Wall St. forces sports leagues to wave yellow flag

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The spreading financial gloom that envelops Wall Street has hit the most Main Street of American sports: NASCAR.The popular race circuit has expanded beyond its redneck roots in the Deep South to capture fat profits and a huge TV audience throughout North America. But now it has turned into another high-profile victim of the global financial crisis and a rapidly slowing economy.Some of the most illustrious names in the sport, including Dale Earnhardt Jr. and Michael Waltrip, have suddenly lost a slew of big-time sponsors as struggling auto makers, flailing financial firms and retrenching oil companies decide they have better things to do with their shrinking capital than spend up to $25-million annually to sponsor a team.NASCAR races are supposed to have 43 cars. But fields are certain to be smaller next year."There's maybe 26 teams that have sponsorship for next year, and five or six that have partial," Waltrip told Bloomberg News.As money for deals dries up, stadium financing charges soar, expenses climb and major corporate sponsors disappear, the sports gravy train is definitely sputtering.The evidence lurks everywhere from golf and tennis tournaments to British soccer stadiums and auto speedways."It's a tough situation," said Sal Galatioto, a New York investment banker who specializes in sports financing and franchise valuations. "Everyone is looking at this now and thinking if it continues for a while, it's an impact thing. It's too early to really say what kind of effect it's going to have. Obviously, in the short run, it's not good."Richard Peddie, chief executive of Maple Leaf Sports and Entertainment, which owns the Toronto Maple Leafs and Toronto Raptors, said the company is keeping tabs on costs."We are very, very mindful of what's going on," Peddie said in an e-mail. "Defensively we are really watching costs. Offensively we are upping our marketing and service levels ... if the meltdown continues it will affect our future revenue expectations."The Leafs, whose iconic former home, Maple Leaf Gardens, was built at the height of the Great Depression, are among the most financially sound sports organizations in North America.The sports operators most at risk are those that have done heavy debt financing for acquisitions or stadiums, as well as those that lack steady, large income streams from national TV deals and revenue producers such as long-term lease agreements on luxury suites.Particularly vulnerable are the smaller-market teams that depend heavily on gate revenue and a handful of corporate backers, sports analysts say.That includes struggling National Hockey League franchises in cities such as Nashville, Atlanta and Phoenix, where competition for the sports dollar is already fierce.But at the end of the day, it's the local bank that buys advertising hospitality and season boxes that mean more to the health of a franchise than "Joe Six-Pack and his family," said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon.Even the mighty National Football League, the world's most lucrative sports business, has announced that it is considering limiting teams' access to a league-managed line of credit."Every other company is evaluating their debt levels and we're no different than that," said NFL Commissioner Roger Goodell.There are also growing concerns about the financing for some new stadium projects. Four NFL teams -- the New York Giants and Jets, the New England Patriots and the Dallas Cowboys -- have financed new venues with bonds and other debt instruments that have suddenly become more risky because of the credit crunch. That has pushed up the interest those clubs have to pay bondholders. In a lawsuit filed this summer, an affiliate of the New England Patriots said the team could face $44-million a year in extra interest payments because of problems with its bonds. Soccer officials in Britain are so concerned about rising costs they are considering adopting a salary cap for the vaunted Premier League. The league's teams have piled up an estimated $6-billion in total debt.Not all the news is bad, though. Top seats at the New York Yankees' new $1.3-billion ballpark are expected to cost $2,500 next season, and the New York Mets have sold all luxury suites in their new facility, at up to $500,000 a pop. And the NHL has announced a new sponsorship deal with Visa Canada. (Distributed by Scripps Howard News Service, www.scrippsnews.com.)