Bills Bonds - An Idea for Helping to Keep the Bills in Buffalo

[BillnutinHouston]

Well done Billsbonds! This is not an easy task to take on, and we appreciate your efforts. Keep us posted.

[metzelaars_lives]

If, say, a typical investment in Bills Bonds is $1,000, you would still need 800,000 people to step up, and that does not include the cost of managing such an endeavor. You definitely have the right idea, just wondering if there are enough fans to pull it off.

 

I had a similar idea about stadium financing. It would be like a PSL but the fans would actually own their share of the stadium. 70,000 fans would contribute around $11,000 over 20 years to raise $800M. That would add about $50 per game ticket, but they would literally own their seats and could earn a small dividend on every event held in such a facility.

 

PTR

 

No, that would be if the ownership group had no money. This is a way to generate extra money. So say for instance they have $ 700 million but the franchise would be valued at $850 or maybe it even takes $900 to outbid someone, they have an extra $200 million accessible to them. Still a lot of people, but unless I'm missing something, this is a great idea.

[bbb]

No, that would be if the ownership group had no money. This is a way to generate extra money. So say for instance they have $ 700 million but the franchise would be valued at $850 or maybe it even takes $900 to outbid someone, they have an extra $200 million accessible to them. Still a lot of people, but unless I'm missing something, this is a great idea.

 

Much more doable.

[lets_go_bills]

Below is a brief explanation of the idea. Please visit the recently launched website (www.BillsBonds.com) and find us on facebook and twitter, if you are interested. We’re interested to hear your thoughts.

 

 

______________________________________________________

 

- A way for Buffalo Bills fans to invest in the future of their team and to help keep the Bills where they belong -- in Buffalo.

- A way of tweaking the Green Bay Packers idea of selling stock to fans so that it complies with current NFL Bylaws.

- A way for fans to help save the Bills, while saving money.

 

Please visit the www.BillsBonds.com for more information.

______________________________________________________

 

Buffalo Bills fans realize that the team is at risk of leaving Buffalo. What's frustrating is that it seems that there's almost nothing fans can do to effect whether the team stays or goes. When Ralph Wilson, Jr. passes away and the team changes ownership, fans will be on the sideline hoping that the new ownership group keeps the Bills in Buffalo rather than moving the franchise to a larger market.

 

This doesn’t have to be the case. Fans do not have to sit idly by and just hope for the best. In 1923, with the Green Bay Packers on the brink of brink of bankruptcy, fans bought the team by purchasing shares of Packers stock. NFL Bylaws now prevent Bills fans from replicating this idea, but with a twist to the Packers idea Bills fans could invest in the future of the Bills.

 

Bills fans could provide a “loan” to a new ownership group that is committed to keep the Bills in Buffalo. Proceeds from that loan, or more specifically bonds (a loan chopped into many pieces and sold to the public), would be used by the new ownership group to help pay the ~$800 million price tag for the team. The Bills new ownership would then pay the bondholders back overtime plus interest with cash flows generated by the team. By purchasing these bonds (called Bills Bonds) fans would be saving the team, while saving money.

 

Please visit BillsBonds.com for more information.

 

If you can be trusted, it's a good idea. If you can't, it's a ponzi scheme.

[Rubes]

I'm actually surprised how well received this has been so far. I fully expected it to get thrashed mercilessly.

 

I know next to nothing about business and finances, so I have no idea if this is a good idea or not. Anything that could help keep the Bills around is fine with me, though.

[Bills Bonds]

No, that would be if the ownership group had no money. This is a way to generate extra money. So say for instance they have $ 700 million but the franchise would be valued at $850 or maybe it even takes $900 to outbid someone, they have an extra $200 million accessible to them. Still a lot of people, but unless I'm missing something, this is a great idea.

 

Exactly, that's the idea. $100-$200 million of financing from fans in the form of low-interest bonds could go a long way in assisting a group of bidders (otherwise the bidders would have to take on high interest loans from financial institutions). I agree that $100-$200 million would still require a lot of people to buy in.

