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Sources of funding for football clubs in the european market
1. Sources of Funding for
European Football
Clubs in the European
Market.
Nicolò Guberti
August 2018
1
2. INDEX
1. Introduction
2. Goals of football enterprises
2.1 Main assets of football clubs
3. Financing opportunities for football clubs
3.1 Internal sources of revenues
3.2 External sources of revenues
3.2.1 Debt capital markets
3.2.2 Risks
3.2.3 Loans
3.2.4 Bonds issuing
3.2.5 Debt restructuring
3.2.6 Receivables purchase agreements
4. Structured finance transactions
4.1 Securitization
4.2 Securitization and football
5. Third party ownership financing
5.1 TPO
5.2 TPO advantages and disadvantages
5.3 considerations on TPO
5.4 Third party investments
5.5 Football academies
6. New sources of financing
1. Introduction
2
3. Until the middle of the twentieth century, football clubs essentially financed
themselves through players’ trading, the ticket price paid by fans to attend home and
away matches and season tickets sale.
Other revenues were based on subsidies received from local companies which
represented a form of sponsorship, typically in situations where the companies were
geographically located close to the club accompanied by investments by major
industry magnates.
During the sixties and seventies, advertising and sponsorship revenues increased
considerably, so as to create a strong direct identification between lenders and
football club. This model of financing, defined as SSSL (Spectators-Subsidies-1
Sponsors-Local), lasted for a long time in all the main European countries.
In the eighties, new financial sources were introduced, arising from broadcasting
rights payment. This was due to the increasing competition in telecommunications.
Meanwhile, a new generation of entrepreneurs, invested huge financial resources
and played an important economic role in society. This led to a governance grounded
on managerial criteria and on the possibility of taking advantage from the synergies
produced through the integration of football business with other different sectors: the
development of merchandising and the turning of football clubs into real enterprises.
This new model, named MCMMG (Media-Corporations-Merchandising-Markets-
Globalized) refers to a globalized professional sport finance, in which funds are no
more necessarily linked with the club’s country. This has contributed to an
exponential growth of the football business over the last few decades, thus bringing a
huge amounts of additional revenues to the clubs.
Corporate costs went through a sharp increase, forcing clubs to remain financially
sustainable and competitive.
The globalization of football has brought to the system not benefits only, but also
some problems affecting the whole European football system:
Wladimir Andreff (2008). Globalization of the Sports Economy. Rivista di Diritto ed Economic dello Sport.1
3
4. First of all, this system clearly bring more advantages to the clubs with higher
financial resources, which have greater possibility to acquire best players on the
market and collect additional funds to increase investments. These clubs are
destined to dominate all competitions, to the detriment of small clubs. Moreover,
there is the risk that financial and not sporting criteria should be the guideline the
determination, for example of matches’ calendars, follows.
2. Goals of football enterprises
Sport, economic and intangible results are the main goals of football clubs.
Sport results are referred to as the ability of the clubs to perform well in sport
competitions in order to expand the fan base and gain national and international
success.
Economic results aims at enhancing the sustainability of the club’s business model,
thus strengthening their financial stability. Economic results became a crucial point
after the 2009 implementation of UEFA Club Licensing and Financial Fair Play
Regulations, which forced clubs to balance their books over specific periods and to
meet all their debt obligation. This, restricting indebtedness of clubs and enhance
transparency in the system.
Intangible results, the brand and image of the clubs, are mainly obtained through
commercial and marketing initiatives.
These factors are interrelated and interdependent. Sport results are definitely
important, because they represent the factor on which the structure is based on.
They create a positive “circular trend” for the football system.
On-field successes and trophies enhance the improvement of the brand, which
become more suitable and requested for commercial campaigns. The more the clubs
are widely known, the more they are able to find new financial resources and attract
new investors, in order to improve financial stability and sustain on-field
performances with new players.
2.1 Main assets of football clubs
4
5. • Players multi-annual performance rights, including the main team, the youth team
and the players of the football academy.
• Library: economic use of the club’s television archive images. (intangible asset with
an indefinite useful life, as the historical archive feeds itself over time with the
possibility of perpetual use).
• Lands, buildings and infrastructures: the stadium, the training grounds, the stores,
the club’s museum.
• Sport debentures, which allow fans to reserve seats to watch the team, including
the possibility of a return on the investment. The tickets in fact, can also be resold
among fans, allowing investors to profit if they are unable to attend the games.
• Participation in other societies linked to the football business are possible. FC
Juventus for example, owns participations in J Medical s.r.l., Tobeez F&B s.r.l.
(restaurant services management around the stadium and J village) and B&W Nest
s.r.l. (management of J hotel).
3. Financing opportunities for football clubs
5
6. Football clubs almost use the same financing and credit instruments as other
enterprises.
The evolution of the football system and its governance, highlighted a sharp increase
in corporate and management costs in football clubs.
This phenomenon, combined with the desire to acquire the best football players on
the transfer market, has increased the financial needs of the clubs. Some of them
have deemed it necessary to diversify the sources of financing using the equity
capital market, stock listing or sophisticated debt instruments. Other more traditional
methods are represented by bank loans or security issuing.
Additional capital can be provided with both internal and external financing. Usually
football firms depend more on internal financing: this, is grounded on increase of
revenues, a decrease of expenses or on the unlocking of tied up capital.
