Big Ten Discussing $2 Billion Private Capital Deal

[FloridaCuse]

The "shut up, you have no say in this matter" approach isn't working so well with the very trustees who set the policy, budget, senior positions, etc.? Petitti could be shown the door if he isn't careful.

I was about to say the same thing. It is a real possibility that Petitti doesn't survive this gambit.

 

[HtownOrange]

I was about to say the same thing. It is a real possibility that Petitti doesn't survive this gambit.

I agree. I would not be surprised if the various boards are talking with their respective legal counsel. The squeezing out of BoTs from major decisions and financial obligations cannot be sitting well with them.

Imagine, if the UM trustee and whoever it was with USC hadn't raised the issue...

 

[Sherman20]

Michigan and USC are perfect schools for the ACC to pickup and start the breakup of the Big10. Add Ohio State and UCLA and Penn State, and the ACC is vastly better than the Big 10. Go make it happen, Jim Phillips. Penn State has always wanted to be in an Eastern conference, and Michigan and Ohio State are better off with east coast schools than the dying rust belt Midwest. Plus Michigan, USC and UCLA would be associated with more prestigious peer academic schools like UNC, Virginia, Wake, Stanford, Cal, Ga Tech, etc. Iowa, Indiana and Nebraska are small moribund states.

 

[FloridaCuse]

 

[HtownOrange]

Michigan and USC are perfect schools for the ACC to pickup and start the breakup of the Big10. Add Ohio State and UCLA and Penn State, and the ACC is vastly better than the Big 10. Go make it happen, Jim Phillips. Penn State has always wanted to be in an Eastern conference, and Michigan and Ohio State are better off with east coast schools than the dying rust belt Midwest. Plus Michigan, USC and UCLA would be associated with more prestigious peer academic schools like UNC, Virginia, Wake, Stanford, Cal, Ga Tech, etc. Iowa, Indiana and Nebraska are small moribund states.

Sherman20 for ACC president! I agree with your line of thinking.

My only concern is that tOSU, PSU and UCLA all want the investment deal without knowing what the agreement is. I would accept UM and USC immediately, though I would be cautious of the others willing to make a rash, uninformed decision. I would likely demand some assurances or guarantees to ensure they don’t try the same thing in the ACC.

 

[HtownOrange]

A well written letter.

I would like a legal analysis from someone in the know regarding potential conflict of interest with a competitor owning an equal share and how much influence they could potentially wield. It seems, on its face, that a competitor cannot be a truly disinterested party especially with a roughly 5% stake in the venture.

P.S. if the investment is a precursor to Cal joining the B1G, the investment is an horrible act by the Cal board as no other B1G school has invested close to that amount for entry. I don’t think this is the case, but as a potential outcome it should be addressed.

 

[orange79]

Michigan and USC are perfect schools for the ACC to pickup and start the breakup of the Big10. Add Ohio State and UCLA and Penn State, and the ACC is vastly better than the Big 10. Go make it happen, Jim Phillips. Penn State has always wanted to be in an Eastern conference, and Michigan and Ohio State are better off with east coast schools than the dying rust belt Midwest. Plus Michigan, USC and UCLA would be associated with more prestigious peer academic schools like UNC, Virginia, Wake, Stanford, Cal, Ga Tech, etc. Iowa, Indiana and Nebraska are small moribund states.

It'll never happen, but sure.

One small change - Penn St. doesn't get a full share for 10 years, a la Rutgers in the B1G. If they don't want the deal, screw 'em.

 

[FloridaCuse]

STRONG article. Good read!

"Is Tony Petitti trying to kill the Big Ten all by himself?"

Big Ten is letting the wolf in the door and selling its soul. For what?

Is Tony Petitti trying to kill the Big Ten all by himself?

www.usatoday.com

 

[HtownOrange]

STRONG article. Good read!

"Is Tony Petitti trying to kill the Big Ten all by himself?"

Big Ten is letting the wolf in the door and selling its soul. For what?

