The NCAA’s lucrative television deals didn’t prevent a rating downgrade of the organization.

DALLAS – The eight-year extension of the National Collegiate Athletic Association's lucrative broadcast agreement with two major broadcasting networks wasn't enough to stave off a rating downgrade.

S&P Global Ratings recently downgraded the organization's outstanding debt one notch to AA from AA-plus. The outlook is stable.

The Indiana-based NCAA issued bonds through the Indiana Finance Authority and the Indiana Development Finance Authority.  The association has $28 million in debt.

The rating agency said that the downgrade reflects the organization's weakening financial resources over the past two years.

In the 2016 fiscal year, which ended in August, the NCAA ran a $411 million deficit. The organization reported revenue of $989 million while expenses, driven higher by a decision early last year to make a one-time, $200 million distribution to Division I schools and by a $209 million lawsuit settlement, were $1.4 billion.

It marked the second consecutive year that the NCAA posted an operating deficit.

S&P also noted that the organization suffered from the fiscal burden of additional one-time liabilities in fiscal 2016 including $44 million in accrued legal fees in the "O'Bannon" case – a high-profile legal case with former UCLA basketball player Ed O'Bannon, who, with two dozen other plaintiffs, sued the NCAA in federal court over the use of student athletes' likenesses in broadcast rights and video games.

"We continue to believe that the NCAA faces significant risk from the potential effects of continuing litigation and in the longer term from reputational risk," S&P said in its report.

The NCAA said it was not surprised by the Feb. 28 downgrade.

"We were expecting the downgrade based on some expenses that we had in 2016," Kathleen McNeely, the NCAA's senior vice president of administration and chief financial officer, said in a statement. "We continue to believe AA-stable is a very strong bond rating."

S&P said it expects the organization's finances will benefit from broadcasting contract extension with CBS and Turner Broadcasting System for the NCAA men's basketball tournament. Total rights fees to be paid to the NCAA over the eight-year extension period are $8.8 billion. The agreement provides for the television and multimedia broadcast of the Division I Men's Basketball Championship. The new agreement runs through 2032.

The contract extends beyond the final maturity of NCAA's bonds in 2025. Under the contract signed in 2010, CBS/Turner paid the NCAA $740 million in 2016, with the fee increasing to $761 million this year.

S&P said the revenue should help offset the future risk of litigation and in the longer term reputational risk.

"The NCAA has continued to show willingness to repay its debt and has no additional debt/capital plans, which we view positively. It is our opinion that the weakening of its financial resources and the possibility of increased future litigation (since the courts have indicated that its regulations are subject to antitrust scrutiny) modestly elevates credit risk and is therefore commensurate with the revised rating.

Moody's Investors Service rates the organization Aa2 and in April 2016 changed the outlook to stable from negative based on its expectation that future costs for the organization related to the ongoing litigation settlements and regulatory changes would remain manageable.

However S&P said the organization still remains at risk of further downgrades if financial resources continue to deteriorate due to unfavorable court rulings, if it loses a major contract or revenue source, or if significant weakening of the overall credit profile occurs.

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