3.1 Internal sources of revenues
Within the European market, as far as professional football clubs are concerned, TV
and broadcast rights revenues, sponsorship and commercial contracts revenues,
matchday revenues and players’ trading revenues are the main sources of internal
financing.
The total revenue of the top 20 football clubs reached €7.9 billion in 2016/2017.
Broadcast revenues, with 45% of the total, represent the largest revenue source for
the major clubs, followed by matchday and commercial revenue with 17% and 38%
respectively .2
data from Deloitte Football Money League. January 2018. 21st edition.
2
Deloitte, is a UK-incorporated multinational professional services network. Deloitte is one of the "Big Four"
accounting organizations and the largest professional services network in the world by revenue and number of
professionals. Deloitte provides audit, tax, consulting, enterprise risk and financial advisory services with more
than 263,900 professionals globally.
The Deloitte Football Money League is a ranking of football clubs by revenue generated from football operations.
It is produced annually by the accountancy firm Deloitte and released in early February of each year, describing
the season most recently finished.
6
33%
46%
21%
matchday broadcast
commercial
38%
45%
17%
matchday broadcast
commercial
7. A. Club’s ability to generate revenue from matchday
T h i s c a t e g o r y i n c l u d e s
revenues generated by t i c k e t
s a l e s a n d c o r p o r a t e
h o s p i t a l i t y s a l e s
(facilities such as fan clubs events or exclusive stadium seats and programmes
offered to fans in order to make their matchday experience“special” and unique).
Within this category, the stadium plays a fundamental role. Stadium ownership has
become one of the most important assets generating revenues for football clubs. The
future of football teams cannot be separated from the stadium ownership.
In Europe and the UK in particular, a process of change of the “stadium” concept is
under way: the stadium has to represent not only the traditional arena where fans get
together to watch “the show”, but also a multifunctional structure able to attract fans
and citizens on daily basis, with the possibility to integrate inside it other functional
infrastructures, as the team museum, supermarkets, malls and restaurants. Stadium
should be a “product” to be sold to the fans, an autonomous source of revenue, able
to produce benefits for the owner: this allows a greater personalization and a greater
exploitation of this resource.
FC Juventus represents a perfect example. They have been playing home matches
in their own stadium “Allianz Stadium” since 2011. FC Juventus registered stadium
revenues for €57,8M in the 2016/2017, reporting the highest annual growth in3
€58.835.297. FC Juventus annual financial statement season 2016/2017. Page 68, “ricavi da gara” in “conto3
economico”
7
Revenue
2015/2016
€7415M
Revenue
2016/2017
€7896M
8. stadium revenues (32.27% ) among the top 20 most profitable European football4
stadiums.
These data are particularly significant, considering that in the 2016/2017 season the
Allianz Stadium overtook the historical San Siro plant in Milan in terms of extra and
non-matchday revenues, despite the fact that two teams played in San Siro in a
stadium with double capacity.
B. Commercial sources
This category includes revenues generated by sponsorship contracts,
merchandising, stadium tours and other commercial operations.
The German team FC Bayern Munich have the highest commercial revenue of any
other football club with €343.4 million, covering the 58% of the club’s total revenues.5
C. Broadcasting rights
This category includes revenues generated by distributions from participation in
national leagues, tournaments and European club competitions. For certain periods,
these revenues can be considered fixed.
The English Premier League is the championship that receives the highest local
broadcasting sum: £5.14B for three seasons 2016/2019 .6
In addition to this, clubs receive additional funds from national league broadcasting
rights sold abroad and funds from broadcasting rights distributed among clubs which
participate in European competitions (Champions League, Europa League and
“Classifica ricavi da stadio 2016-2017”, January 23rd 2018. calcioefinanza.it4
data from Deloitte Football Money League report, January 2018.5
“Premier League TV Rights”, February 13th 2018. bbc.com6
8
0
0,75
1,5
2,25
3
Premier League ENG La Liga ESP Serie A ITA Bundesliga GER Ligue 1 FRA
0,726
1,161,221,24
2,74
local + foreign broadcasting revenues €B
9. European Cup). In the 2017/2018 season €1.32 billion are distributed, based on the7
proportional value of each TV market represented by teams of each nation.
D. Players’ trading revenues
The selling of the main assets on the transfer market is another source of revenue for
football clubs. Clubs are often forced to sell players in order to maintain the club
creditworthy and fit the financial FairPlay rules.
The vast majority of football clubs, specially the ones which cannot enjoy huge
broadcasting revenues, are not able to be “cash flow positive”. Costs for football
clubs are relevant and often revenues do not cover all costs and expenditure.
Internal sources of revenues main advantages and disadvantages.
3.2 External sources of revenue
External financing defines both long-term and short-term funds that enterprises as
outsources.
Advantages Didadvantages
Ownership preservation, i.e. no need of
collaterals or share part of the
ownership with investors.
No possibility to increase capital and
less capital is available to manage
recurrent expenditure.
More control over the club, also on
future credits. Involving outsider
creditors might give them a degree of
influence over the club.
No tax benefits on external debt.
Internal financing is not tax-deducible.
No interest payments
No leverage increase, major
creditworthiness, major attractiveness
towards potential investors.
Internal capital is more flexible and
immediately available.
“Distribuzione premi UEFA Champions League 2017-2018”, August 17th 2017. calcioefinanza.it7
9
10. Debt capital markets (loans or bonds), equity capital markets or structured finance
transactions represent the alternative the football clubs can use to collect financial
resources.
