The Texas Rangers are looking to sell at least $1 billion in bonds backed by their television contract with Fox Sports Southwest, according to people familiar with the matter.
The regional network agreed to pay the team about $1.6 billion over 20 years under terms of a broadcast deal that began last year. The club, which is principally owned by Avatar Investments Chairman Ray Davis, is working with Citigroup and Morgan Stanley to raise money against that contract, said the people, who asked for anonymity because the matter is private.
The Rangers, Major League Baseball and Fox Sports Southwest declined to comment. The network is aware of the team’s attempt to raise money but isn’t involved in the financing, one of the people said.
A prospectus reviewed by the people said the proceeds would be used for risk mitigation and diversification — anything that would keep the network, a unit of 21st Century Fox, from honoring the contract that extends through 2034.
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The money raised will be held in escrow and paid out to the team over time, a revenue stream designed to mimic payouts from the television deal, the people said. The team won’t be able to access the money outside of those payments or ahead of the schedule, which has been approved by Major League Baseball.
The TV contract will be used as collateral. That’s not common, said television consultant Lee Berke, but other teams have used their long-term TV deals as collateral against loans, lines of credit and other kinds of financing.
Teams have other ways to raise money, including selling equity, borrowing from a bank or issuing unsecured debt. Selling bonds backed by a guaranteed income stream like the TV deal gives them a higher credit rating, which makes the debt cheaper for the team.