Private Credit Investing in University Athletic Departments - Status & Opportunities for Lenders (As of April 2025)

Introduction

Private credit, defined as non-bank, non-public direct lending to institutions or enterprises, has grown rapidly across the U.S. economy over the past decade. However, it has historically been rare or nonexistent within university athletic departments. Recently, a confluence of financial pressures has triggered exploratory discussions between athletic departments and private credit providers about potential lending relationships.

Although no large-scale public transactions have yet been completed, the sector is reaching an inflection point where private credit could soon become a regular part of athletic department financing.

This essay explains the current status of those discussions, the permissibility framework under which private credit could be used in athletics, and the business opportunities available to lenders who move early into this emerging market.

Status of Discussions Regarding Private Credit in Athletic Departments

Traditionally, universities funded their athletic departments through a mixture of operating revenues (ticket sales, broadcasting rights, sponsorships, and licensing), philanthropic donations, institutional subsidies, and municipal bond financing for large capital projects.

Borrowing through private lenders was rare because universities typically accessed tax-exempt municipal bond markets for cheaper financing and because athletic departments were seen as appendages of either public institutions or nonprofit organizations, creating reputational concerns about overt commercialization.

However, beginning around 2021–2022, several major financial trends placed significant strain on athletic department finances:

- The explosion of NIL (Name, Image, and Likeness) costs, with players now able to demand substantial monetary inducements indirectly funded by booster groups or collectives.

- Conference realignment pressures, which imposed heavy costs on programs seeking to maintain competitive positioning and television revenue shares.

- Capital inflation, making construction of new stadiums, arenas, and training facilities substantially more expensive.- Revenue compression, particularly for programs outside the elite "Power Two" (Big Ten and SEC), whose TV contracts are increasingly dominant.

As a result, athletic departments, particularly those at mid-major and second-tier Power Five schools, have begun seriously considering private credit as a supplemental or alternative source of capital.

Several private credit providers, including major firms like Apollo Global Management, Sixth Street Partners, Ares Management, and Blackstone Credit, have expressed direct interest in lending to athletic departments. These firms see athletic programs as relatively stable cash-flow generators with under-monetized assets, particularly given predictable media rights revenues and strong alumni fundraising networks.

Although no major transactions have yet been publicly announced, credible sources (including financial advisory firms, sports investment boutiques, and trade media) report that exploratory term sheets and preliminary structures have been proposed. The first completed deals are expected to emerge between late 2025 and mid-2026.

Permissibility of Private Credit in University Athletics

From a legal and regulatory perspective, private credit to athletic departments is permissible, but with important qualifications.

- Public universities are governed by state laws that often require approval by boards of regents, boards of trustees, or other public oversight bodies for any new borrowing. However, athletic departments often have their own affiliated 501(c)(3) booster organizations or foundations that can legally borrow money directly without triggering the same degree of public oversight.

- Private universities have fewer restrictions. Their athletic departments are typically part of broader nonprofit entities that are free to engage in borrowing as long as debt service obligations are prudent and consistent with fiduciary duties.

- Use of collateral is a critical constraint. Certain revenue streams, such as student fees or tax revenues, may be restricted from use as loan collateral under state law or university policy. However, revenues from ticket sales, media contracts, merchandise, suite sales, and certain donor pledges can usually be pledged without issue.

- Reputational and political risks remain significant. Schools must consider the optics of borrowing private money, especially if it appears that they are taking on debt for the benefit of paying athletes or for speculative investments in athletics. Nevertheless, such concerns can often be managed through careful structuring, such as earmarking borrowed funds specifically for capital improvements, NIL advancement funds, or revenue-producing assets.

There is no federal or NCAA regulation that prohibits athletic departments from taking private loans, provided that such arrangements are disclosed properly and comply with general nonprofit governance standards. In fact, the use of private credit in other parts of university operations (such as financing dormitories, energy systems, or technology infrastructure) has become fairly common over the past decade. Thus, athletic departments are seen as a natural extension of this broader trend.

Business Opportunities for Lenders

Likely Early Adopters

The first programs likely to utilize private credit include:

- Mid-major universities (such as those in the American Athletic Conference, Mountain West Conference, or Sun Belt) that need to invest aggressively in facilities and NIL to remain competitive.

- Former Power Five schools that have lost access to major television revenue streams after conference realignments (e.g., Oregon State and Washington State).

- Private universities (such as Notre Dame or Southern California) with strong brands but desires to manage athletic finances separately from endowment resources.

Business Opportunities for Lenders

Private credit providers who enter this space early could capture attractive returns in a relatively low-competition environment. Specific opportunities include:

Type of Lending

Advantages for Lenders:

- Highly predictable cash flows tied to contractual media rights and loyal fan bases.

- Lower default risk compared to typical private corporate borrowers, given potential for alumni fundraising support.

- Opportunity to structure creative, collateral-backed deals with attractive covenants.

Risks to Manage:

- Athletic department revenues are sensitive to team performance, donor enthusiasm, and conference affiliation changes.

- Political interference at public universities could complicate enforcement or refinancing.

- Negative public perception if private lending arrangements are perceived as excessive commercialization of collegiate athletics.

Conclusion

Private credit is on the verge of entering the university athletic department landscape. Although no large transactions have yet closed, exploratory discussions are underway, and financial pressures are creating a powerful catalyst for adoption.

From a legal standpoint, private credit lending to athletic departments is permissible, subject to governance, collateral, and reputational considerations. Private universities are freer to proceed, while public universities may require additional approvals.

For private lenders, the sector offers a rare chance to capture strong yields from fundamentally creditworthy borrowers with built-in donor bases and revenue streams. While reputational and political risks must be carefully managed, the medium-term opportunity to establish first-mover advantage is considerable.

Lenders who can structure creative, collateral-secured deals — and who understand the unique political sensitivities of higher education — could unlock a highly attractive new asset class as early as 2025–2026.