Equity capital markets and IPOs represent very particular instruments, available for a
restrict group of clubs. Will not therefore be taken into account.
3.2.1 Debt capital markets
After the introduction of UEFA Financial Fair Play Regulation, the sums owners can
spend in football sharply decreased and the banks are trying to exploit this
opportunity, capitalizing on clubs’ need for new sources of financing.
Goldman Sachs and Bank of America Merrill Lynch (BAML) dominate the sector,
using stock and bond issues, the sale of branding rights, and the securitization of
future ticket and TV revenues in order to bring “fresh” financial resources to the clubs.
These instruments are becoming increasingly utilized, in Europe in particular,
favoured by the presence of well-run clubs with strong ownership groups.
Greg Carey, responsible for sport finance division at Goldman Sachs confirms: “how
do we help the clubs become more competitive? By building better facilities so they
can put more money into the team, so they can be potentially better and play in the
Champions League and make more money. So it’s a virtuous cycle ”.8
3.2.2. Risks
Collecting additional funds through the external debt markets requires important
financial considerations: due to the high uncertainty about the sport business, risk
represents an important issue for football clubs, being usually higher than in other
economic areas. This is due to the fact that in the long-term, clubs management is
often unable to meet the joint requirement of sports results and appropriate economic
result or at least it is unable to draw investors.
Anjuli Davies, Steve Slater. “U.S. banks look to rebuild European football from the ground up”, June 22 2017.8
reuters.com
10
11. Credit risk, interest rate risk, liquidity risk and exchange rate risk must be considered
when selecting financing solutions. A proper assessment of market value and cost of
capital should be significant for clubs management.
In particular, receivables towards clubs within a national football system, are
guaranteed by the national football federation which acts as clearing house:
receivables and payables are matched with and the federation takes on the
counterparty risk stepping in between the clubs in transfer contracts. It aims at
reducing counterparty risk, acting as a specialized and highly regulated counterparty
in the negotiations. Clubs receivables are guaranteed by debtors through bank
surety, insurance surety or other guarantees issued by counterparts.
“Relegation risk” is also to be taken into consideration by smaller clubs: relegation
causes a massive cut of the clubs’ revenues, which might be unable to maintain their
creditworthiness in the successive years.
National football federations are trying to mitigate relegation risk, providing additional
“financial cushions” to relegated teams, in order to reduce the revenues’ difference
between main and secondary leagues (difference in broadcasting revenues is the
most relevant).
3.2.3. Loans
Bank loans represent one of the most common sources of financing for enterprises.
Loans for football clubs usually come from commercial banks, investment banks,
credit institutes or funds, depending on the size of the club, its corporate structure
and the size of the required loan.
As above mentioned, football clubs present more risks and uncertainties compared
with other enterprises. Due to this higher risk, loans transactions are to be sustained
by a strong financial stability and an efficient managerial activity.
Other than these requisites, clubs have to present strong collateral in order to
guarantee the transactions in case of future impossibility to repay the debt.
11
12. It is not easy to obtain loans also for major championships clubs: in many cases,
they present difficult financial situations and their revenues do not add up with their
expenses, especially for smaller clubs.
Loans main advantages and disadvantages
FC Tottenham Hotspurs example
Goldman Sachs and Bank of America Merrill Lynch were among the banks that lent
Tottenham Hotspur £400 million in 2017 in order to finance the new stadium based in
London, the “Tottenham Experience” and the largest retail store of any football club in
Europe.
The five-year loan is backed by the new stadium itself and by commercial and
matchday revenues. It does not include early repayment penalties, amortization
requirements or material financial covenants until the stadium opens .9
The margins and the fees charged on the loan reflect the risk profile of the
transaction. For example, there is the possibility that future revenues might not cover
the debt taken on or the event of costs overrun or delays during construction. These
Advantages Disadvantages
Preserve internal financial resources for
other purposes.
Accept supervision of banks, which is
going to monitor the club.
Collateral required.
Ownership preservation. Increase of club’s leverage.
Driver of growth, i.e. possibility to
increase capital and to finance growth
projects the company might not fund on
its own
Covenants and strict requirements, such
as strict repayment schedule or
prepayment penalties and charges.
Confidentiality is preserved, contracts
details not disclosed to the market.
Interest payment.
Needs for collateral and
creditworthiness.
Data: Tottenham club public announcement on may 31 20179
12
13. risks can be offset by setting up projects which can generate additional revenues
using the stadium itself, such as concerts or other sports events. As far as Tottenham
example is concerned, Spurs plan to host two NFL games a year.
AC Milan example
The US investment fund Elliott Management played a fundamental role in the €740
million purchase of AC Milan in 2017. Elliott provided a last minute financing, allowing
the Chinese businessman Yonghong Li to conclude the transaction.
This example, even if not completely suitable because it deals with an acquisition
loan instead of a pure financing loan, can be relevant in order to show the importance
of the collateral chosen.
Elliott lent Yonghong Li €303 million to complete the acquisition of the club. The
contract has an 18-month maturity starting from April 13th, with an interest rate just
below 10% .10
Other than the first financing tranche, Elliott provided a further €32 million loan to
back AC Milan in a dispute against the football’s European governing body UEFA
about the respect of financial fair play rules.
Elliott Management Fund obtained Rossoneri Sport Investment Luxembourg s.r.l.
which owns AC Milan S.p.A. as collateral for the loan transaction.
