NCAA Soon to Be ‘Entirely Debt Free’ for First Time in Decades
The NCAA has decided that it no longer needs the “AA”—at least when it comes to its outstanding debt.
Last week, the NCAA asked the credit rating agency S&P Global to withdraw its most recent AA bond credit rating. The decision came as the NCAA readies a final, $1.5 million payment to retire a series of 2012 revenue bonds, which would bring to an end a quarter-century saga of financing expenses through municipal debt. The final payment for what started out as $13.5 million in bonds is due May 1.
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Once it clears, an NCAA spokesperson says, the organization will be “entirely debt free,” with “no plans to borrow additional funds at this time.” The spokesperson insisted that the decision to withdraw the credit rating was done to save money, and not because the NCAA believed it was about to be downgraded. That position was affirmed in a press release S&P put out on Friday, in which it called the NCAA’s outlook “stable at the time of withdrawal.”
An “AA” rating refers to investment grade credit whose issuer has a “very strong capacity to meet financial commitments.”
It is unclear exactly what the NCAA was paying for the rating. According to its fee disclosures, S&P typically charges public finance obligors between $6,500 and $500,000 to rate their credit, based on its size, structure and complexity. (Both the NCAA and S&P declined to comment on the financial terms of their arrangement.)
The NCAA’s municipal debt dates back to 1999, when it issued its original series of tax-exempt revenue bonds to help pay for litigation and acquisition costs associated with its $56.5 million takeover of the NIT. At that time, S&P had given the NCAA a credit rating of AA-. The association had just relocated its headquarters to Indianapolis from Overland Park, Kan., and entered a 30-year lease (with three, 10-year renewal options) for its new national office from the Indiana White River State Park Development Commission.
In 2005, the NCAA issued another $31.75 million of bonds to help refund a portion of the 1999 series. S&P gave that issuance AA, while Moody’s appraised it similarly as Aa2. Five years later, by the time its series 2005 bonds had matured, the association issued another $18.75 million of new bonds to help pay for a 140,000-square-foot addition to the governing body’s national office. By then, S&P had improved the NCAA’s credit rating to AA+, before lowering it back down to AA in 2017.
The 2012 revenue bonds, which carried a premium of $2.65 million, were used to help refund a portion of the 2010 notes.
Technically, all of the bonds were issued by the Indiana Finance Authority, an independent “instrumentality” created by the state legislature in 2005 that serves as a credit conduit for tax-exempt organizations in the state. But as part of its loan agreement, the liability of the debt fell squarely on the NCAA.
According to the NCAA’s most recent tax returns, $10.49 million of the series 2012 bonds were retired as of the end of the 2023 fiscal year, during which the NCAA reported $1.3 billion in revenue. The organization reported $304.1 million in total liabilities, the majority of which are labeled as “accounts payable and accrued liabilities.”
S&P most recently reaffirmed its AA rating for the NCAA in August 2023, stating that this grade reflected the view that the NCAA’s “solid financial resource ratios, dominant market position in college sports, and strength of its various broadcasting contracts” was more than sufficient to cover its debts.
At the same time, college sports’ governing body is confronting multiple financial headwinds at what is arguably its most precarious point in organizational history.
On Monday, U.S. District Court Judge Claudia Wilken granted preliminary approval of a $2.8 billion settlement agreement that would resolve three antitrust lawsuits filed on behalf of college athletes against the NCAA. The proposed settlement would be paid out over a decade using monies in the NCAA’s reserves and from shares of future member distributions.
Even if Wilken grants the settlement final approval next year, there are still a number of other antitrust lawsuits the NCAA would have to either settle or litigate to a resolution, and which could ultimately cost it billions more.
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