Is Tony Petitti trying to kill the Big Ten all by himself?

www.usatoday.com

The article confirms my suspicion that the BOTs were left out of the loop for the most part. That is never a wise course as they are tasked with oversight and usually held to a fiduciary standard, the highest standard of responsibility to the client (the university).

 

[FloridaCuse]

Why Michigan and the Big Ten disagree on the next move with $2.4 billion on the table

The situation has some at Michigan questioning the future of the school’s 129-year relationship with the Big Ten.

www.nytimes.com

 

[HtownOrange]

Why Michigan and the Big Ten disagree on the next move with $2.4 billion on the table

The situation has some at Michigan questioning the future of the school’s 129-year relationship with the Big Ten.

www.nytimes.com

It sounds like UM was really hoping for the super league.

I would love to see the real analysis reports.

UC gets a 10% stake in the conference (Double the 5% assumption I was operating under), 15 year guaranteed with the sole option to sell or continue the deal. Not bad, if I am UC I am probably good with this. Never mind the probable conflict of interest of a non-member school holding a 10% stake in the BTN, as a famous penguin once said, "You don't see anything."* On the bad side, there is no new growth projections, if the B1G fails to maintain its status the investment may devalue in 15 years (not be worth the $2.4BB investment, let alone growth for inflation, let alone extra cash for profit).

Meanwhile, the B1G schools get the cash version ($133MM, or so) of a shot in the arm. They lose 10% of their share for at least 15 years and that loss may be continued or sold at the option of the new shareholder of 10%. Eight of the said schools are $225MM in debt or worse. While the infusion will cut into the debt, it is not erased. Nor do these schools show signs of fiscal responsibility; which begs the question if they cannot pay their bills with the current revenue, how will they afford the remaining debt on 10% less revenue? Plus, if they don't like the deal, they have to buy back the investmen

Has anyone seen hard numbers on this? Has anyone heard of each school's plan to attain fiscal responsibility? Let alone how they will manage to do so with less revenue? Has anyone shown how the B1G will generate more revenue to make up the loss of 10%? Who among us would take a small cash feel-good loan in exchange for insufficient cash to pay my other debts and rebuild while paying out 10% of our paycheck for 15 years and likely more?

This looks more like self destruction more than a recovery plan.


*Madagascar - My girls loved that movie.

 

[FloridaCuse]

It sounds like UM was really hoping for the super league.

I would love to see the real analysis reports.

UC gets a 10% stake in the conference (Double the 5% assumption I was operating under), 15 year guaranteed with the sole option to sell or continue the deal. Not bad, if I am UC I am probably good with this. Never mind the probable conflict of interest of a non-member school holding a 10% stake in the BTN, as a famous penguin once said, "You don't see anything."* On the bad side, there is no new growth projections, if the B1G fails to maintain its status the investment may devalue in 15 years (not be worth the $2.4BB investment, let alone growth for inflation, let alone extra cash for profit).

Meanwhile, the B1G schools get the cash version ($133MM, or so) of a shot in the arm. They lose 10% of their share for at least 15 years and that loss may be continued or sold at the option of the new shareholder of 10%. Eight of the said schools are $225MM in debt or worse. While the infusion will cut into the debt, it is not erased. Nor do these schools show signs of fiscal responsibility; which begs the question if they cannot pay their bills with the current revenue, how will they afford the remaining debt on 10% less revenue? Plus, if they don't like the deal, they have to buy back the investmen

Has anyone seen hard numbers on this? Has anyone heard of each school's plan to attain fiscal responsibility? Let alone how they will manage to do so with less revenue? Has anyone shown how the B1G will generate more revenue to make up the loss of 10%? Who among us would take a small cash feel-good loan in exchange for insufficient cash to pay my other debts and rebuild while paying out 10% of our paycheck for 15 years and likely more?

This looks more like self destruction more than a recovery plan.


*Madagascar - My girls loved that movie.