 

However, the Packers were able to sell 120,010 shares of Packers stock at a price of $200 per share during a 17-week period in 1997 and 1998 (raising $24 million). Keep in mind that this "stock" is stock in a non-profit entity. The stock does not pay dividends, cannot be resold and can only be redeemed at a fraction of its original purchase price. So the Packers raised $24 million effectively through charity. And the Packers weren't even at risk of being moved out of Green Bay at that point (they've been community owned since 1923).

 

Considering what the Packers accomplished, maybe Bills fans could raise more than $24 million with Bills Bonds or another form of fan financing?

[birdog1960]

great idea and great work. the commitment to this team by it's fans always amazes me. i think this would raise the amount needed (even from non bills fans) if the interest rate was even 1/2 the 10% snyder reportedly pays. my major concern would be the assurances in place to stop the bills from moving. what stake would an owner require from the bonds to give up that option?

Edited November 8, 2010 by birdog1960

[Bills Bonds]

I'm actually surprised how well received this has been so far. I fully expected it to get thrashed mercilessly.

 

I know next to nothing about business and finances, so I have no idea if this is a good idea or not. Anything that could help keep the Bills around is fine with me, though.

 

It does sound a bit crazy at first. But when you think of the idea as only a slight tweak to what the Packers have already done four times -- in 1923, 1935, 1950 and 1998 -- it doesn't seem as crazy.

 

We have spoken with a number of sports investment banking firms about the idea (firms that provide financial advice to buyers and sellers of professional sports teams). The first time we met with one, I thought we were going to get laughed out of the room. That didn't happen. In fact, they all told us that "the idea works on paper." Their doubts were related to whether fans would actually be interested in investing in their team at a low interest rate (clearly they weren't Bills fans) and whether the NFL would squash it before it gathered the required momentum. The most recent version of the presentation that we shared with these sports investment bankers is available on the website: www.BillsBonds.com

 

If you can be trusted, it's a good idea. If you can't, it's a ponzi scheme.

 

Ha - very valid concern. Don't worry -- we wouldn't have Bernie Madoff run the process. In fact, you wouldn't have to trust my group. We're just pitching the idea. If the idea could gather some momentum, then a reputable financial institution could run the process of selling the bonds (preferably a financial institution with an interest in keeping the Bills in Buffalo so that fees don't get out of hand).

[Bills Bonds]

great idea and great work. the commitment to this team by it's fans always amazes me. i think this would raise the amount needed (even from non bills fans) if the interest rate was even 1/2 the 10% snyder reportedly pays. my major concern would be the assurances in place to stop the bills from moving. what stake would an owner require from the bonds to give up that option?

 

Very good point and that’s actually one of my largest concerns. Even an owner that wants to keep the Bills in Buffalo would be slow to commit to never moving the teams. As you point out, that option has value and committing to keeping the team in Buffalo for the long term would likely bring down the market value of the team whenever that owner sells.

 

The potential owner would just need to weigh the value of low-interest financing against the value of giving up the option of moving the team. Hopefully, if the owner really wanted to see the team stay in Buffalo long term, he or she would be willing to give up that option.

 

To your point on non Bills fans being willing to invest -- I hope you are right (and in fact that was the case in the Packers stock issuances). But certainly Bills fans that no longer live in Buffalo would be interested in joining the effort. People always call Buffalo a small market, but there are thousands of people who no longer live in Buffalo who are diehard fans. These people may watch every game on TV or at a local bar, but that doesn’t increase the size of the Buffalo market and the dollars they spend don’t flow to the Bills franchise. If these ex-pats participated in a fan financing, the Buffalo market wouldn’t seem so small.

[Mr. WEO]

Very good point and that’s actually one of my largest concerns. Even an owner that wants to keep the Bills in Buffalo would be slow to commit to never moving the teams. As you point out, that option has value and committing to keeping the team in Buffalo for the long term would likely bring down the market value of the team whenever that owner sells.

 

The potential owner would just need to weigh the value of low-interest financing against the value of giving up the option of moving the team. Hopefully, if the owner really wanted to see the team stay in Buffalo long term, he or she would be willing to give up that option.

