The largest ticket receivable securitization to be undertaken by a F.A. Premier League football club was concluded in a deal lead-managed by Lazards in September 2001. The GBP60 million bond issue by Leeds United Football Club, is the fifth ticket receivables securitization to be undertaken by an U.K. football club.
Other football clubs, which have tapped the securitization market, include Ipswich Town, Southampton, Newcastle United and Leicester City. There have been similar type deals done in Italy, which have been mainly privately-placed and these deals are also popular in the U.S., however they tend to be larger transactions because, aside from ticket receivables, they are also securitizing naming rights and media flows.
In August 2001, Ipswich Town closed a GBP25million bond issue, also arranged by Lazards. The proceeds were used to refinance the building of the club's South stand, which is shortly to be completed, and to finance the building of the North stand on which work has just commenced. While Southampton Football Club has also done a GBP25million securitization of ticket receivables, and the proceeds of the issue were used to build the club's new St. Mary's stadium, which hosted its first Premier League game on Aug. 25 against Chelsea.
Bernard Nelson, partner at Latham & Watkins, who worked on the Leeds, Southampton and Ipswich deals, explained that the use of securitization certainly marked a change in funding strategy for the football clubs. Further Nelson commented that a lot of the credit for the transaction should go to Stephen Schechter, who had the developed the structure and had been effective in promoting the financing to football clubs, as well as selling the deals.
In fact, Stephen Schechter has worked on all five football deals, starting with the first securitization of revenues from an U.K. sporting arena for Newcastle United in September 1999, while he was at Schroders. The GBP55m issue was used to finance the expansion of its football ground at St. James's Park.
This latest transaction enabled Leeds United to issue bonds in two tranches secured against future gate receipts over the 25-year life of the bonds. The receipts include both season tickets and the daily in-takings at the game.
The proceeds are being used to refinance the improvements and expansion of Elland Road, (the football club's stadium), that has taken place over the last few years as well as to refinance other short-term indebtedness. The bond was priced at 7.695%.
Leeds United is also planning to build a new GBP60 million stadium in the near future, which would seat 50,000. They plan to fund the new stadium by selling naming rights and the sale of Elland Road. This will be a departure from the football deals seen in the U.K. until now, which have been only ticket receivable transactions.
Nelson, partner at Latham & Watkins, whose firm has been involved in similar deals in the U.S. commented that: "Clubs that wanted to raise a substantial sum of money, in the hundred of millions, would have to look at other sources of income other than ticket receivables, such as naming and media rights." Graham Stark, vice president in the corporate finance division of Lazards said that the other potential asset class that football clubs could securitize in the future would be television revenue rights, which provided an important source in terms of income.
