How Financially Stable Is Your Football Team?
Welcome to the second issue of S&P Capital IQ’s Credit Football League report. In the last issue*, published in October 2014, we explained how ‘following the team’ has taken on a whole new meaning as the share prices and financial standings of football clubs are increasingly monitored. Whether it’s a bank lending to a club or would-be investors buying a stake in clubs directly, the football industry is fast emerging as an investment sector in its own right.
We analyzed the credit quality** of 44 European football teams and which clubs’ financial stability have improved and which have deteriorated since the beginning of the season. We have included Latin American teams and other European super clubs like Chelsea FC, FC Barcelona, Real Madrid FC and Liverpool FC.
Our assessment revealed the following key findings:
- Our virtual Credit Football League clearly demonstrates how the UEFA Champions League tournament impacts clubs’ revenue, and overall financial stability. This is illustrated by A.S. Roma’s (BIT:ASR) rise (16 places) and the fall of Manchester United (NYSE:MANU) and Valencia (both dropping 12 places).
- All of the super-clubs assessed by our PDFN model, except Chelsea F.C., have a mapped credit score which is in the high yield range, indicating elevated credit risk for football clubs.
- AFC Ajax (ENXTAM:AJAX) and Arsenal F.C. retain their respective first and second rankings in our virtual Credit Football League with balanced financial structures.
- FC Barcelona’s stellar season - winning the treble (La Liga, Champions League and Copa del Rey) for the second time in the history of the club – may move its mapped credit risk score closer to the investment grade range once the club’s 2015 financials have been announced. Currently it is in the high yield category
- Overall, UEFA’s Financial Fair Play (FFP) directive has put a greater emphasis on football clubs’ financials than ever before in history. Making models that examine a club’s corporate-financial structure vital to any financial business decisions.
*The data in the October 2014 report was as of 8 September 2014
**The credit risk was calculated using S&P Capital IQ®’s Credit Health Panel (CHP) and Probability of Default Fundamentals (PDFN). CHP is a relative financials based model that assesses the credit score in a portfolio of counterparties or in this case Football clubs. The PDFN is a quantitative model using financials, country risk and industry risk. This model is used by corporates, banks and insurance companies to assess counterparty credit risk. The model expresses a one year forward looking probability of default percentage. See the full report and ask for trial: here
Data Source: S&P Capital IQ Platform, Credit Analytics Platform, As of June 8th, 2015