 

To your point on non Bills fans being willing to invest -- I hope you are right (and in fact that was the case in the Packers stock issuances). But certainly Bills fans that no longer live in Buffalo would be interested in joining the effort. People always call Buffalo a small market, but there are thousands of people who no longer live in Buffalo who are diehard fans. These people may watch every game on TV or at a local bar, but that doesn’t increase the size of the Buffalo market and the dollars they spend don’t flow to the Bills franchise. If these ex-pats participated in a fan financing, the Buffalo market wouldn’t seem so small.

What keeps the owner for moving the team?

[Bills Bonds]

What keeps the owner for moving the team?

 

Good question -- it would have to be written into the bond indenture (the bond legal agreement). Bonds normally have covenants that constrain the actions of borrowers (or in this case the actions of a new owner). For example, a typical bond covenant is that a borrower cannot take on any more debt. In the case of Bills Bonds one of the covenants would be that new ownership could not move the team or sell to someone who then moves the team.

[jo39416]

Bills Bonds - Nice website and a pretty damned good idea.

 

Just spent a few minutes thinking about potential tax issues (I'm a CPA) associated with this plan and one thing that you may want to consider is the IRS imputing interest for a below market rate loan (meaning you are taxed on the difference between the market rate and the reduced rate). Generally you only see this in related party transactions (brother-sister, father-son, etc.) but I could see this being a potential speed bump.

 

Worst case is the potential buyers would see the benefit reduced by approx 38-40% depending on state tax rates.

 

If you have any questions on potential tax implications of your plan, Id be happy to assist.

 

Thanks for thinking outside the box!

[Bills Bonds]

Bills Bonds - Nice website and a pretty damned good idea.

 

Just spent a few minutes thinking about potential tax issues (I'm a CPA) associated with this plan and one thing that you may want to consider is the IRS imputing interest for a below market rate loan (meaning you are taxed on the difference between the market rate and the reduced rate). Generally you only see this in related party transactions (brother-sister, father-son, etc.) but I could see this being a potential speed bump.

 

Worst case is the potential buyers would see the benefit reduced by approx 38-40% depending on state tax rates.

 

If you have any questions on potential tax implications of your plan, Id be happy to assist.

 

Thanks for thinking outside the box!

 

Thanks jo39416 -- finance guys like me like to pretend that taxes don’t exist. We have not thought through all of the tax implications of below-market bonds. If taxes really did cut into a new owner’s interest savings that would definitely reduce the benefit of fan-supported bonds. Thanks for brining that to our attention. We’ll certainly reach out to you on tax implications as the idea progresses (right now we are just in the early stages of spreading the word). That is an area where we could use some expertise.

[truth on hold]

How about some Barry Bonds?

 

But seriously, how about we get some of these trilliions the feds are giving away to at least gaurantee the bonds and make them pay a lower interest?

[Bills Bonds]

Thanks again to all who have taken the time to read this idea and comment on it.

 

Please voice your support for the idea by following it on facebook and by sending it to others:

http://www.facebook.com/pages/Bills-Bonds/169457796400351

 

We will make sure to keep this message board updated as the idea progresses (as some have suggested).

[Bills Bonds]

How about some Barry Bonds?

 

But seriously, how about we get some of these trilliions the feds are giving away to at least gaurantee the bonds and make them pay a lower interest?

 

I’m glad you suggested that. If a fan financing effort could gather some momentum, I don’t think that a government guarantee is unrealistic. The state and local governments would certainly benefit from the Bills staying in Buffalo and certain politicians claim to be committed to the cause.

 

When the Montreal Canadiens last changed ownership, an investment arm of the Quebec government (Investissement Québec) offered any new owner from Canada a C$75 million subsidized loan to help cover the purchase price of the team (see the articles below). They were tired of rich Americans owning the team and wanted to incentivize a Canadian purchaser. A few months later the Molson family purchased the Canadiens.

 

If the Quebec government is willing to give a loan just so a Canadian owns the Canadiens, it is not unreasonable to think that a government entity could guarantee Bills Bonds in order to help keep the Bills in Buffalo.

 

http://www.montrealgazette.com/sports/Canadiens+sale+done+deal+Gillett/1979251/story.html

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8j61p1VaB2A

http://www.nationalpost.com/m/story.html?id=1685925

[Mr. WEO]

Good question -- it would have to be written into the bond indenture (the bond legal agreement). Bonds normally have covenants that constrain the actions of borrowers (or in this case the actions of a new owner). For example, a typical bond covenant is that a borrower cannot take on any more debt. In the case of Bills Bonds one of the covenants would be that new ownership could not move the team or sell to someone who then moves the team.

