The NCAA’s credit outlook was changed to negative by ratings agency Moody’s on Monday, Melvin Backman of The Wall Street Journal reports. The reason for that is the ongoing lawsuit against the collegiate governing body brought forth by former UCLA basketball player Ed O’Bannon. O’Bannon is attempting to gain class-action certification for his lawsuit, which seeks compensation from the NCAA for the use of players’ likenesses in television, video games and elsewhere.
Ed O’Bannon lawsuit dings NCAA’s credit outlook to ‘negative’
With the NCAA facing a potentially disastrous lawsuit, its credit outlook is taking a hit.
To be clear, the negative outlook does not mean that the NCAA’s credit rating has been downgraded; a downgrade in rating could be one of the negative consequences to hit the NCAA were it to lose a class-action lawsuit, though that is in all likelihood years away from materializing, if it happens at all.
The O'Bannon lawsuit: Where it's going and what it means.
Should O’Bannon’s suit become a class-action case, the NCAA’s solvency could end up in jeopardy, which would have wide-ranging reverberations throughout college athletics. A victorious class-action suit could leave the NCAA on the hook for millions of dollars in damages, and this was the primary reason for the decision by Moody’s to re-examine the NCAA’s credit status.
“In the event the plaintiffs in the O’Bannon v. NCAA case gain class action status the rating could be pressured as the likelihood of an ultimate outcome that would materially damage the Association and its members would increase,” the report said.
A class-action hearing was held in front of a federal court judge on Thursday, with attorneys representing O’Bannon and the NCAA presenting their respective cases. No ruling emerged in the immediate aftermath of that hearing, and it may be some time before the judge decides whether or not class-action certification is warranted.
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