Good analysis. Thank you. My view is that 16 schools are just looking at the initial cash infusion and not at anything beyond that. UM & USC are looking more long term & it makes no sense to them.

 

[HtownOrange]

Good analysis. Thank you. My view is that 16 schools are just looking at the initial cash infusion and not at anything beyond that. UM & USC are looking more long term & it makes no sense to them.

Agreed. The 16 want/need the shiny new thing (cash) and are not looking at the trade-offs to get what they want.

It amazes me that the BoTs at each school allowed the ADs to get in serious debt, there could be some lawsuits due to the debt and poor fiscal management. Tax payers will not be happy if they end up footing the bill at the state schools.

 

[hoopsupstate]

Agreed. The 16 want/need the shiny new thing (cash) and are not looking at the trade-offs to get what they want.

It amazes me that the BoTs at each school allowed the ADs to get in serious debt, there could be some lawsuits due to the debt and poor fiscal management. Tax payers will not be happy if they end up footing the bill at the state schools.

So much for their huge payout every year. They still can’t manage their budgets. Who the heck are running these schools?

 

[Janner]

What possible, and realistic, recourse does UM and USC potentially have if the rest of the conference decides to go and take the equity deal?

 

[HtownOrange]

What possible, and realistic, recourse does UM and USC potentially have if the rest of the conference decides to go and take the equity deal?

1) They can accept the deal.

2) They can reject the deal and leave.

3) Allegedly, they can reject the deal and stay, but too many issues are not addressed in the article. How does that affect their shares? How are they all on equal footing? How long must they extend their portions of the GOR? Will the other schools remain viable in 5, 10, 15 years? If the deal seeking schools cannot control their finances, what assurances are there to support the deal will get them to a fiscally responsible footing? And more.

 

[javadoc]

Agreed. The 16 want/need the shiny new thing (cash) and are not looking at the trade-offs to get what they want.

It amazes me that the BoTs at each school allowed the ADs to get in serious debt, there could be some lawsuits due to the debt and poor fiscal management. Tax payers will not be happy if they end up footing the bill at the state schools.

"And now we come to it"

 

[FloridaCuse]

Agreed. The 16 want/need the shiny new thing (cash) and are not looking at the trade-offs to get what they want.

It amazes me that the BoTs at each school allowed the ADs to get in serious debt, there could be some lawsuits due to the debt and poor fiscal management. Tax payers will not be happy if they end up footing the bill at the state schools.

Absolutely

 

[Janner]

1) They can accept the deal.

2) They can reject the deal and leave.

3) Allegedly, they can reject the deal and stay, but too many issues are not addressed in the article. How does that affect their shares? How are they all on equal footing? How long must they extend their portions of the GOR? Will the other schools remain viable in 5, 10, 15 years? If the deal seeking schools cannot control their finances, what assurances are there to support the deal will get them to a fiscally responsible footing? And more.

Thanks, I know you follow this stuff as close as anyone on here. So this might kind be a dumb question, but if Michigan and USC say thanks but no thanks, were leaving, doesn't that effect the value of the deal itself? It would seem that losing 2 of the bigger B10 properties would effect the currently stated value of the equity deal for UC? And could that be significant enough reduction in equity per school that it might not be worth it for a couple other schools who might be on the fence to say no as well?

 

[TerryD]

Thanks, I know you follow this stuff as close as anyone on here. So this might kind be a dumb question, but if Michigan and USC say thanks but no thanks, were leaving, doesn't that effect the value of the deal itself? It would seem that losing 2 of the bigger B10 properties would effect the currently stated value of the equity deal for UC? And could that be significant enough reduction in equity per school that it might not be worth it for a couple other schools who might be on the fence to say no as well?

The Big Ten GOR runs until 2036.

This deal would extend it out ten more years.

If USC and Michigan want to leave, they still have to deal with the existing GOR.

Does the Big Ten have an exit fee? How much?

It seems weird to talk about these issues regarding the Big Ten.

(Not that any school is going to leave, but it is fun to see the cracks and unease in that conference)