NBA’s Financial Situation Could Affect Payrolls

We’re all glad that basketball is back, but our inability to actually attend a game has an impact on the NBA owners’ bottom line.

According to ESPN’s Brian Windhorst, several teams may be facing future payroll problems.

With Golden State Warriors owner Joe Lacob informing fellow owners of a deal he’s considering with Goldman Sachs to raise up to $250 million to manage coming expenses, Windhorst writes:

The Warriors are an outlier, as they derive around 80% of their revenue from Chase Center and can clear more than $5 million for some home games, according to league and team sources. Many teams earn less than $2 million per home date, and some get less than $1 million on average. But unlike some teams, the Warriors haven’t laid off or furloughed any employees. Lacob has also already significantly invested in technology and testing methods in an attempt to safely get fans back into Chase Center sometime next season.

Getting the fresh injection of capital could help the Warriors maintain their large payroll, which is expected to be above $150 million for the next few seasons. They have four players — Stephen Curry, Klay Thompson, Andrew Wiggins and Draymond Green — each scheduled to earn more than $22 million next season. They are assured a top-five draft pick and have a $17 million trade exception available to use.

“The Warriors have the ability to raise money that a lot of teams can’t,” one team president said. “Good for them. If our team was in that situation, we may have to trade players to deal with it.”

As they face what some expect to be tens of millions per franchise in losses next season, some teams might have to slash payroll, perhaps trading players or electing not to aggressively pursue free agents. Others might offload draft picks.

“I suspect first-round picks will be for sale in this draft,” one team executive said. “We haven’t really seen that in a decade.” The last first-round pick to be sold was in 2013 by the Denver Nuggets (the Utah Jazz selected Rudy Gobert at 27th).

The possible losses have teams looking at other ways to generate money, from the sale of assets, including real estate, or tapping credit facilities. One NBA team, the Minnesota Timberwolves, is already publicly for sale.

“I don’t know what will happen, but I may lose $50 million next season,” one owner told ESPN. “If that happens, I have three options: I could borrow the money, I could sell part of the team or I could do a cash call and me and my partners would have to write checks.”

The collective bargaining agreement allows owners to borrow up to $325 million against their equity in their teams. Their have been discussions about raising the debt ceiling, but the NBA already raised it from $250 million just two years ago.