Big 12 nearing private capital deal that could raise up to $500 million

The Big 12 is nearing an agreement with RedBird and Weatherford Capital for a cash infusion of millions.

Big 12 presidents and chancellors recently authorized commissioner Brett Yormark to take another step toward finalizing a credit deal that, if all schools choose to participate, would deliver $500 million to Big 12 members and create a strategic business partnership with the firms.

Multiple people with knowledge of the agreement spoke to Yahoo Sports under condition of anonymity. The Big 12 is not giving up any stake or equity to the firms. A final decision on the move is expected in the coming weeks after the completion of long-form agreements.

In a statement to Yahoo Sports, the Big 12 confirmed that the league is in negotiations with the two firms to “create a multifaceted strategic business partnership” focused on growing commercial operations of the league, while also “providing an opt-in capital solution for our member institutions to take advantage of up to $500 million of capital.”

“RedBird will also work with the Conference to identify complementary investment opportunities inside and outside of the collegiate athletics ecosystem that will create new revenue streams and long-term asset appreciation,” the statement said.

The agreement would end the conference’s more than three years of exploration into private equity and capital, and it would become the first publicized conference-wide capital agreement in major college sports. The Big 12’s deal with RedBird and Weatherford closely follows the finalization of an equity partnership that one of the league’s members, Utah, struck earlier this week. The agreement would not impact Utah’s deal.

The Big 12’s RedBird/Weatherford partnership, spearheaded by Yormark and Kansas president Doug Girod, the league’s chair, is a three-prong package that is described as a “low-risk venture with tremendous upside for the league,” said one stakeholder.

The Big 12’s RedBird partnership is a three-prong package. Redbird, a New York-based investment management firm with $12 billion in assets, has agreed to infuse millions into the Big 12 office as an initial step to help drive commercial business, perhaps even create new businesses and lead to the league’s investment in revenue-generating companies.

The firm is also offering roughly $30 million to each member school in a capital credit line at a reduced rate. Schools are not required to accept the capital.

At the center of the third part of the package is a strategic business relationship between the firms and the Big 12 in an effort to further evolve the conference office in a more professionalized environment. The Big 12 used Moelis as its banker in the process.

“To date, the RedBird ecosystem has delivered over $145 million of contracted revenue to the Big 12 and its member institutions,” the Big 12 statement said. “This partnership would provide the Conference with a world-class strategic and capital partner, while preserving 100% of the member institutions’ equity in the Big 12.”

The partnership between the Big 12 and RedBird/Weatherford resolves more than a year of negotiations between the entities over a capital deal and delivers to the firm its long-awaited attempt to enter the college sports sphere. For months now, RedBird and Weatherford have pitched equity or capital proposals to individual schools.

Private equity or capital has emerged within an industry that finds itself in its most financially stressful era. With budgets expanding to pay college athletes and coaching salaries continuing to balloon, schools and conferences are searching for upfront dollars that they plan to pay back over a matter of years — much of the cash contingent on future television contracts.

Utah became the first school to strike such a deal in an equity agreement with Otro Capital, but the Utes are unlikely to be the last. Several power programs across the country are seriously considering similar plans.

In one of the more publicized proposals, the Big Ten negotiated for months an equity and capital partnership with UC Investments only to see the deal paused as two members, USC and Michigan, opposed the plan. Months ago, the SEC began working with investment banker Goldman Sachs in an effort to explore potential partnerships, even though the league’s presidents have publicly and privately expressed their resistance to such deals.

However, the amount of cash involved cannot be ignored.

These capital infusions pose a threat for those not taking the money. Those without capital dollars risk being placed at a financial disadvantage, potentially in the recruitment of both athletes and coaching staff members.

Big 12 and ACC schools are already at a disadvantage financially from the SEC and Big Ten, whose television contracts — the largest revenue driver for college programs — distribute more cash to their schools. The capital infusion helps the Big 12 close a gap that continues to widen between the league and what many have deemed the “Power Two” of the SEC and Big Ten.

Big 12 nearing private capital deal that could raise up to $500 million

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