Other than this, Elliott also obtained a guarantee on all brands, all intellectual rights
and all properties owned by AC Milan S.p.A. The “revenues current account” of AC
Milan created at Banca Popolare di Milano, the receivables from commercial/
sponsorship contracts and the receivables from broadcasting contracts were included
as collateral within the loan contract.
This example is particularly relevant because the collateral clause was enforced in
July 2018 after Yonghong Li failed to repay the debt to Elliott within the scheduled
deadline.
“Ownership and control of the holding company that owns AC Milan has today been
transferred to funds advised by Elliott Advisors (UK) Limited (“Elliott”). This transfer
Elvira Pollina, “Elliott offers more financial support to AC Milan”, March 21 2018. reuters.com10
13
14. has occurred as a result of steps taken to enforce Elliott’s security interests after the
previous owner of AC Milan defaulted on its debt obligations to Elliott” .11
3.2.4. Bonds issuing
The bond markets represent a valid alternative for those clubs which require long-
term financing solutions. Bond issuing is not a very usual financing solution among
football clubs. This type of transaction in fact is to be supported by adequate financial
results, a strong financial stability and a huge and internationally known brand in
order to attract the necessary number of investors.
These conditions are rare even in the major leagues, especially for smaller clubs,
which can overcome the problem by issuing a low volume of fan bonds (to be dealt
with in the last chapter).
Bonds main advantages and disadvantages.
3.2.5. Debt restructuring
Debt restructuring is a financial transaction used by enterprises with outstanding debt
obligations, raised both with loans or bonds issuing, in order to modify the terms of
the debt agreements.
Advantages Disadvantages
Possibility to subscribe debt with fixed
interest rates in order to stabilize the
club’s finances.
Interest payment (usually lower than
bank loans interest rate).
No diluition for pre-existing
shareholders. (differently from stock
issuing).
No confidentiality preservation, clubs
have to disclose to the market their
financial stability and creditworthiness in
order to attract investors.
Long-term source of financing. Increase of the club’s leverage.
Bondholders restrictions: covenants in
order to limit risks.
Elliott official press release on July 10 2018.11
14
15. This transaction is useful in order to avoid default on existing debt or take advantage
of lower interest rates during financial distress periods.
Debt restructuring gives the enterprises the possibility to extend the length of their
loans and also to reduce interest rates, by increasing the companies chances of pay
back the debt. This is also in the interest of the creditors, which would avoid
bankruptcy or liquidations events.
There is also the possibility for clubs (and more in general for enterprises) to
restructure debt using debt-equity swap, by eliminating a portion of the outstanding
debt in exchange for equity in the enterprise.
A debt restructuring transaction was implemented by two Italian clubs in 2017: AS
Roma and FC Internazionale Milano.
FC Internazionale, in 2015 obtained a loan from Goldman Sachs and Unicredit for
€230 million. In order to restructure and pay back this debt, FC Internazionale issued
a secured bond addressed to institutional investors with the assistance of Goldman
Sachs. The bond has a nominal value of €300 million, an interest rate fixed at
4.875% and 2022 deadline. The bond, which represents the first bond issued by an
Italian football club on the international capital market, will be used in order to
refinance the 2015 debt, procrastinating the deadline of the whole repayment and to
improve the club’s financial stability. Goldman Sachs International is the global
coordinator and book runner of the issue and UBI Banca is the co-leader .12
3.2.6. Receivables purchase agreements (RPAs)
RPAs are financing transactions used to unlock the value of enterprises’ accounts
receivables.
FC Internazionale Investors Relations. Milano, December 14 2017. inter.it12
15
16. In RPAs, banks or other financial institutions, can buy an agreed amount of debt from
an enterprise in exchange for fees and interests payment.
The credit institution then becomes the direct creditor towards the initial debtor and is
entitled to receive the payments when the debt eventually becomes due.
This type of transaction allows the seller to “sell” its assets instead of increasing its
debt: the seller has the possibility to manage its cash flows more efficiently, rather
than subscribe a loan which usually presents more stringent covenants.
RPA’s fees are higher than traditional bank loans fees, due to the higher credit risk of
the transaction and to the involvement of an external counterpart, which could be
also part of a different jurisdiction (country risk is present in cross-border
transactions).
FC Juventus Pogba transfer example
In the 2016 summer transfer session, Paul Pogba Labile passed to FC Manchester
United from FC Juventus for €110 million, record prize paid by a football team at the
time.
The contract provided that FC Manchester United had to pay immediately a first
tranche of €50 million, with the possibility to pay the remaining €60 million in
installments in the successive years.
FC Juventus was able to unlock its receivable with a RPA transaction: the Italian
bank Banca Popolare di Sondrio purchased FC Juventus €60 million receivable
anticipating the sum and becoming FC Manchester United creditor .13
4. Structured finance transactions
Structured finance is a highly involved sector of finance, which includes financial
instruments that are presented to large financial institutions or enterprises with
Simone Filippetti, November 4 2017. “Lo United deve 60 milioni alla Popolare di Sondrio” ilsole24ore.com13
16
17. complicated financing needs, usually not compatible with conventional financial
products.
4.1 Securitization
Asset-backed securitization is a particular financial technique in which assets are
refinanced in the market by issuing securities sold to capital investors by a
bankruptcy-remote special purpose vehicle (SPV).
