Fitch: Major League Baseball Labor Progress Viewed Positively

NEW YORK--(BUSINESS WIRE)-- A new collective bargaining agreement (CBA) between Major League Baseball (MLB) and the Major League Baseball Players Association (MLBPA) appears probable as MLB and the MLBPA signed a memorandum of understanding on a new-five year Basic Agreement. The new agreement must be finalized and ratified independently by the owners and the players which Fitch expects to happen in mid-December. The new agreement guarantees 21 straight years of labor peace in MLB. At this time, Fitch does not expect any rating implications (positive or negative).

The five-year CBA is expected to continue a number of the economic and competitive fundamentals from prior agreements including the salary structure that includes a 'competitive balance tax' system, free agency structures and a high level of revenue sharing among member clubs, all key rating drivers for MLB and MLB facility ratings. The competitive tax system has been slightly altered. The tax will decline to 17.5%, from 22%, of the actual dollars spent for clubs exceeding the threshold for the first time, but the repeaters tax will increase to 50% of that same figure for clubs that have spent above the predetermined level at least four consecutive times. An increase in the minimum salary will also be implemented. The five-year agreement is consistent with prior deals and eliminates any instability for the next five seasons.

MLB clubs are subject to a debt service rule (DSR) based on a two-year rolling average of earnings before interest taxes depreciation and amortization (EBITDA). Under the new agreement, the rule for leverage will now be 8 times (x) EBITDA (and 12x EBITDA for any club which has incurred stadium-related debt to finance construction of a new ballpark or major renovation in the last 10 years). Under the prior agreement MLB's debt service rule of 10x and 15x EBITDA, respectively, was viewed as high. Fitch views the lower leverage thresholds and the oversight of the Commissioner's Office to enforce compliance with the DSR favorably.

The new CBA also includes mandatory testing of blood for human growth hormone for the first time at the Major League level beginning in Spring Training. Additionally, the League will be slightly realigned with 15 teams in each league by the 2013 season; another round of playoffs; two more Wild Card teams as early as the 2012 season; changes to the First-Year Player Draft and expansion of the use of instant replay. The new agreement will also include additional restrictions on signing players in the entry draft identified as key cost containment measures.

Fitch will review the details of the final CBA to analyze any potential impact on the ratings of MLB's league-wide borrowing program and notes and Fitch's universe of stand-alone MLB stadium ratings and comment further. For additional information related to Fitch's MLB ratings please see 'Fitch Rates MLB Club Trust Securitization Notes 'A-'; Outlook Stable' dated Aug. 31, 2011, available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

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Fitch RatingsChad Lewis, +1-212-908-0886Senior DirectorFitch, Inc.One State Street PlazaNew York, NY 10004orScott Zuchorski, +1-212-908-0659DirectororCorporates:Melissa Link, CFA, +1-212-908-0611Senior DirectororMedia Relations:Sandro Scenga, +1-212-908-0278Email: [email protected]

Source: Fitch Ratings