Leading (and subsequently winning) Italian football’s Serie A league, as it has done since 2011, Torino club Juventus surprised financial market observers in February when it netted €175m with the careful placement of a five-year euro bond slotted into the Dublin Euronext market. Pricing at issue of the rare football bond was keen with an annual coupon of 3.375 per cent, suggesting a shadow credit rating of Juventus’ bond versus officially rated new issue comparator bonds, in the solid BBB lower medium investment grade area.
The implied yield on Juventus’ bond, and issue spread over reference swaps and government bonds, was also economically low compared to football market comparators, namely Inter Milan’s five-year 4.875 per cent bond due 2022 listed on the Luxembourg Stock Exchange (although that could be partly explained by the larger Eur 300m principal amount of Inter’s bond) and Manchester United’s previous £250m 8.75 per cent notes issued in 2010 and called in 2013, and $425m 8.375 per cent notes also issued in 2010 and called in 2015.
The Juventus bond prospectus revealed a very broad range of business risks, particularly future match results related, as is common to the top football clubs, although recent history could support the idea that Juventus seems to have less overall risk of not winning its domestic league and not getting into the Champions League than many other world leading football teams. The influence of the Financial Fair Play Regulations (PDF) should also make investing in football clubs less risky than it once was. Top marquee player Ronaldo joined Juventus in 2018 reportedly for around €112m but has recently been valued at €127m and brings extra branding and social influence value and cashflows to the club. Although there are always 'key-man risks' that have to be managed for top football teams, the average remaining contract length of first-team players at Juventus is almost four years (and Ronaldo is reportedly 1,000 per cent certain to stay next season) providing some average medium term stability. Juventus also claims in its prospectus a huge 31 per cent share of the Italian fan base and 45 million European supporters, 340 million worldwide supporters, and a 508 million global TV audience, ranking fourth behind Real Madrid, Manchester United and FC Barcelona.
Against this, Juventus has recently fallen out of the top 10 to 11th place with revenues of around €395m for the 2017/2018 season in Deloitte’s Football Money League Top 20, and reported a modest loss of around €19m for financial year 2017/2018. So the need to replenish funds for new player purchases and maintain and enhance its Serie A and Champions League prospects (in future years after this year's subsequent untimely recent exit ) and hopefully move back up the Deloitte table, combined with the availability of relatively low cost bond funding, probably made this seem like an opportune moment for Juventus to tap the football bond markets.
The same logic could equally well apply to other top Champions League football clubs, suggesting that the Juventus bond having successfully tested the market, may soon be followed by others from competitor clubs.
(Rupert Macey-Dare is a commercial barrister and PhD-economist. Rupert gratefully acknowledges helpful comments from: Chris Mort, David Brooks, Renato Paternollo, Emilio Salice, Tom Dye, Tom Scott and Alison Grady. These are discussion points of the author and do not constitute legal or economic advice or endorsement of any form.)