Colleges are paying athletes — private credit wants to play ball
- Tom Quinn
College sports are set to change in a big way. After years of students campaigning in court, a judge approved a settlement last month that allows direct payments from colleges to student athletes.
Good for athletes, perhaps less so for the schools themselves, who will have to contend with extra costs or risk being outcompeted by schools with deeper pockets. But that new need for liquidity has opened the doors to direct lenders to invest in college sports, and some already have the structure to get started.
“Everything has changed considerably with the House settlement and the fact that these athletic programs are essentially now having taken a hit to their bottom line. They're trying to come up with creative ways to be able to meet these payments to these athletes,” Frank Azzopardi, head of IP and commercial transactions at Davis Polk, told 9fin in an interview.
In June, Elevate announced the Collegiate Investment Initiative, a $500m private credit fund focused on investments in college athletics. The initiative, funded in partnership with Velocity Capital Management and Texas Permanent School Fund Corporation, has already closed two eight-figure deals, Elevate’s chief business officer Jonathan Marks told Front Office Sports.
Elevate and Velocity’s fund is not the first in the space. It follows the Collegiate Athletic Solutions fund, announced in May 2024. The latter is a partnership between RedBird Capital and Weatherford Capital to provide flexible funding solutions to college athletics programs. Ariel Investments also launched Project Level, a fund for women’s sports, including at the college level, in January 2025.
The ruling meant payments from colleges to student athletes began on 1 July, allowing for schools to pay all athletes a combined sum of up to $20.5m for the 2025-2026 school year. This standardizes and shifts NIL (name, image, and likeness) payments to school payrolls and away from booster funds, which are supported by donors to provide NIL payments without expressed business interest. A newly formed clearinghouse will act as a referee on all sponsorship deals, including those by booster funds, to halt payments that are above market rate for the services provided by the athlete.
The shift from boosters to schools’ payroll curbs the influence of extremely wealthy donors as there is now a cap on what programs can spend to attract talent. But that shift also exerts real pressure on schools looking for additional funding to contend with new costs to their bottom line.
It’s no small hit. The $20.5m limit represents more than a fifth (22%) the average revenue among Power Five conference schools (ACC, Big Ten, Big 12, Pac-12, and SEC) from media rights, ticket sales and sponsorships.
Schools have responded to the ruling in different ways. Virginia Tech increased student fees, the Ivy League is opting out of paying athletes, and Kentucky is creating a separate LLC for its athletics program. Others, however, are in talks to take advantage of private capital interest.
Profitable non-profits
Now that the antitrust settlement has provided some stability for investment in college, advisors speaking to 9fin expect increased private credit investment. The clarifications in recent years, particularly around NIL sponsorships and revenue sharing, have brought more certainty to college sports investments and builds on the momentum that professional sports have gained as an asset class in recent years.
“Look at all the professional sports in the US, their media rights have all been growing. And if you look at it internationally the same is true as well,” Azzopardi said.
“With the college landscape, given that they've all been essentially run like non-profit enterprises without much involvement with outside credit and outside investment, I think some see an opportunity to potentially disrupt that and get involved.”
Sources of funding will vary for each school, and private credit’s flexibility could be essential to the speed and certainty of execution, particularly when it comes to whether an institution is a public or private one.
“I think that kind of flexibility is also something that private credit brings to the sports world, where there is a real need for bespoke deals,” Randall Boe, senior counsel at Akin and former CEO and commissioner of the Arena Football League, said. “I mean, every team situation is different. There are different dynamics, different prospects.”
Opportunities in professional sports — historically more reliable investments as college funding rules waited for more legal stability — have grown substantially in recent years. The strong investment potential is driven in large part due by increasingly valuable content rights, which are buoying the entire industry.
The number of US consumers watching at least one sports game per month has increased by 32.5 million since 2021. Growing consumption is paired with growing content valuations. Last year, the NBA signed a $76bn, 11-year contract for content rights (an increase of 160% per season).
Professional sports teams are also riding the wave. The average NFL franchise valuation grew $4.5bn from 2013 to 2024, landing at an average of $5.6bn. Even this week, Apollo has reportedly entered talks to purchase a stake in Atlético Madrid.
Private credit readies the cash
This backdrop is why the private credit giant Ares is seeking to raise $2bn for a dedicated sports, media, and entertainment, 9fin reported in April. Andalusian Credit Partners is also a big private credit player in the sports, media, and entertainment sectors and recently raised around $500m for its private BDC.
Deployment of credit funds will face unknowns in the first year following the settlement, leading experts to look across the pond for inspiration, where Sixth Street has provided funds to Real Madrid in exchange for a 20-year partnership for revenue in its stadium operations. This model, where schools separate income streams or IP assets and sell portions of the revenues, is ripe for the college landscape.
There are issues to consider, however. Public universities need to be sensitive to any state laws that may restrict the purposes for which they can raise debt, said Azzopardi.
“As a non-profit, [those institutions] can’t enter into transactions with a for-profit entity that would impair [their] non-for-profit status,” Azzopardi said. “So the transaction has to be structured in a way that threads that needle.”
The deployment structure is just one of many key questions that remain regarding how the implementation of the settlement, regarding regulations and league structures, will shape investment risks. Of course, no investor likes uncertainty, especially private credit firms.
”It’s kind of like a junior high dance,” Boe said. “Lots of people circling and not really sure where things are going.”