Madrid, Juve, Barca tap credit markets for €1b+ in financing

There’s been a burst of activity in the It’s been a busy winter for soccer financing the major European clubs

Real Madrid has secured financing for the long awaited redevelopment of the Santiago Bernabeu with a syndicate of banks taking on a €575 million issue. US lenders Bank of America and JP Morgan led the deal with local banks Santander and CaixaBank also participating. El Confidencial says the financing is for a period of 30 years, with interest capped at a maximum of 2.5%.

Juventus has been busy issuing €200 million in non-convertible bonds to qualified investors across Europe just last week. Use of proceeds is stated by the club as “to provide the Company with financial resources for its general corporate purposes, streamlining the structure and the maturity of the debt.” With the purchase of Cristiano Ronaldo and recruitment of other high-wage stars the emphasis is likely to be on the latter and using the funds to clean up the capital structure. Juventus is also exploring plans to redevelop their Turin home.

And finally, Barcelona also announced €140 million in financing from two US funds, according to El Pais. Pricoa Capital Group and Barings have extended €90 million and €50 million respectively for use in normal operations and transfer funds. El Pais says the club do not have to repay the loans for five years and have agreed an interest rate of 1.8% subject to periodic adjustment. While most reporting is treating this as long-term debt it appears that this is actually a revolving credit facility that Barca will draw on for short-term financing.

Madrid, Juve, Barca tap credit markets for €1b+ in financing

Historic collective rights sale for La Liga fetches €600m

Telefonica has bought the domestic broadcast rights for Spain’s La Liga and Segunda Division in a €600m (~$667m) sale. The one year deal covers the broadcast and audio coverage rights of La Liga, the second division and Copa del Rey matches for the 2015/16 season. International rights are still in contention and expected to yield a similar figure.

Historic Sale

The sale is the first time that Spanish clubs have sold their rights as a package. Traditionally clubs have negotiated media deals on an individual basis, an arrangement which heavily favors Barcelona and Real Madrid, with both commanding huge contracts thanks to their global brands and high profile players. Other clubs have benefited much less from the explosion in interest in Spanish soccer, with the two giants often taking as much as half of the TV money flowing into the league.  The disparity is particularly pronounced for clubs in the second division with several clubs declaring bankruptcy over the past few years as a result of the financial crisis and low media coverage.

Worries about balance in the league have simmered for years but calls for change accelerated recently and culminated in a royal decree mandating collective rights negotiation. The decree was approved by the government in May and set off a brief strike as Spanish players protested the interference and distribution of TV revenues. The National Court quickly ruled the stoppage unlawful and allowed the season to end in normal fashion.

2015/16 and Beyond

The 2015/16 package is still a half step towards complete collective bargaining, as Telefonica holds individual deals with Barcelona and Real Madrid’s for one more season. Each contract is estimated to be worth approximately €140m ($160m); when combined with the €600m deal this suggests a combined value of domestic Spanish rights in the ~€900m ($1bn) range for the 2015/16 season.

While the collective sale is a triumph for the LFP the value still falls short of the eye-watering growth of the English Premier League. Jut in February the Premier League announced a new domestic deal worth €2.32bn annually (2.59bn) over three seasons beginning in 2016, a 70% rise on the previous €1.39bn (1.55bn) agreement. Much of the difference is explained by a much less developed market for subscription tele€vision in Spain (2014: ~€2bn) compared to the UK (2014: ~€6bn); but while currently smaller, the Spanish subscription tv market is growing rapidly adding 76% more subscribers in 2014 alone.

International Rights

Much of the short term potential for La Liga is likely to be realized outside of Spain. International rights sales only brought in €200m in 2014/15 and expectations around the new deal are high with many predicting at least a doubling in value. With Telefonica submitting a €450m bid as recently as two weeks ago an even greater increase seems possible.

The established pay-tv markets of Western Europe are low hanging fruit for La Liga, especially with growing interest in clubs outside the big two like Atletico and Valencia. The biggest opportunity though remains increasing league adoption in Asia and tapping into a generation of supporters that have grown up idolizing Ronaldo and Messi. The potential has not gone unnoticed with clubs have been taking on Asian investors and forming strategic commercial and media partnerships to spread their influence in the region.

