LOS ANGELES -- The Los Angeles Lakers have returned approximately $4.6 million that they received from a federal government program intended to help small businesses weather the economic burden caused by the coronavirus pandemic, the team said in a statement to ESPN on Monday.
The Lakers, one of the NBA's most profitable franchises, applied for relief through the Small Business Administration's Paycheck Protection Program, and were among the companies and nonprofits granted loans during the first round of distributions. But after reports that several large or highly capitalized entities were securing aid from the program's initial $349 billion pool -- while hundreds of thousands of smaller businesses were shut out -- the Lakers said they returned the money.
"The Lakers qualified for and received a loan under the Payroll Protection Program," the Lakers said in a statement to ESPN. "Once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need. The Lakers remain completely committed to supporting both our employees and our community."
The program, which was established as part of the $2.2 trillion CARES Act and launched on April 3, enables small businesses to apply for and receive loans to cover employee salaries and other expenses. As a business with about 300 employees, the Lakers were eligible for a PPP loan, which is forgivable so long as the recipient spends 75% of the amount on payroll and doesn't fire anyone.
The PPP ran out of money after less than two weeks, leaving many mom and pop businesses without the assistance they sought. Some of those loans went to high-profile companies with strong relationships with commercial or private banks, who were able to simplify the application process for their clients.
Those lopsided outcomes drew considerable public outcry, especially toward brands consumers know well.
Shake Shack, the specialty burger chain with a market capitalization of $2 billion, received a $10 million loan. AutoNation, a Fortune 500 auto retailer, received $77 million from the PPP. Both companies have since announced they would return the funds.
Likewise, the Lakers opted to send back their loan of approximately $4.6 million in the days following the news that the PPP had exhausted its funds.
The Lakers' value was estimated to be more than $4 billion prior to the virus outbreak. They have the league's most lucrative local broadcast deal, which generates more than $150 million in annual revenue. In addition to the Buss family, which presides as the controlling owners, the franchise has three billionaire minority partners -- Philip Anschutz, Patrick Soon-Shiong and Ed Roski Jr.
But with the completion of the NBA regular season and playoffs in doubt, tens of millions of dollars in revenue from a potential playoff run are at risk for the Lakers, from ticket sales to unfulfilled local television dates. The Lakers have pledged not to lay off or furlough any employees, and in early April, senior staff took a voluntary 20% salary deferral.
In preparation for a second round of PPP funding that begins Monday, the SBA last Thursday issued new guidance that discourages applications from wealthier businesses that have access to liquidity and credit markets. The Lakers are considered one such organization.
As a tentpole NBA franchise, the Lakers have the capacity to borrow at favorable rates. For instance, the NBA extended its credit line to $1.2 billion soon after it suspended the season. Teams in need of cash can tap the league's credit facility program, so long as they abide by the NBA's $325 million debt limit. Sources say at least one team has pursued this option.