The university and donors are going to need to prop up Cal Athletics for the time being with no revenue coming in. If things continue Cal will need to consider creative financing avenues such as selling a piece of the real estate under Memorial Stadium or other assets to generate cash. The remaining debt service on the stadium retrofit complicates matters as well.
I think you are right...and as the value of on campus instruction is reassessed post Covid, there may indeed be some surplus real estate in the UC portfolio.
I'd like to hear the opinion of an actual lawyer, but here's mine. Learfield - like Under Armour - asking for cancellation or restructuring tells me that there is a Force Majeure clause in their contract - otherwise, they have no leverage apart from operating under common law. If I'm Cal, the only incentive for me to cancel the contract would be them paying me a lump sum payout in consideration for the cancellation. Restructuring could be done so that payments shift out later. But Learfield IMG can offer me very little in terms versus of negotiating downward because it is a Prisoner's Dilemma. If I accept less, how do I know that other debtors are accepting similar terms? If Learfield defaults when it is not in Chapter 11, that's a slam dunk in Cal's favor in collections. For $100m, I'm hiring outside counsel and seeing them in court. If Learfield goes Chapter 11, then so be it.
The problem is that Learfield IMG's business model provides a number of services external to cash payments of which they are basically the only game in town and especially so if you are looking for a one stop shop. If you nuke the relationship, where does Cal go for licensing services, ticket sales, etc? Learfield owns the company that operates their website (Sidearm Sports), the ticketing platform (Paciolan), Licensing operations, marketing services. They are essentially a vertically integrated monopoly within the college sports licensing space. There is no game in town, so Cal can go get their 100mm if they so wish but the result is to be locked out of these services.
The university and donors are going to need to prop up Cal Athletics for the time being with no revenue coming in. If things continue Cal will need to consider creative financing avenues such as selling a piece of the real estate under Memorial Stadium or other assets to generate cash. The remaining debt service on the stadium retrofit complicates matters as well.
How many luxury apartments can you fit in a press box?
I think you are right...and as the value of on campus instruction is reassessed post Covid, there may indeed be some surplus real estate in the UC portfolio.
I'd like to hear the opinion of an actual lawyer, but here's mine. Learfield - like Under Armour - asking for cancellation or restructuring tells me that there is a Force Majeure clause in their contract - otherwise, they have no leverage apart from operating under common law. If I'm Cal, the only incentive for me to cancel the contract would be them paying me a lump sum payout in consideration for the cancellation. Restructuring could be done so that payments shift out later. But Learfield IMG can offer me very little in terms versus of negotiating downward because it is a Prisoner's Dilemma. If I accept less, how do I know that other debtors are accepting similar terms? If Learfield defaults when it is not in Chapter 11, that's a slam dunk in Cal's favor in collections. For $100m, I'm hiring outside counsel and seeing them in court. If Learfield goes Chapter 11, then so be it.
The problem is that Learfield IMG's business model provides a number of services external to cash payments of which they are basically the only game in town and especially so if you are looking for a one stop shop. If you nuke the relationship, where does Cal go for licensing services, ticket sales, etc? Learfield owns the company that operates their website (Sidearm Sports), the ticketing platform (Paciolan), Licensing operations, marketing services. They are essentially a vertically integrated monopoly within the college sports licensing space. There is no game in town, so Cal can go get their 100mm if they so wish but the result is to be locked out of these services.
Now that is a five-star answer. Thanks!