This article will really brighten your day...or not.

[Black Diamond Vol]

http://www.sportsbusinessdaily.com/Journal/Issues/2013/01/28/Colleges/Tennessee.aspx

 

[BanditVol]

What happened to "Hamilton brings in the contributions", or his reputation as a "numbers" guy strong on the financial side?  I attended a Big Orange Caravan meeting in March of 2009.  Hamilton was not there.  The senior AD person was Condredge Hollaway, probably because he's from Huntsville.  But there were plenty of junior AD staff there.  Pretty much all they talked about the whole time was the new facilities.  A new track and field facility.  A new aquatics center.   The new building mentioned in that article.  The renovations to Neyland.  Another practice facility for football.  Maybe something to do with baseball, and I don't even know what else.  There were at least 10-12 projects underway, and it seemed like that's all the AD wanted to talk about.

So the thing that was supposed to be Hamilton's big strength - finances - appears to be cluster fizzleed also.    

Let me add that I always thought what was supposed to be his biggest strength, fundraising, appeared to be over-rated to me.  USA Today has published the financial budgets of all the public universities for 7-8 years now.  I went through UT's budgets for that time period last year, and our fund-raising seemed to increase only marginally more than other schools, if even that.

Wow.  Just wow.   One fifth of the athletic budget to service the debt.  Unreal.   

[murfvol]

Gotta say I'm not too concerned. Here's why.

1) Corporate (or athletic department) debt isn't the same as individual debt. My house can get repossessed, but Neyland isn't going to. There's no real exposure. Also, the athletic department is projected to have a much longer earning life than I do so they don't need to be as frugal. Long term debt is fine for the Vols even if it could be awful for me.

2) Money is cheap right now if you're going to go on a building spree the past few years have been good times to do so.

3) Tennessee's cash flow is in much better shape than it appears given the $7 million that won't go directly to the university. If something can be done about Knoxville siphoning off $1.6 million annually the department suddenly has a decent surplus.

[Creek Walker]

Murf is right, I think, in that this isn't as bad as it appears on paper. What are the consequences of debt? Having to tighten down on spending for a few years? Okay, fine. So we cut back on facility upgrades...let's be honest: our facilities are in good enough shape that we can afford to rest on our laurels for 3 or 4 years in that regard.

I'm much more concerned about the longevity of our current down cycle as it relates to fan apathy. Fan support makes or breaks most programs, and ours isn't too big to crumble.

It's obvious, though, that Hamilton's one perceived strength was something of a paper tiger. Again, there is no doubt that he is the worst AD in school history...maybe the worst in SEC history.

[BanditVol]

It isn't the amount of debt that concerns me at all.  In fact, while acknowledging that corporate and personal are different, a rule of thumb for banks is don't lend a person more than 3x their salary for a house, or so I have heard.  Using that, $200M a year vs revenue of ~ $100M should not be a big deal.

OTOH, a corporation with long-term debt larger than it's equity in the market (market cap) is considered to be at risk, at least by Peter Lynch.  He recommends staying away from corps that have more than 60% LT debt as a percent of market cap, in fact.

Of course, the UT AD is neither a person nor a corp but a non-profit.  As such, it's harder to parse what the LT debt means, but again, I am not concerned with that.

What does concern me is that to SERVICE the debt requires about 15% of revenue.  This is a huge amount IMO. Couple that with another ~ 5% going to former coaches and administrators the next couple years, and yes, IMO we are under a strong amount of pressure. 

I do agree that the money back from the larger university plus higher TV revenue will help offset that but I see football revenue staying weak for a year or two, unless Jones pulls a major upset or two. 

I definitely think it's  a concern. 

[Creek Walker]

ESPN.com provides some perspective.

http://espn.go.com/blog/playbook/dollars/post/_/id/2837/vols-financially-strapped-but-not-alone