DBRS Publishes Commentary on Football Clubs in Europe

DBRS Ratings Limited (DBRS) published a commentary on European football clubs.

Football clubs’ business model evolved from a pure matchday revenue generator model strongly correlated with on-pitch performance into a more diversified model. The value of sports franchises and football clubs has increased significantly as teams have monetised their brands.

DBRS believes that in future clubs will raise more capital in many forms (public equity and debt issuances) as a consequence of football’s growing economic importance and clubs’ more sophisticated business models. DBRS views the popularity of the league and the strength of a team’s brand as fundamental in assessing credit risk, as it drives strong, contractual revenue streams during periods of on-field underperformance.

DBRS considers revenue stability and diversification to be key aspects in the assessment of football clubs’ creditworthiness. Sports franchises typically spend a high relative proportion of revenues on player costs in the form of salaries. DBRS views positively a sports team’s historical discipline in managing such costs, as well as any other mechanisms in place to contain growth in player costs.

DBRS views positively the mechanisms many leagues have in place to ensure team profitability and the capacity of national leagues to successfully negotiate lucrative broadcasting contracts on behalf of the teams. Clubs competing in the most competitive and famous leagues are able to show a long history of very high stadium attendance.

DBRS considers the predictability and diversification of owned revenue sources to be important in assessing a stadium’s credit risk.

Notes:
The Commentary is available at www.dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com