Josh Harris must switch funding to win NFL deal to buy Commanders

The penultimate paragraph was added after this story was published.

JNFL Finance Committee is unlikely to vote in favor of the $6.05 billion purchase of the Washington Commanders from Daniel Snyder by a group led by Josh Harris because of the way the funding is being put together, according to NFL owners who are maintained with Forbes on condition of anonymity.

Some of the league’s owners are concerned that, as the deal stands, Harris’ group will fund the purchase with a $5.85 billion down payment that would include $3.75 billion in equity, 1 $.1 billion in secured debt and $1 billion in unsecured debt. Additionally, Snyder would get 50% of the incremental increase in Commander’s gross revenue over the next two years, which will be paid out of team cash flow. (Snyder thinks the two sides will split $400 million while Harris thinks $200 million will be split in the middle.) Add it all up and you have the total purchase price of $6.05 billion.

It’s the $1 billion in unsecured debt that has some members of the league’s finance committee worried, sources say. As a sports banker said Forbes“It would be a leveraged buyout of a football team.”

Another concern: the NFL limits the number of investors in a team to 25 – a general partner who must own at least 30% of the team (in this case, Harris) and 24 sponsors. As the deal is currently set up, there are more than 24 limited partners when investors within the various LP groups are counted, according to people familiar with the deal.

“The Harris Group may think the billion dollars is equity rather than debt,” said another person familiar with the deal. Forbes. “But part of the $1 billion is private equity money, so if it’s considered capital, it would violate NFL rules.” The NFL prohibits private ownership of teams.

A Harris Group spokesperson declined to comment.

A person close to the Harris group who refused to answer questions from Forbes before this article was published, he then responded by saying “there is no unsecured debt and there are 21 individual investors, including Josh Harris”.

Although a leveraged buyout guy like Harris likes debt, he’s a co-founder of private equity giant Apollo Global Management.
APO
— in this case, it’s almost a certainty that his group will have to use more equity and reduce the number of LPs if he wants to buy the Commanders. An NFL owner said Forbes the Harris Group has a combined net worth of $50 billion, so it should have the equity to do so.