What’s the Score? S&P Capital IQ’s Credit Football League

Spurred on by the 2014 FIFA World Cup, football is fast emerging as an investment sector in its own right, with Europe’s biggest clubs ranking alongside household-name media and entertainment corporations.

From foreign billionaire owners, bank lenders, and large corporate investors to day-trading stock pickers, ‘following the team’ has taken on a whole new meaning as the share prices and financial standings of clubs are monitored. These would-be investors in football – known, of course, as soccer in the United States – are simultaneously drawn to the potential opportunities offered by the sport and concerned by the potential risks.

This new trend, whereby football teams are expanding their sources of finance, brings major credit risks and forms an essential pillar for any investment decision which needs to be understood holistically.

However, as the UEFA Champion’s League, one of football’s most lucrative drivers of profit, gets underway, investors can take heart from the existence of a link between a club’s revenue and match performance on the one hand, and the equity market’s perception of its credit risk on the other.

Success on the field, in other words, apparently has bred success off it.

We decided to look at the financials of professional football clubs globally, and quickly whittled the list down to 44 private and public European football clubs, as there lies the lion’s share of financial data and investment interest.

In this report, we analyze these clubs through three sophisticated quantitative credit methodologies, providing investors with a set of essential signals to monitor improving or declining credit strength, and enabling us to establish a virtual Credit Football League.

Beginning with a look at 17 publicly-listed clubs and the equity market’s perception of their credit risk through stock price movements, the analysis proceeds to include a relative financial assessment of these clubs alongside an additional 27 private teams. We treated these clubs, for all intents and purposes, as corporations and assessed the risk elements in their financial structures.

This inaugural credit assessment of European football clubs reveals:

  • As more professional football clubs are listed on financial stock exchanges than ever before, we have identified a link between the match performance of the publicly-listed clubs and equity market’s perception of credit risk via stock price movements
  • The escalation of foreign ownership has increased the global appeal of football and the commercial opportunities it presents
  • Quantitative analysis of how the ability of these public clubs to achieve consistent match performance relates to stronger financial credit quality
  • A Northern and Southern European club divide among the 44 public and private clubs, whereby the Northern clubs have stronger financials and lower credit risk than the Southern clubs

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