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NCAA’s credit outlook now negative, in part because of Ed O’Bannon case

Jun 24, 2013, 9:59 PM EDT

NCAA Men's Final Four - Practice Getty Images

The Ed O’Bannon case could be hurting the NCAA’s credit outlook, according to the Wall Street Journal.

Looks like the case is starting to affect other things outside the courtroom, with the case slowly catching on nationally after a slow start. O’Bannon, a former UCLA player, is looking to help former college players recoup royalties from their likenesses being used in video games.

The report marked the first time that litigation has emerged as a risk in a Moody’s report for NCAA debt. A federal judge in Oakland is weighing a class-action certification for the suit, launched by former UCLA basketball star Ed O’Bannon in 2009, that would add potentially thousands more current and former athletes to the case and expose to the NCAA to greater damages if it loses.

The NCAA’s credit rating has not changed, but ┬áthe outlook presents a prediction of what it will be in the near future. This is especially true if the lawsuit O’Bannon is keying gains class status. The credit watch is a prediction that covers the next two years. Their current credit rating sits at Aa2, the third-highest rating available. If the case does gain class status, that would prompt the change, more than likely.

If the O’Bannon case gains class certification, Moody’s says the NCAA could face greater danger of a downgrade from the third-highest Aa2 rating, which would affect $40 million in debt the association took out in 2005 and 2010 to buy rights to basketball’s National Invitation Tournament and renovate its Indianapolis headquarters, among other expenses.

The NCAA is currently staring down $40 million of debt taken from 2005-2010.

Increasing interest in the case was the reason for the report. “We felt the trial has advanced to a point where it was worth looking at the credit again,” said Moody’s spokesman David Jacobson.

Follow David Harten on Twitter at @David_Harten

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