Historic collective rights sale for La Liga fetches €600m

Real Madrid removes badge cross for Middle East deal

Real Madrid have secured a key commercial partnership as the Spanish club continues to grow its presence in the Middle East. Marca reports that Los Blancos have landed a three-year sponsorship with the National Bank of Abu Dhabi which will allow the bank to issue a branded credit card.

Real undoubtedly benefits from the partnership in several ways including licensing fees, increased brand presence in the region and potential new supporters (the credit card doubles as a club membership).  It wasn’t all free though, the club made a concession of removing the cross from the “Real Corona”, the iconic crown atop the badge that symbolizes the Spanish monarchy.

madrid-before-after
Image credit: The Washington Post

The alteration is likely to cause a mini-uproar from political and religious circles but it is important to remember that the change is only within the United Arab Emirates. ‘Customization’ is more apt than ‘crusade’ here and it highlights the desire of clubs to seek out growth on a global scale more than anything else.  This raises more pedestrian questions for clubs about brand management and whether there should be a limit to any customization and extension of the brand.  Does it matter if a club is marketed differently to different sets of supporters?  Should a club strive for branding consistency or is it fine (perhaps even advantageous) to be a commercial chameleon?

Real Madrid removes badge cross for Middle East deal

The Financially Unsound and the Red Fury

Just don't let Ramos hold the trophy

There is no doubt which country currently sits on top of the iron throne of soccer. Spain. All foes have fallen at the hands feet of the Spanish national team for the past four years and La Furia Roja go into the summer as favorites to defend their European Championship title of 2008. Those odds are likely to carry over to the their bid to retain the World Cup in 2014. Domestically, La Liga attendance is high with the twin giants Barcelona and Real Madrid locked in a battle for the league title and on course to meet in this year’s Champions League final. The Spanish brand is also the strongest it has ever been with the rivalry of Messi v Ronaldo pulling in eyeballs from all over the globe and Spanish players in high demand across the continent for their technical brilliance.

Unfortunately, the difficult thing about being on top is staying there. Continue reading “The Financially Unsound and the Red Fury”

The Financially Unsound and the Red Fury

The Month in Soccer Business: March 2012

A monthly compilation of interesting business news related to soccer. March 2012. Continue reading “The Month in Soccer Business: March 2012”

The Month in Soccer Business: March 2012

The Soccer Import-Export Business…

Just a quick tidbit today.

The commercial trade in soccer talent is a global industry that shuttles hundreds of players between the leagues of the world every year. The river of money that follows the annual player migration is staggering in its volume and has spawned an entire economy that feeds people like Kia Joorabchian.

So where are those waves of cash spilling into? Which leagues sell the most and which buy the most? You can probably guess the top countries in each category but you will probably be surprised by some of the entrants further down.

Note that these figures reflect the the buying/selling of any player currently registered to one of the domestic leagues, not just players of the country’s nationality. As an example the sale of Ronaldo from Manchester United to Real Madrid counts in England’s column as an export and an import in Spain’s column, Portgual gets nothing. Figures in Euros.

Behold the top exporters of talent between 2006-2011: Continue reading “The Soccer Import-Export Business…”

The Soccer Import-Export Business…

Why UEFA Should Crowdsource Financial Fair Play

The Great Financial Meltdown was preventable.  The post-mortem of the 2008 collapse has reiterated what is true of every man-made crisis, that they can be avoided.  The warning lights were flashing long ago and there was ample time to stop the bubble.  Robert Shiller knew,  Nouriel Roubini knew and plenty of others were sounding the alarm because they had the information to understand what was going on.  Currently soccer is depriving itself of its own early warning system because data on club finances, including player transfer activities and ownership is being kept out of supporter hands.  This needs to change throughout the soccer world and the best place to start is through UEFA. Continue reading “Why UEFA Should Crowdsource Financial Fair Play”

Why UEFA Should Crowdsource Financial Fair Play