Bengals Finances - Private Equity

[CrashDavisSports]

In theory - if the team goes bankrupt - the NFL would likely then be on the hook to pay the salary. Not that they couldn't, but it could lead to teams giving out 100% guarantees left and right and the NFL isn't going to want to risk it.

Likely to happen? No - but I don't see the NFL removing this part. Maybe they lower the amount required to be kept in escrow? I'd see them go that route 1st before removing it all together.

A team go bankrupt with the revenue sharing greater than the annual salary cap? I don't freaking think so. If it got too close as far as liquidable money, maybe that team should be forced to sell the franchise. However, that is basing shit on the team spending so much more than the cap and not reworking stuff. You can't pay more than the cap. You may have dead oney fall into the next year and stuff, but you have to cut or remove salary in order to stay within cap. The system is set up to where no owner will ever go bankrupt or not be able to pay their bills. They may not make the millions that other owners make, but they can pay all the bills plus some. Even without the escrow accounts. The signing bonuses should be harder for small financial owners, not the guarantees. Guarantees are still part of the cap equation.

 

[redskinsfan1963]

Private equity in the NFL? How team ownership might shift

A move to allow private equity firms to invest in NFL teams would represent a large shift in how the league has historically operated.

www.espn.com

This is an underrated topic that not enough people talk about. Given the demands for guaranteed contracts and the need for liquid assets to support the guarantees, there are major issues for teams that aren't owned by folks with wealth from other endeavors. The Brown family, Bidwells, Rooney's, etc are all at a disadvantage when it comes to the modern era of contracts. If teams can start selling off some of their equity and future profits for liquid cash, this could help these teams. The Bengals likely need this to happen if they are going to survive in the modern era...... Or they will have to further exhaust revenue streams, which will hit a limit at some point in a small market like Cincinnati.

all teams beside Dallas will go this route eventually I bet.

 

[Cincyfan78]

A team go bankrupt with the revenue sharing greater than the annual salary cap? I don't freaking think so. If it got too close as far as liquidable money, maybe that team should be forced to sell the franchise. However, that is basing shit on the team spending so much more than the cap and not reworking stuff. You can't pay more than the cap. You may have dead oney fall into the next year and stuff, but you have to cut or remove salary in order to stay within cap. The system is set up to where no owner will ever go bankrupt or not be able to pay their bills. They may not make the millions that other owners make, but they can pay all the bills plus some. Even without the escrow accounts. The signing bonuses should be harder for small financial owners, not the guarantees. Guarantees are still part of the cap equation.

Like I said - likely to happen? No, of course not.

But if you are the NFL - do you want to risk it and be on the hook for an entire teams salary that's been guaranteed?

No, of course not.

 

[Cincyfan78]

A team go bankrupt with the revenue sharing greater than the annual salary cap? I don't freaking think so. If it got too close as far as liquidable money, maybe that team should be forced to sell the franchise. However, that is basing shit on the team spending so much more than the cap and not reworking stuff. You can't pay more than the cap. You may have dead oney fall into the next year and stuff, but you have to cut or remove salary in order to stay within cap. The system is set up to where no owner will ever go bankrupt or not be able to pay their bills. They may not make the millions that other owners make, but they can pay all the bills plus some. Even without the escrow accounts. The signing bonuses should be harder for small financial owners, not the guarantees. Guarantees are still part of the cap equation.

I also think you are missing a bit of the point - this isn't about the cap - it's about guarantees.

A team could, in theory, start offering 80-90% guarantees or even like Cleveland did with Watson - 100%. You can easily stay within the lines of the cap and still end up with an issue in escrow amounts because of the guarantees...and that's what the focus of this is about. How are teams that don't have Millions/Billions coming in from other revenue sources where owners made their millions in the stock market, private sector, etc...How are those teams going to be able to keep up with other teams when the guarantees get to a point where the team doesn't have liquid cash on hand to put into escrow.

That has nothing to do with the cap...

 

[CrashDavisSports]

I also think you are missing a bit of the point - this isn't about the cap - it's about guarantees.

A team could, in theory, start offering 80-90% guarantees or even like Cleveland did with Watson - 100%. You can easily stay within the lines of the cap and still end up with an issue in escrow amounts because of the guarantees...and that's what the focus of this is about. How are teams that don't have Millions/Billions coming in from other revenue sources where owners made their millions in the stock market, private sector, etc...How are those teams going to be able to keep up with other teams when the guarantees get to a point where the team doesn't have liquid cash on hand to put into escrow.

That has nothing to do with the cap...

Well, my entire post was about the guarantees and how all teams should be able to afford guarantees. If they plan on keeping a player for their entire contract, and not cutting guys part way through, winding up with a ton of dead cap like Denver just did with Wilson. All these contracts with the guarantees are still required to fit inside the parameters of the salary cap. Therefore, no one can overspend on contracts and cause their franchise to go bankrupt. You can guarantee a contract 100% like you did with Watson, and still only pay over the life of the contract term, minus signing bonus. If you cut him early, you incur dead cap and it is accelerated like Wilson's contract was, but still within team and cap restrictions. Owners CAN'T spend over the value of the cap. They have to massage and use loop holes in the cap, but they still can't spend over.

I get what you are saying, this will not occur, as the NFL supposedly doesn't want the risk, but what risk do they really have? If a team can't spend over the cap and if owners spend into default, they have a franchise they get to sell at that point. They sell the franchise for 4 billion, or whatever, and they pay the contract of the players still owed, and all costs associated with this, and the remainder goes to the owner who had to sell. It would never get that far, because as I said, there are too many safeguards in place to prevent that from happening, OUTSIDE the ESCROW.

