An Unexpected Benefit of Winning a Sports Championship

Four years ago, Villanova Men’s basketball team won its second national championship, in dramatic style, with Kris Jenkins hitting a 3-point shot at the buzzer for the victory. The clip below never gets old:

It was a big win for the team and the school, and I am sure it raised the name recognition of Villanova across the country.

But who would have thought that winning such a championship would have helped the University’s credit rating with Moody’s, a firm that provides such a rating service? I know it was not the first thing I was thinking about when the ball went through the hoop.

Today in class I was talking about bonds, and I showed a write-up that Moody’s had prepared on a proposed bond issuance of $43 million by the University. Moody’s rated the bond issuance as A1, a strong credit rating.

Here were some of the strengths Moody’s highlighted:

  • Established market position as a large Catholic comprehensive university with a national reputation and noted intercollegiate athletics.
  • Strong financial oversight, yielding consistent cash flow generation in the 15% range and three-year (FY 2012-15) average debt service coverage of 3.9 times
  • Strong fundraising bolstered by a $600 million comprehensive campaign
  • Substantial and growing unrestricted liquidity, with 405 days cash on hand, affording good financial flexibility

Of course, it also highlighted some credit challenges:

  • Heavy reliance on student charges, representing 81% of total operating revenue, could contribute to operating pressures in the event of softening student demand.
  • Highly competitive student market, evidenced by constrained net tuition per student growth
  • Narrowing of financial reserve cushion relative to debt and operations from recent large debt issuance and expected spending of $100 million

Later in the report, it highlighted a couple of recent developments and discussed the impact of such developments on the creditworthiness of the University:

  • Villanova’s academic profile is further bolstered by the recent change of its “Carnegie Classification” classification to the Doctoral Universities category from the Master’s Colleges and Universities category. The university currently offers three doctoral programs, and is adding a fourth in Theology beginning in fall 2016. Overall, this recognition is favorable and underscores the continued strengthening of the university’s reputation and research profile.
  • In April 2016, Villanova men’s basketball team won the NCAA national championship. The team’s success is credit positive, enhancing the university’s overall brand recognition and elevating its national profile. The widespread media coverage contributes to increased student demand and greater fundraising. The university reports that the team’s success will likely translate into added student demand for the fall 2017 incoming class.

So there it is. Our sports program is listed twice, both times as a strength. And look at that wording: the team’s success is credit positive. It does not get more obvious than that that. Winning the title had a favorable impact on our credit, which likely led to a more favorable interest rate for the University.

So while a successful sports team may have some obvious benefits like enhancing school spirit, increasing name recognition, and boosting alumni donations, it can also do wonders for your credit rating.

Now if only successful sports teams could lead to increased faculty wages…

*image from Bank Info Security

28 thoughts on “An Unexpected Benefit of Winning a Sports Championship

  1. Winning a championship or developing a historically winning program has a long-range impact in many ways. Certainly, it enhances name recognition and boosts enrollment along with boosters.

    I’ve been following sports long enough to remember Villanova’s championship back in 1985 under coach Rollie Massimino. I wouldn’t normally remember that far back, but it was one of the few times where a much lower seed went all the way to the national championship. I looked back and saw they were only 9-7 in the Big East that year. I remember them knocking of Georgetown and Patrick Ewing.

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  2. I don’t know how universities work but would guess that successful sports programs will lead to increased faculty wages only if coaches and their multi-million dollar salaries and bonuses are part of the faculty. Higher university credit ratings being a byproduct of successful sports programs just seems to put even more pressure on athletic programs to produce. That pressure likely leads to more cheating by coaches, more exploitation of student athletes, and less rigorous oversight by administrations. If student athletes can generate millions in school revenue and reduce school interest expenses by huge sums, that is even more reason why athletes in those programs should receive monetary compensation for their efforts.

    I wonder how much those factors weighed in school decisions to play contact sports during a pandemic. Off topic (so what’s new😄) but the Notre Dame President attending the White House party for Barrett without social distancing or wearing a mask and catching Covid would have been grounds for expulsion for a student.
    What the heck was he thinking!

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    1. I agree that student athletes should benefit financially from the revenues/savings they help to generate. And I am sure the pressure you talk of drives many decisions at a school, and not just athletic decisions.
      As for the President of Notre Dame, I think he has lost a lot of credibility on campus as a result of his actions.

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      1. Congratulations to Villanova. The ’85 championship game was a real Hoosier barn burner. I get absurdly worked up and superstitious over games like that. If my school had been playing, I’d be unable to watch the final minutes unless I was there in person. I wonder if there was a spike in heart attacks that day.

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  3. I don’t know that I would have ever made this connection until I read this article. It sounds logical once you look at the reasoning behind the thinking, but it is not the most obvious of benefits that come to mind. I believe your salary is waiting for the proof of trickle down economics. Great post, Jim! Loved this!

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  4. so interesting, but it does make sense in the ‘business and reputation’ of the brand/school. only a matter of time before you see your big payday –

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  5. That’s an exciting clip to watch. And what a shot. A three-point swisher.

    I don’t think you’d get a wage increase for something like that. The financial reward would come from having bet on your team.

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