Securitization main purpose is to allow enterprises the raise of low-cost finance from
capital markets by unlocking the value of the receivables owned. This allows the
collection of liquidity in the short-term period and its reinvestment it in other profitable
activities.
This financial technique represents an advantage for the enterprises, by allowing
them the avoidance of traditional bank loans, increases of capital or bonds issuing,
which are usually more expensive and riskier than securitization.
Only the investors in the SPV will have a claim against the securitized assets in the
event of the seller’s bankruptcy, but not against the seller and not against the seller’s
creditors. Due to this, if the SPV is not able to recover the whole debt, the investors
will lose the capital and the agreed interests.
After a securitization transaction, he who is really interested in recovering the whole
capital is no longer SPV (which purchased the receivables), but rather the securities
underwriters.
The Process:
Through securitization, companies can package pool of assets, receivables or other
financial assets generating cash flows and can sell them to third-party acquirers,
wiping them off their financial statements.
These transactions are led and managed by specialized investment banks called
arrangers.
The subject that plans to set up a securitization transaction (called originator), sells
the property of a specific receivables portfolio (collateral) to an entity precisely
17
18. created with the purpose of carrying out this type of transaction: the special purpose
vehicle SPV.
The SPV (purchaser) finances the purchase by collecting funds through a securities
issuing. These securities are called asset backed securities (ABS) and are placed on
the capital market by the SPV.
The payment to the originator, subsequent to the sale of the assets, comes from the
proceeds earned by issuing securities and by placing them to the public or to
institutional investors.
The recovery of purchased receivables (collateral) allows the SPV to remunerate the
capital invested by ABSs acquirers.
The purchase of receivables represent a ‘non-recourse’ transaction: the originator
cannot be considered liable and cannot respond with his own assets in the event of
debtors’ default.
The originator is also to perform a servicing activity (credit recovery actions) due to
his relationship with customers within the specific cases.
Securities issued on a securitization transaction receive a rating based on the
capacity of the transferred asset (collateral) to provide sufficient financial resources in
order to pay the liabilities deriving from securities issuing.
The costs for the originator are represented by the interest costs of the debt
(interests paid to security investors), by the debt’s issuance expenses and by other
costs such as the fees for arranger banks or rating agencies’ fees.
18
Sponsor Club
Investors
Assets funding proceeds
ABS issued
Payment for
securities
SPV
19. Main advantages and disadvantages of securitization
4.2 securitization and football
The main source of revenues selected by the clubs in order to set up securitization
transactions comes from matchday ticket sale or broadcasting rights revenue.
By anticipating cash flows of future revenues allows clubs to pay off the long-term
low-cost sources raised in order to fund football business activities.
Other sources of revenue, such as sponsorship or commercial contracts are not
properly suitable for this type of transaction. Just because they are “contracts”, their
liquidity can be unlocked using receivables purchase agreements (RPA) or factoring
transactions.
One of the main differences between a securitization transaction and a traditional
contract, such as a sponsorship contract or a broadcasting rights contract, is
represented by their duration. Sponsorship contracts, in football, are usually long-
term contracts, which provide a fixed amount of money every season: this type of
contracts can last over ten years while securitization transactions generate short-term
cash flows.
However, it is possible for clubs to make them longer by using revolving-period
securitization transactions.
Advantages Disadvantages
Off balance-sheet treatment: assets are
wiped off the originator’s financial
statement.
Complicated to structure instead of
traditional types of debt.
Offer to the issuer higher target rating for
instruments.
It may restrict the ability of the clubs to
raise money in the future.
Lower borrowing costs. Costly to dismiss.
Reduce club’s dependence on financial
intermediaries.
Possibility to lose direct control of
business assets.
Liquidity management: convert long-
term assets into cash.
19
20. In this type of transactions, during the revolving period, the SPV uses part of the cash
flows collected in order to purchase additional receivables from the originator on
prearranged terms.
There is also the possibility to increase the length of the securitization period, for
example by securitizing matchday revenues for more than one season. The
investors’ return in that operation does not consist in an interest rate payment, but in
the difference between the initial tickets’ wholesale at the start of the period and the
subsequent individual sale.
Benefits are immediate: clubs are able to anticipate future revenues in favour of short
term financing. On the other hand, club lose the control on the involved asset (for
example after the tickets’ securitization, the clubs are unable to change tickets price
for the subsequent seasons) and the control on future revenues.
AS Roma receivables securitization:
In the 2017 summer football transfer session, the Italian club AS Roma sold two of
their most representative players: Mohamed Salah and Antonio Ruediger to FC
Liverpool and FC Chelsea respectively. These players were paid €42 million and €35
million respectively, plus €8 million and €4 million bonus part .14
AS Roma agreed to receive these sums in three installments: the first installment was
paid immediately to AS Roma, differently from the second and the third ones, which
were to be paid one year and two years respectively after the conclusion of the
contract.
AS Roma implemented a securitization transaction in order to quickly unlock the
value of the owned receivables and to avoid waiting for two years for the whole
payment.
On August 8th 2017, the special purpose vehicle Madrigale s.r.l. was built in Milan15
and on the same date it purchased a pool of non-recourse receivables by AS Roma.
