Fitch Downgrades MLB Club Trust Securitization to 'A-'; Outlook Stable.

NEW YORK -- Fitch Ratings downgrades Major League Baseball's (MLB) Club Trust Securitization to 'A-' from 'A'. The Trust consists of approximately $780 million variable funding notes, $339 million series-1 term notes, and $125 million series-2 term notes. The Rating Outlook is Stable.

The downgrade solely reflects a criteria change related to transaction structures which generally utilize a bankruptcy-remote securitization of future contractual flows. The criteria change is intended to fully reflect all business risks associated with the issuer. The MLB Club Trust structure utilizes a bankruptcy-remote securitization of pledged revenues consisting of long-term national broadcast partners in place through 2013 with ESPN (Disney; rated 'A' with a Stable Outlook by Fitch), FOX Broadcasting Company (NewsCorp.;, rated 'BBB' with a Stable Outlook) and Turner Broadcasting System (TBS) (Time Warner, Inc; rated 'BBB' with a Stable Outlook). Noteholders still benefit from the bankruptcy remote structure, which eliminates team related risks; however, they remain subject to all the fundamental operational risks of MLB. Importantly, Fitch notes the one-notch downgrade only reflects a change in criteria related to Fitch's opinion regarding the enhancements provided from the legal structure and not related to Fitch's analysis of the principal qualitative and quantitative factors that contribute to performance of MLB. All the notes in the Trust rank pari-passu and are secured by, among other things, rights to receive certain payments shared among MLB clubs, including, primarily, the aforementioned national television revenues and radio broadcast revenues from national and international media contracts, and, to a lesser degree, revenues under licensing and sponsorship contracts entered into by Major League Baseball Enterprises, Inc.

The 'A-' rating primarily reflects MLB's premiere status as a professional sports league in the U.S. which has operated for over 100 years, the strength and ability to renew future broadcast contracts and the structural aspects of the transaction which isolates noteholders from team level performance. Additionally, the 'A-' rating reflects the fundamentally strong league economics and fiscal governance, including financial covenants, league level borrowing limits, reserve levels and mandatory pay down mechanisms (in the event national broadcast contracts are renewed at lower rates), collective-bargaining agreement (CBA) which is in place through December 2011, historical renewals of national broadcast contracts, attendance and viewership and popularity and international growth initiatives.

Key credit risks for the transaction include future renewal risk associated with the broadcast contracts as well as the current economic conditions which indicate heightened risks for all of Fitch's sports ratings. Fitch expects there will likely be increased pressure on individual and corporate discretionary spending levels and on the renewal values of key sponsorship and advertising agreements. (See Fitch's 'U.S. Sports Outlook 2009', dated Feb. 17, 2009, and available at 'www.fitchratings.com'). Mitigating the renewal risks in the near-term are the national television contracts which run through 2013 and provide noteholders with significant collateral. Renewal risks are additionally mitigated by continued stable viewership and historical attendance growth since 2000.

Individual teams may be partially insulated in the near-term by the high percentage of multi-year contractually obligated arena-based income streams from luxury suites, club seats and sponsorship and advertising agreements. Nevertheless, potentially lower renewal levels of key revenues at the league and individual team levels should economic conditions worsen, would financially constrain the league and member teams. Additional risks include the overall high financial leverage of the participating teams, inherent risks associated with extension and/or renewal of the current CBA.

While Fitch positively views MLB's economic model and financial policies, a wide disparity exists between the financially strongest and weakest teams. A team's reliance on local revenues, which fluctuate significantly between small and large markets, and a team's discretion to spend unreservedly on player salaries can result in greater financial disparity among MLB teams. This disparity has the potential to lead to a less competitive framework for MLB, however, Fitch recognizes MLB's very long history of viability in very good and very bad economic times and more recently the diversity of MLB clubs that have participated in the post season since 2000 as important mitigating factors. Furthermore, Fitch importantly notes despite the range of financial disparity of participating clubs, noteholders are insulated from team level operations given their rights to national television contracts to service debt prior to distributions to teams for operations.

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). While the DSR limits are high at 10 times (x) EBITDA and (15x 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), Fitch views the oversight of the Commissioner's Office to enforce compliance with the DSR favorably. Key remedial measures, which primarily included debt and expense reduction, are viewed as important mitigating factors.

The current CBA was enacted in December 2006 between MLB's club owners and the MLB Players Association, which ensures no work stoppage through the 2011 season. Fitch notes that the CBA promotes financial stability among MLB clubs through continued oversight of club level financial activities by the Commissioner's Office, enhanced revenue sharing, and the competitive balance tax. Teams exceeding certain predetermined thresholds are required to pay dollar-for-dollar into a central fund for distribution to other clubs.

Regular season television viewership has been stable while viewership for the first round of the playoffs has increased. Stadium attendance levels declined slightly; however, Fitch views this positively taking into consideration the current economic climate and pressure on discretionary spending from individuals and corporations. Fitch expects final attendance figures to be down approximately 6%-7%, which also factors in the new smaller stadiums for the New York Yankees and New York Mets which opened in 2009.

MLB currently has 30 teams in major metropolitan areas in the U.S. and Toronto, of which 22 participate in the league lending facilities. MLB's extensive international marketing efforts, success of the MLB Network and the 2009 World Baseball Classic are viewed favorably as additional future potential for the sport.

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

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