According to John Lombardo of Sports Business Journal (SBJ), the NBA is giving each team a cash distribution of $30 million to help with finances and protect against any liquidity issues due to the COVID-19 pandemic.
The entire sum of money comes from the $900 million the league raised from notes issued by the NBA in the private placement market, per SBJ. The publication said that the market generally includes institutional investors and insurance companies.
The notes are for a period of three or four years, and is expected to be paid back with interest from “general collective league sources,” reported SBJ, citing multiple different sources in its report. The publication also noted that the league’s financial strength allowed it to secure the financing and that the NBA was being proactive.
SBJ also said that this is the first time the NBA has turned to the private placement market to fund league initiatives. A source told the publication that the $30 million per team will help with liquidity and cash flow issues caused due to playing with few or no fans in arenas to start the year.
The league gets around 40% of its revenues from game-day incomes, including ticket sales, concessions and other in-arena revenue.
The money could be especially valuable with the 2020-21 season set to start on December 22 despite local restrictions preventing the type of sold-out arenas that bring in cash for franchises.
Several teams have already announced that they will begin the upcoming season without fans in their stands.
Due to the pandemic, NBA reportedly lost 10 percent of its revenue in 2019-20. This includes $800 million in gate receipts and around $400 million in merchandise and sponsorships.
Finishing the postseason in the bubble in Orlando helped recoup a significant part of the money, allowing the NBA to end the season with $8.3 billion in the income generated.