Investor relations, Roberto Fonzo. Operazioni di mercato Mohamed Salah Ghaly. Roma, June 22 2017.14
asroma.com
Investor relations, Roberto Fonzo. Operazioni di mercato Antonio Rudiger. Roma, July 9 2017. asroma.com
Gazzetta ufficiale della Repubblica italiana, August7 2018. Madrigale SPV S.R.L, GU Parte Seconda n.96
15
20
21. SPV Madrigale s.r.l. paid AS Roma for this transaction and subsequently issued
securities guaranteed by the receivables just purchased by SPV itself.
Consequently, SPV debt recovery, i.e. the future cash flows from debtors Liverpool
FC and Chelsea FC, guaranteed the return of capital for securities investors.
5.Third party ownership (TPO) financing
5.1 TPO
21
22. Third party ownership (TPO) in football represents the ownership of the economic
rights of a player by a third-party source, which can be a football agent, a football
agency or a private investor such as a company, a hedge fund or an individual.
TPO splits player’s rights into two parts:
• Federative rights, which binds a player to a club by a working contract. These rights
include the economic aspect resulting from the contractual relationship with the
club and consequently with the national federation. They can neither be shared nor
fractionated with third parties, as part of the “national sport system”.
• Economic rights, which indicate the right to receive any amount from the extinction
of the federative rights. Due to this, they are directly linked with the players’
transfers from a football club to another. Economic rights were not exclusively for
the clubs and could be transferred to third parties, even to subjects not members of
the football system.
By sharing the players’ economic rights with TPO, football clubs were able to obtain
funds from third-party external investors. These funds were reinvested on the transfer
market in order to buy new players, in exchange for a fixed percentage return on the
future transfer paid to the TPO investor.
If the player under the TPO agreement is not transferred by a certain date, the
investor is entitled to receive an amount equivalent to the initial price paid to
purchase economic rights, plus an interest return (non-transfer clause).
Owing to this, the players were treated as real investments: their rights were bought
by hoping in the increase of their value and then sold with a profit.
Furthermore, the players’ economic rights could be used as a credit guarantee in
order to secure financing transactions. In this case, they had to be totally owned by
the clubs (more frequent in Spanish and Portuguese clubs).
5.2 TPO advantages and disadvantages
The possibility to share with third-party investors the risks linked with the acquisition
of a player is one of the upsides of the TPO contracts for the clubs.
22
23. Moreover, TPOs represent an alternative source of funding for the clubs, in particular
for smaller clubs which can purchase better players, thus filling the gap with “first
band” clubs and making the competition stronger and the leagues more interesting.
On the other hand, it’s clear that these transactions could bring strong conflicts of
interests into the football system. TPO could create constraints not only from an
economic point of view but also from a management one.
TPOs alter the contractual stability of the players and the development of young
talents, thus undermining the integrity of competitions and championships. For
example, clubs contracting with the same investor could facilitate the players’ transfer
in order to generate proceeds. Some players could be forced to stay or leave the
team against their will, in order to wait for his value to increase and generate profits.
In other situations investors might force clubs to recruit players they already have a
stake on, thus undermining the decisional and managerial independence of the
clubs.
These conflicts of interest could also rise problems in “football related” areas, strongly
linked with clubs and championships such as the betting industry.
To avoid these risks, to guarantee the fairness of championships and competition
laws and to protect the integrity of the game and the players, in December 2014,
FIFA implemented a ban on TPOs which took effect from May 2015.
“No club shall enter into a contract which enables the counter club/counter clubs, and
vice versa, or any third party to acquire the ability to influence in employment and
transfer-related matters its independence, its policies or the performance of its
teams ”.16
“Agreements covered by paragraph 1 which predate 1 May 2015 may continue to be
in place until their contractual expiration. However, their duration may not be
extended” .17
article 18bis, FIFA regulations the status and transfer of players.16
article 18ter (3), FIFA regulations the status and transfer of players.17
23
24. Following to these decisions, other players ownership contracts have been banned or
restricted in order to avoid conflicts of interest within the European major
championships.
Players co-ownership contracts between clubs (in which each club owned 50% of the
rights of a player, that could terminate in favour of one of the clubs or with the
transfer to a third club) were banned in Italian Serie A in the season 2015/16.
Even the English Premier League created constraints on the possibility for clubs to
lend players among themselves.
5.3 Considerations on TPO
Different absorption of TPOs by football federations
It’s important to underline that each national football federation has absorbed TPO
transactions in different periods. This contributed to the creation of a confused and
fragmented regulation system (until the definitive ban in 2015), which made it difficult
to build a homogeneous and systematic regulation. For example, the English Football
Association banned this practice in 2008, six years earlier than the definitive FIFA
ban.
FIFA rules are to match legislations of various countries all over the world, often very
different from each other in terms of laws and rules (for example laws on fair
competition or principles on freedom for investments and for the movements of
capitals). These differences have caused an additional fragmentation within the
football system and its regulations.
“TPO is enshrined in a separate private law contract between a third-party and a club
or a player. The plurality of TPO situations derives from this contractual basis. The
parties are free under national private law to creatively draft those contracts as they
see fit, each one of them being a specific type of TPO in itself ”18
TPO ban as constraints introduced in order to guarantee a fair market:
FIFA’s TPO ban and its compatibility with EU competition law, Asse Institute sports law blog, April 201518
24
25. From an another point of view for football clubs TPOs ban might represent a “specific
constraint”, other than various financial market rules, which limit the use of their
assets. The same can be said for limitations on loans between clubs or co-ownership
ban mentioned above.
