If you remember about a month ago, it was The Athletic’s Daniel Kaplan who joined Grant & Danny to explain a report that Josh Harris’ official bid for the Commanders may have included some sort of indemnity clause for Daniel Snyder:
Well, on Thursday, Kaplan was back, this time with a flying solo Danny Rouhier, to discuss his latest report that there are some serious complexities and abnormalities with Harris’ bid, and the WaPo report that there may be some concerns after Wednesday’s NFL Finance Committee meeting about the viability of the bid based on NFL rules.
When Kaplan joined Kevin Sheehan on The Team 980 Wednesday to discuss the first part, this is what he said:
“There are certain issues with this deal regarding NFL debt rules. He’s borrowing the max against his team as collateral, and he’s proposing to borrow against his other sports teams, which gives the league pause, because they don’t want the owner to be debt-ridden and not be able to finance other things around the team.”
When he joined Danny, he expounded upon the second part, echoing something that he had also told Sheehan on Wednesday before the WaPo report:
“We’re very far afield from what’s normal in any sports sale; these issues are not insurmountable, but the one thing that has become clear is that this deal would really not have a prayer if it were anyone else but Dan Snyder,” Kaplan said, explaining how deals usually work versus how this one has gone. “The league is considering this deal, and is willing to bend over a lot to get Snyder out of there. There was hope that it could get full support from ownership, at least for preliminary approval, at their meeting in a couple weeks, but these are uncharted waters, and the league will try anything to get Snyder out.”
We know Harris is leveraging the maximum against the new team as capital, is looking to borrow outside his framework – perhaps even from Snyder himself – and maybe leveraging his other teams, too, so Kaplan doesn’t think the NFL is wrong to have questions.
“I sure hope it happens, but Harris can’t get together the money, it won’t occur,” Kaplan said. “He’s a wealthy individual and there are a lot of wealthy individuals in the group, but he’s scrambling to put together a financing package. So while I do think this deal will get done, the league is right to have concerns about him having the financial wherewithal to get this done.”
Danny had used the analogy that Harris’ group might be ‘house-poor’ when discussing reports on Wednesday, to which Grant mentioned the wealth of the limited partners – who is closer to right?
“We’ll have to see what comes out from the finance committee in the next couple weeks, but the league has a cap of 25 limited partners per team; Harris only has 16 or 17, but that’s a big number by NFL standards,” Kaplan said. “When you become a limited partner in an NFL team, you’re not expecting a capital call, you’re expecting dividends – your role is to infuse money now so you don’t have to borrow a ton and leverage the franchise to where you’re paying off tons of debt and don’t have the money to do anything else.”
Kaplan referenced the Glazer family buying Manchester United and the fact that they leveraged so much to do so that there was nothing left for the team, and that’s something the NFL has to consider.
Still, perhaps all those limited partners is what’s holding up part of the deal going forward in earnest?
“It’s going to take a lot of vetting for the NFL to get through that, so any hope this is happening in the short-term has been laid to rest,” Kaplan said.
The Wild Card in all this is Snyder himself and indemnification.
“He wants to get this deal done, is what I’m told by people close to Harris, and that’s why he’s willing to supply some limited financing to get it done,” Kaplan said. “But, he’s still looking for indemnification from either a new owner or the NFL because he wants to wipe his hands clean when he sells. The NFL doesn’t want to do that, so they have to figure something out there – and if Snyder hasn’t signed the agreement when the NFL approves the Harris group, if he says you have to indemnify me, at least partially, will the NFL agree to do it to get rid of him?”
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