Europe's Top Soccer Teams Turn to U.S. Bond Market for Fundingby
XXIII Capital is the first to bundle and sell club loans
Latest entry in growing market for esoteric securities
European soccer teams are turning to the U.S. bond market for funding that could help them buy and trade more players.
London-based XXIII Capital sold last week $73 million of bonds backed by media-rights payments and player-transfer fees from clubs in Europe’s largest soccer leagues, including U.K.’s Premier League, Germany’s Bundesliga, Spain’s La Liga, France’s Ligue 1 and Italy’s Serie A, according to Kroll Bond Rating Agency. The bonds pay investors through cash streams, mostly insured, from agreements made across the leagues.
The deal may help clubs hire more sales staff, open new offices or finance new stadiums and facilities, in addition to obtaining players, said Kroll, which rated most of the bonds A.
Stephen Duval, co-managing partner of XXIII, didn’t immediately respond to a message seeking comment. The company specializes in “capital solutions for the sports, music and entertainment industry,” according to its website. Guggenheim Partners LLC., which structured the transaction, didn’t immediately provide a comment.
Soccer teams across Europe have been struggling to raise funds since the 2008 banking crisis, when top-tier financial institutions largely pulled out of providing loans to clubs. Since then, they’ve turned to boutique investment funds that typically provide loans in return for higher premiums than banks and ask for teams’ television income, receivable transfer fees or future season-ticket income as collateral.
The soccer bonds -- the first of their kind, according to Kroll -- are the most recent “esoteric” securities being sold in U.S. securitization markets. Esoteric deals proved popular with investors in recent years, thanks to higher yields on the securities, some of which can carry bigger default risks. The senior notes yielded a coupon of 3.7 percent, according to data maintained by Bloomberg.
Unusual securitizations lean for collateral on such assets as shipping containers, music royalties and restaurant franchises. Sales of these securities rose 16 percent to about $40 billion through November from a year earlier, Barclays Plc analysts said in a year-ahead outlook, forecasting at least $45 billion in creative securitizations in 2016.
The new bonds come at a time when another source of funding to clubs has been closed. Soccer governing body FIFA last year banned so-called third-party ownership of players’ trading rights, which allowed clubs to raise financing in exchange for giving away percentages of their future transfer fees.
The value of the bond sale is worth a fraction of soccer’s global $5 billion annual player trading market, and less than the 80 million pounds (then worth $133 million) that Real Madrid paid to Manchester United for Cristiano Ronaldo in 2009.