The Spanish and Portuguese National Federations lodged a complaint with the19
European Commission, arguing that the ban does not comply with the EU
competition law.
In the complaint, the FIFA ban was interpreted as a restrictive measure of the
economic freedom of investors and as a restrictive tool for free competition rights.
From a financing point of view, banks and credit institutions also provide loans and
funds used, inter alia, also to buy players. These institutions require collaterals and
guarantees, which might have the same TPOs impact on clubs independence.
If credit institutions are reluctant to finance clubs (smaller clubs in particular) as in the
the last years, they lose the possibility of attracting risk-averse investors and
enhance their investment. In this case TPOs, represented a valid alternative.
FIFA radically decided to ban the practice instead of regulating. This allows funds and
investors to search for other similar methods in order to bypass the rules and gain
profits over the football business.
Strong monitoring and regulations could bring benefits to the system. The prohibition
of TPOs and transfers of minors, the inclusion of caps on the percentage of the
economic rights a club can sold or the imposition of maximum remunerations for
investors they could all be effective provisions to promote the transparency and
enhance a fair and ethical clubs financing through TPOs.
5.4 Third party investments (TPI)
TPIs represent an evolution of the more diffused third party ownership transactions.
With TPIs, an investor can invest money in a club, either to sustain it to buy a player
or to help it pay for players’ salaries or other expenses.
Spain and Portugal challenge Fifa’s ban on third-party ownership. February 10th 2015. theguardian.com
19
25
26. In exchange of this, the investor can negotiate the economic rights for the potential
future transfer of the player with the football club.
The investor return is represented by a fixed percentage of the future transfer fee. If
the player is not transferred, the club pays back the entire amount invested.
In TPI contracts, investors confine themselves to lend funds to the clubs. This is
different from TPOs, in which the investors sign contracts directly with the players,
involving the purchase of their economic rights.
In TPI contracts, the investors are bound to the club only and a player-investor direct
contract is not involved.
Despite these differences, also TPI transactions were banned by FIFA, together with
the TPO ones since May 2015 .20
5.5 Football academies
Football academies investments are one of the tools used in order to bypass third-
party ownership rules.
This is possible due to the regulations, which consider football clubs academies and
young players, who are part of them, as assets unlinked from the main
championship. Due to this, fair competition issues and integrity issues among clubs
in the major competitions are not involved.
Investments in football academies can be compared to venture capital (VC)
investments. VC are financings that investors provide to start-ups and small
companies which are believed to have long-term growth potential.
Young academy’s players are not subject to TPO limitations. Owing to this, pools of
young players can be used as collaterals for investors: young talents grow, some of
them reach professional level and then they can be sold with profits for investors.
Third-party ownership of players’ economic rights, background informations. April 2015. FIFA.com20
26
27. 6. New forms of financing
Recently, football clubs have had the possibility of collecting new financial resources
involving and exploiting their fan base.
Over the last years, many on-line platforms have been created, allowing clubs to use
alternative ways to improve their finances by turning to their fans through crowd-
funding, fan bonds or the exploitation of new on-line tools such as the blockchain.
27
28. These innovative methods can bring interesting changes to the football business,
enhancing a greater involvement of the fan base and sustaining projects socially
useful and functional to the whole local community.
Tifosy.com
Tifosy.com is an equity crowd-funding platform which allows people to invest in sports
clubs.
Through Tifosy.com, football clubs have the possibility of issuing mini-bonds or
launching projects such as the creation of football pitches, football academies or
clubs museums which directly involve fans and the local communities.
Initially, Tifosy.com started with rewards campaign. Through the financing of projects,
fans receive customized prizes such as signed jerseys or match balls and might have
their name signature at the training ground. This business still goes on.
Successively, investing in mini-bonds has become possible for fans through the on-
line website: the investors’ return consists of a fixed interest per annum, usually
divided between cash interest and credit to spend at the club’s events other than
bonuses in case of major league promotion and privileges access to the club’s
services.
“Tifosy.com is a platform allowing fans to invest in meaningful projects for their own
football clubs. It is about football clubs doing something with the fans to make the
club more solid, more sustainable and also generate a financial return for the fans.
Football clubs have got to be sustainable companies and if fans are involved then
you have a duty to be a bit more transparent and think a bit harder about any
decision you take ”.21
The Italian club Frosinone Calcio issued a mini bond in 2017 through the platform
Tifosy.com in order to raise a sum between €1 million and €1.3 million. The mini-bond
Jason Burt, October 11 2017. “Gianluca Vialli: Crowdfunding in football clubs will be the norm in 10 years’21
time”. telegraph.co.uk . Gianluca Vialii is on of the founders of Tifosy platform.
28
29. has a five-year maturity and a fixed return of 8% (5%+3% as mentioned above), with
the possibility of subscribing it with a minimum investment of €500.
The project includes the creation of ancillary works linked with their new stadium
such as a multifunctional football centre, a restaurant, a medical centre and the
restructuring of the training ground.
The Frosinone’s chairman motivated his choice: “we want to connect our fans, the
territory and all our stakeholders to our club. Our fans have to feel this place as their
home and we believe that participating in the financing campaign strengthens this
bond which might become deeper and deeper” .22
Kickoffers.com
This platform allows clubs to issue mini-bonds particularly suitable for fans and small
investors thanks to the possibility of subscribing mini-bonds in small denominations.
