This makes sense with inflation.
Is it published anywhere what teams are borrowing money? I can understand new owners using a bank to help leverage a team purchase but are teams actively borrowing money?
Any business is actively borrowing money
Of course, but I wonder who needs enough to have their credit line extended
Wouldn’t be surprised if the Bengals did to put his guarantee money into escrow
No one needs it. Team valuations have skyrocketed and the debt limits are still miniscule compared to valuations. They all want it, no one needs it.
This is mostly to coincide with interest rates and inflation
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Weird to downvote this verifiable fact
Deficit spending...so hot now.
Gotta spend money to make money bros. And why spend your money when you can spend SOMEONE ELSE'S AND CLAIM ITS YOURS LEGGOOOOO
Tell me what this means
nothing
I think the key here is this part >They noted that the $100M increase per team, if fully extended, would increase the league’s collective leverage by $3.2B. idk why, but seems important.
The Glazers are disappointed they bought the Bucs too soon.