Just saying, before the salary cap, I understand the need of the escrow. But with the cap and current rules in place, it is not necessary anymore.

 

[Cincyfan78]

Well, my entire post was about the guarantees and how all teams should be able to afford guarantees. If they plan on keeping a player for their entire contract, and not cutting guys part way through, winding up with a ton of dead cap like Denver just did with Wilson. All these contracts with the guarantees are still required to fit inside the parameters of the salary cap. Therefore, no one can overspend on contracts and cause their franchise to go bankrupt. You can guarantee a contract 100% like you did with Watson, and still only pay over the life of the contract term, minus signing bonus. If you cut him early, you incur dead cap and it is accelerated like Wilson's contract was, but still within team and cap restrictions. Owners CAN'T spend over the value of the cap. They have to massage and use loop holes in the cap, but they still can't spend over.

I get what you are saying, this will not occur, as the NFL supposedly doesn't want the risk, but what risk do they really have? If a team can't spend over the cap and if owners spend into default, they have a franchise they get to sell at that point. They sell the franchise for 4 billion, or whatever, and they pay the contract of the players still owed, and all costs associated with this, and the remainder goes to the owner who had to sell. It would never get that far, because as I said, there are too many safeguards in place to prevent that from happening, OUTSIDE the ESCROW.

Just saying, before the salary cap, I understand the need of the escrow. But with the cap and current rules in place, it is not necessary anymore.

I think it's a fair point to consider - but I do still think it's required...selling a team is a long and lengthy process at times, and in the meant time - players aren't getting paid. I guess the NFL could foot the bill until then, but again - that's likely something they'd rather avoid.

I don't think the escrow is going anywhere, but I do think they could lower it. Players would likely be for this as, while it does pose at least some risk, it would mean more players could get more guarantees without the worry of liquid cash.

 

[cincygrad]

I think it's a fair point to consider - but I do still think it's required...selling a team is a long and lengthy process at times, and in the meant time - players aren't getting paid. I guess the NFL could foot the bill until then, but again - that's likely something they'd rather avoid.

I don't think the escrow is going anywhere, but I do think they could lower it. Players would likely be for this as, while it does pose at least some risk, it would mean more players could get more guarantees without the worry of liquid cash.

I think it benefits the owners. The rich guys can play fast and losse with their cash. The family-run businesses know that the rules puts some limit on the guaranteed money out there on the market and it certainly slows it's growth. And, really all owners benefit from having a penalty to guarantee cash..... Even the rich guys hate tieing up their money.

 

[cincygrad]

Well, well.... In the long tradition of owners meetings, the Bengals once again cast the lone dissenting vote. If anything, this move to private equity partnerships is just going to continue adding to the available cash that can be paid in guaranteed contracts - A situation the Bengals have been avoiding like the plague. As smart as the league has been about putting in a salary cap to create parity, they continue to water down the impact of the salary cap and have made liquid assets crucial for keeping superstars. I was for this idea for the Bengals when I heard about it, but I do worry that we're seeing the CBA circumvented in novel ways and it's only a matter of time before we erode the parity that has defined the league over the last couple of decades.

Private equity rule passed by 31-1 vote, with only the Bengals opposed

On Tuesday — the same day all rosters reduced to 53 players for 2024 — the NFL adopted a rule allowing limited private equity investment in teams.

www.nbcsports.com

 

[CrashDavisSports]

This will ruin the NFL parity and only the big markets will own the league. Teams like Cincinnati, Jacksonville, Buffalo, etc will be on the outside looking in.

 

[Cincyfan78]

This will ruin the NFL parity and only the big markets will own the league. Teams like Cincinnati, Jacksonville, Buffalo, etc will be on the outside looking in.

I don't know if it will ruin the NFL - but I do see a few issues that they will need to address.

Mainly multiple teams having investments by the same people...which can cause issues....they need to stipulate that a firm and it's people can only invest in 1 team. There should also be something that states once a firm is no longer with a team - they cannot invest again for 3-5 years.

 

[CrashDavisSports]

I don't know if it will ruin the NFL - but I do see a few issues that they will need to address.

Mainly multiple teams having investments by the same people...which can cause issues....they need to stipulate that a firm and it's people can only invest in 1 team. There should also be something that states once a firm is no longer with a team - they cannot invest again for 3-5 years.

So are these companies getting stock and partial ownership of these franchises? Because if so, what owner wants to do that? If they are not, how are they getting compensated for fronting these escrowed guarantees? If they are just making a rate, that gets very expensive for owner also. Just not sure how this is working.

 

[cincygrad]

So are these companies getting stock and partial ownership of these franchises? Because if so, what owner wants to do that? If they are not, how are they getting compensated for fronting these escrowed guarantees? If they are just making a rate, that gets very expensive for owner also. Just not sure how this is working.

The private equity firm can essentially buy up to 10 percent of a team. This isn't much different than having a minority owner - It just makes it possible for a corporation (or a private equity firm) to invest, rather than private minority ownership. The idea is that private equity firms can provide cash in exchange for future worth. It's a sound investment - Providing 100s of millions of dollars now for an asset that significantly appreciates over time, makes for large profits in the future. My issues is that it is just adding more and more up-front cash into a system that is already eroding the power of the salary cap and CBA.