The interest return for investors is the innovative instrument, which is linked to the on-
pitch performance of the club’s most representative player and more in general on
the results obtained by the team.
Other than the interest payment, a reward campaign is expected for investors, which
allows club’s services and experiences based on the sum invested to be obtained.
These instruments are clearly closer to “game” or “betting” concepts instead of
traditional finance ones, but they could be interesting, enhancing fans participation
and investments in new infrastructures as above mentioned.
At the moment the Italian club AC Chievo Verona is the only team which is using the
Kickoffer.com platform: they aim at collecting €3 million with a “kick-bonds” issuing.
Starting from April 4th 2018, investors can invest a sum between €500 and €3000 in
order to subscribe Chievo’s “kick-bonds”. The three-year maturity bond is quoted in
the Malta Stock Exchange. The return for investors is linked to the team’s
“Il Frosinone Calcio presenta il crowdfunding: il mini-bond renderà l’8% annuo”, November 20th 2017.22
calcioefinanza.it
29
31. REPORTS
Football money league “Rising stars”. Deloitte, January 2018. 21st edition.
(https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/sports-business-
group/deloitte-uk-sbg-dfml2018.pdf)
FC Juventus annual balance-sheet and financial statement at June 30th 2017,
published on October 3rd 2017 on official website juventus.com
(http://www.juventus.com/it/club/investor-relations/pubblicazioni/bilanci-e-relazioni/
2016-17.php)
The European elite 2018, football clubs’ valuation. KPMG Sports Advisory Practice,
May 2018. footballbenchmark.com
(https://assets.kpmg.com/content/dam/kpmg/it/pdf/2018/05/KPMG-Football-Clubs-
Valuation-The-European-Elite-2018.pdf)
Football & Finance: Exploring the Capital Markets. Antonio A. Boccia. Baldi Finance,
march 2018.
(https://www.baldifinance.it/wp-content/uploads/2018/03/Football-Finance-Exploring-
the-Capital-Markets.pdf)
Third-party ownership of players’ economic rights, background informations. April
2015. FIFA.com
(https://img.fifa.com/image/upload/w1tltvr7omt2mqt1cobd.pdf)
FIFA regulations on the Status and Transfer of Players. fifa.com
(https://resources.fifa.com/image/upload/regulations-on-the-status-and-transfer-of-
players-2018-2925437.pdf?cloudid=c83ynehmkp62h5vgwg9g)
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Sam Kerr, “Changing business could drive Premier League to capital markets”, June
29 2018. globalcapital.com
(https://www.globalcapital.com/article/b13n7p5yll7m40/how-capital-markets-could-
change-the-premier-league)
“Classifica ricavi da stadio 2016-2017”, January 23rd 2018. calcioefinanza.it
(http://www.calcioefinanza.it/2018/01/23/classifica-ricavi-da-stadio-2016-2017/)
“Premier League TV Rights”, February 13th 2018. bbc.com
(https://www.bbc.com/sport/football/43002985)
“Distribuzione premi UEFA Champions League 2017-2018”, August 17th 2017.
calcioefinanza.it
(http://www.calcioefinanza.it/2017/08/17/distribuzione-premi-uefa-champions-
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Anjuli Davies, Steve Slater. “U.S. banks look to rebuild European football from the
ground up”, June 22 2017. reuters.com
(https://www.reuters.com/article/banks-sports-finance/rpt-u-s-banks-look-to-rebuild-
european-football-from-the-ground-up-idUSL8N1JK0MP)
31
32. Data: Tottenham club public announcement on may 31 2017
(https://www.tottenhamhotspur.com/news-archive-1/club-announcement-new-
stadium-scheme-financing/)
Elvira Pollina, “Elliott offers more financial support to AC Milan”, March 21 2018.
reuters.com
(https://www.reuters.com/article/acmilan-elliott/elliott-offers-more-financial-support-to-
ac-milan-source-idUSL3N1R33CQ)
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FC Internazionale Investors Relations. Milano, December 14 2017. inter.it
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Simone Filippetti, November 4 2017. “Lo United deve 60 milioni alla Popolare di
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Investor relations, Roberto Fonzo. Operazioni di mercato Mohamed Salah Ghaly.
Roma, June 22 2017. asroma.com
(http://res.cloudinary.com/dmmf8iwwl/image/upload/v1498162435/SALAH_-
_giugno_2017_xbptdi.pdf)
Investor relations, Roberto Fonzo. Operazioni di mercato Antonio Rudiger. Roma,
July 9 2017. asroma.com
(http://res.cloudinary.com/dmmf8iwwl/image/upload/v1499613662/RUDIGER_-
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(http://www.asser.nl/SportsLaw/Blog/post/blog-symposium-fifa-s-tpo-ban-and-its-
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Spain and Portugal challenge Fifa’s ban on third-party ownership. February 10th
2015. theguardian.com
https://www.theguardian.com/football/2015/feb/10/portugal-spain-fifa-ban-third-party-
ownership
32
33. Jason Burt, October 11 2017. “Gianluca Vialli: Crowdfunding in football clubs will be
the norm in 10 years’ time”. telegraph.co.uk . Gianluca Vialii is on of the founders of
Tifosy platform.
https://www.telegraph.co.uk/football/2017/10/11/gianluca-vialli-crowdfunding-football-
clubs-will-norm-10-years/
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rendimento-8-per-cento/)
33
