News

Manchester City is the latest in a line of top European football clubs to tap the debt markets as clubs move to bolster balance sheets and take advantage of lender appetite that is banking on a return of Ebitda and cashflows after lockdowns are lifted.

City Football Group, which has total or partial ownership of 10 clubs in major cities across the world, including Premier League champions Manchester City and New York City FC, recently raised a US$650m term loan.

Some of Europe’s biggest football clubs are also looking to raise significant sums from the financial markets. Many already had major liquidity concerns before the pandemic struck as escalating wage bills and transfer fees hit balance sheets, but the void deepened with the loss of match day receipts and deferred media and sponsorship payments.

To compete at the highest level, clubs must continue to invest in squads and stadium infrastructure and some are hoping to attract investments from institutions looking to tap into lucrative revenue streams from long-term broadcasting contracts and advertising revenue as Covid restrictions are lifted.

CFG’s seven-year loan, which was led by Barclays, HSBC and KKR Capital Markets as joint bookrunners, will be used to fund investments and infrastructure developments. The company also arranged a £100m HoldCo revolving credit facility.

CFG, which is majority owned by Sheikh Mansour’s Abu Dhabi United Group, received a US$500m equity investment from US-based investment firm Silver Lake in November 2019 in return for a 10% stake.

“Football clubs are beginning to be seen as smart financing investments in their own right so as soon as they switch from being an indulgent plaything of billionaires with money to burn to being a viable financial asset that can be profitable and tradable in their own right then you will inevitably start to see interest from private equity and investment firms,” a syndicate head said.

Moneyball

Conversations between lenders and clubs are becoming more regular as football clubs mull refinancings, buyouts or look for co-investors.

“A number of football clubs are kicking around either buyouts or refinancings and these are becoming more regular conversations,” a second syndicate head said. "The football clubs have some liquidity concerns, there are optimistic valuations being considered and it is one of those investments that once investors start doing a couple they get comfortable with the sector and more unearth."

In late June, Barcelona’s members approved a proposed €525m refinancing arranged by Goldman Sachs, which is expected to be signed in August with one or more financial institutions.

The financing will repay an €80m bridge loan provided by Goldman Sachs in June to cover higher treasury obligations for a period of 90 days, renegotiate €200m of senior bonds on more attractive terms and provide necessary liquidity over the next 24 months.

It will have a maximum 15-year term, at a 3% interest rate, requiring the club to obtain an investment-grade rating.

Away from traditional lenders, investment firms have also stepped up their presence in the sector.

Ares Management took a minority stake in Spanish champions Atletico Madrid in June as part of a planned capital increase to raise €182m for the club’s finances, with Mark Affolter, co-head of US Direct Lending, joining the board.

The preferred equity investment will provide liquidity to the existing owners and support future growth, including development of the club's stadium.

“In the past, sports franchises, leagues and clubs borrowed through traditional bank facilities, but there is now a growing need for more flexible capital to meet the needs for expansion,” said Jim Miller, co-head of US direct lending at Ares.

Ares’ investment in Atletico came after the club agreed a €300m US private placement with Pricoa, Barings and MetLife.

In May, Chinese retail giant Suning, which has controlled Milan's Internazionale since 2016 through Luxembourg-based Great Horizon, agreed a €275m, three-year deal with alternative investment firm Oaktree to shore up the club’s finances, pledging Inter shares to guarantee the funding package.

Inter will now look to refinance €375m of bonds due in 2022 secured on media rights as well as a RCF.

Winners and losers

The expectation is that these transactions will be reserved for top European clubs, as lenders focus on revenues from sponsorship and media rights and seek to avoid exposure to relegation risks.

“If you pick the right club it can be a good investment. In each of the leagues there are a handful of clubs you could finance. The mid-tier clubs are sometimes too risky,” a third syndicate head said.

However, clubs with highly complex or vague ownership structures are a bit more difficult as they come up against KYC issues.

There is also the risk of reputational damage to lenders from an increasingly activist fan base unimpressed by big money’s moves on football clubs and leagues.

A €3.5bn financing lined up by JP Morgan to back the proposed breakaway European Super League was ditched in April after clubs withdrew from the plans following a furious backlash from fans.

“If you set aside the sentimentality that people attach to football clubs, you have these very powerful, financeable assets,” the first syndicate head said.

((Alasdair Reilly: +44 204 530 3060, alasdair.reilly@refinitiv.com, Twitter: @loanjunkie, @LPCLoans))

((Claire Ruckin: +44 204 530 3061, claire.ruckin@refinitiv.com, Twitter: @claireruckin, @LPCLoans))