There is no owner alive who would sign that agreement.

[Bills Bonds]

There is no owner alive who would sign that agreement.

 

It would have to be a negotiation with the new ownership group. If you are correct that no owner would sign up for that (which may be the case), there are other ways to put up barriers to the team leaving.

 

Here’s an example – the bonds pay a subsidized interest rate of say 3% as long as the Bills stay in Buffalo. But the bonds accrue interest at a market interest rate of say 6% to 10%. This market rate of interest does not have to be paid unless the team is in fact moved. Over time a financial barrier of interest would accrue that would disincentivize an owner from moving the team.

 

We are speaking in hypotheticals and all of this would be a negotiation. But with some creativity hurdles could be overcome.

[SuperKillerRobots]

Below is a brief explanation of the idea. Please visit the recently launched website (www.BillsBonds.com) and find us on facebook and twitter, if you are interested. We’re interested to hear your thoughts.

 

 

______________________________________________________

 

- A way for Buffalo Bills fans to invest in the future of their team and to help keep the Bills where they belong -- in Buffalo.

- A way of tweaking the Green Bay Packers idea of selling stock to fans so that it complies with current NFL Bylaws.

- A way for fans to help save the Bills, while saving money.

 

Please visit the www.BillsBonds.com for more information.

______________________________________________________

 

Buffalo Bills fans realize that the team is at risk of leaving Buffalo. What's frustrating is that it seems that there's almost nothing fans can do to effect whether the team stays or goes. When Ralph Wilson, Jr. passes away and the team changes ownership, fans will be on the sideline hoping that the new ownership group keeps the Bills in Buffalo rather than moving the franchise to a larger market.

 

This doesn’t have to be the case. Fans do not have to sit idly by and just hope for the best. In 1923, with the Green Bay Packers on the brink of brink of bankruptcy, fans bought the team by purchasing shares of Packers stock. NFL Bylaws now prevent Bills fans from replicating this idea, but with a twist to the Packers idea Bills fans could invest in the future of the Bills.

 

Bills fans could provide a “loan” to a new ownership group that is committed to keep the Bills in Buffalo. Proceeds from that loan, or more specifically bonds (a loan chopped into many pieces and sold to the public), would be used by the new ownership group to help pay the ~$800 million price tag for the team. The Bills new ownership would then pay the bondholders back overtime plus interest with cash flows generated by the team. By purchasing these bonds (called Bills Bonds) fans would be saving the team, while saving money.

 

Please visit BillsBonds.com for more information.

 

Good idea. I think you're biggest problem is going to be your target market of buyers for these bonds. Someone said we'd need 800,000 people to give $1,000 each, and we'd have $800mm. That is an unrealiztic number if you are planning on marketing these to fans. Normally in a bond issue, the company/group issuing the bonds meets with prospective investment banks to pick the one with the lowest fees/best deal. Once the financial institution is picked, an agreement is setup where that institution agrees to issue so many bonds on behalf of the company/group and guarantees buyers for those bonds. Usually those buyers are hedge funds, large companies, wealth managers, or very wealthy individuals who buy the bonds based on their debt appetite and the tier of the bond (i.e. rate of return versus order of default absorbtion of the debt). The buys are done in large chunks for the most part, since the more transactions that occur, the more it costs the financial institution to sell the bonds.

 

In your scenario, there would be multiple small transactions to fund the bond purchases. This would most likely cause the price of the transaction to increase because of how many individual transactions would have to be made. Also, finding 800k people willing to fork over $1k each is not easy. There probably are not that many people over the age of 30 in WNY, regardless of whether they have the money to invest or not. Even $150mm is a lot to get in $1k increments.

 

Also, when these transactions occur, the financial institution has a set amount of time to sell all the bonds before the deal goes bust and the company/group behind the issue walks away (usually at cost to the financial institution). For this reason alone, it might be difficult to get a financial isntitution to sign on.

[joejoebills]

I'd give up to 10 grand to keep the bills in buffalo.