finance

for building new stadiums - cheap money?

Football stadiums are costly CAPEX projects for clubs. Longerterm project and export finance facilities can often facilitate the building of such stadiums. In the case of London-based club Tottenham Hotspur had a very low risk of relegation.

Maguire said, “Tottenham were able to go to the external market; they were able to go to DCM and raised somewhere in the region of £700 million at a 2.5-3.75% interest rate. Some of those loans are not repayable until 2051.”

This long-term project and export finance facility would also have derisked volatility in terms of interest rates, as the club purchased fixed-rate coupons.

As confidence in football as an industry has grown over the course of the last two decades, the industry risk for the elite clubs has decreased significantly, and now clubs can borrow at 2-3%, very much considered as ‘safe’ assets.

Maguire said, “In the case of Everton, things are slightly more complicated.

Everton is not one of the elite clubs. It avoided relegation last season on the last day of the year.

Therefore, trying to get individual corporate lenders to lend under those circumstances is more difficult and therefore we move into owner loans and owner funding, which is quite common within the football environment. At Leicester football club, the owners put in £400 million,

Brighton saw owners put in over £300 million.”

Owner loans are a standard way of funding a football club for two reasons.

First of all, there is a lot of caution by traditional DCM markets in relation to lending to a volatile industry. Secondly, the interest costs can be quite high.

NFTs and blockchain - the future of football financing?

There are many rumours about the potential for new technologies to support football club financings, including digital assets via nonfungible tokens (NFTs), and blockchain for merchandising.

Maguire said, “We are seeing football clubs get into bed with a variety of new digital asset companies, the likes of Liverpool, Arsenal, Paris, Sanjaman and indeed the Premier League itself are trying to create a set of digital assets NFTs.

There’s also one club in the fourth tier of English football called Crawley Town, which has been acquired by effectively a crypto company.

They are trying to make Crawley Town the Crypto Club and to attract interest from a variety of geographical locations to people who wouldn’t necessarily engage.”

However, with the unregulated and volatile nature of NFTs, a cautious approach should be taken.

Maguire said, “[NFT’s are a] highly volatile and easily manipulated market and it can be therefore used nefariously by clubs in terms of their objectives. It’s already a very expensive business being a football fan if you’ve got a season ticket or buying merchandise.”

Cash is (still) king

CFOs and treasurers of football clubs, particularly those in the Premier League, face many headwinds and complexities in running their organizations.

The challenges of fluctuating income streams, expensive players, and the constant threat of relegation require a dynamic and strategic approach to cash flow management.

However, there are practical use cases for trade, receivables, project, and working capital finance that can offer muchneeded support to clubs. At the heart of it all, cash remains king, and its efficient management is crucial to the long-term success of any football club.

Therefore, football finance requires a range of strategies, including trade, receivables and working capital finance, project and export finance, and the ownership and running of football clubs. 

RAELENE MARTIN