Las Vegas's New Football Stadium Is on Its Way to Becoming the "Bailout Bowl"
The stadium naming curse is well known. Enron Field, Adelphia Coliseum, and MCI Center are just a few examples of bankruptcy following a company's name adorning its home team’s stadium or arena. Financial trouble typically comes after the name is attached and the team plays some games.
In the newest case, the company is struggling before a game has been played. Last August, Allegiant Airlines inked a deal with the NFL’s used-to-be Oakland, used-to-be Los Angeles, used-to-be Oakland (again), and now Las Vegas Raiders for the naming rights to the new 65,000-seat and partially taxpayer-funded stadium, which sits along I-15 in Clark County, Nevada.
Terms of the deal were not disclosed, but the Las Vegas Review-Journal (LVRJ) reported, “experts with experience on similar deals say Allegiant is likely paying between $20 million and $25 million in cash and in-kind services a year to put its name on the building.”
Raiders owner Mark Davis let this slip at the time, “I look forward to learning a lot more about the Allegiant brand. We’ve got 30 years ahead of us, so let’s make the best of it.”
Allegiant may be wishing it hadn’t made a thirty-year deal. Eli Segall writes in today’s LVRJ that “Allegiant Air’s parent is burning through at least $2 million in cash per day and hundreds of workers are taking two-month leave at half pay as the carrier grapples with the fallout from the coronavirus pandemic.”
March revenues were down 40–45 percent from a year ago and its prospects are likely to get much worse. The company is applying for funding from the federal government’s Paycheck Protection Program to keep its doors open. Meanwhile, “management expects flying capacity for April and May to drop 80 percent to 90 percent from the same period last year and is ‘continuously’ re-evaluating its flight schedule ‘in light of low demand for future bookings,’” Segall reports.
Allegiant (ALGT) stock has fallen from $183 plus per share in December to a close below $80 today. The company sported over $457 million in cash at year end: a couple hundred days' worth at the current burn rate, excluding a payment to the Raiders, of course.
Allegiant Stadium may work out like New York’s Citi Field, known in the years after the 2008 financial crisis as Bailout Ballpark. CNBC reported,
On the heels of announcing a naming deal that cost Citigroup $20 million a year over 20 years, the company was forced to take $45 billion in government bailouts and saw its stock price drop nearly 94 percent from its November 2006 levels. Because of the heavy taxpayer support given to Citigroup, lawmakers began urging the company to scrap the names rights deal. But the company stuck with its plans, and has managed to avoid bankruptcy.
Allegiant Stadium will likely be the Bailout Bowl, with construction requiring $750 million of taxpayer largesse and now more government bailout money required for the Bowl’s name holder to pay its Raiders bill.