S&P Capital IQ Launches Credit Assessment of European Public and Private Football Clubs
Report evaluates financial assessment of clubs' creditworthiness
New York and London - 9 October 2014 – Recognising the extent to which football has come of age as an investment proposition, S&P Capital IQ™, a leader in multi-asset class research, data and analytics, today launched a credit assessment of major European football clubs. Prompted by a belief that investors in both publicly-listed and private clubs need to be aware of the risks and potential opportunities inherent in a club's financial structure, S&P Capital IQ has produced a rigorous analysis of the credit standing of major clubs across Europe, including powerhouses such as Manchester United (NYSE:MANU), Arsenal (ISDX:AFC), Ajax (ENXTAM:AJAX), Valencia, Juventus (BIT:JUVE) and Bayern Munich. A copy of the report, What’s the Score? S&P Capital IQ’s Credit Football League (“Credit Football League”), can be found here.
S&P Capital IQ’s report analyses a selection of clubs through three sophisticated quantitative credit methodologies, enabling it to establish a virtual Credit Football League of 44 public and private European football clubs. Beginning with a look at 17 publicly-listed clubs and the equity market’s perception of their risk through stock price movements, the analysis proceeds to include a relative financial assessment of these clubs alongside an additional 27 private teams.
S&P Capital IQ’s research reveals:
- A link between the match performance of the publicly-listed clubs and the equity market’s perception of credit risk via stock price movements
- 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 divide among the 44 public and private clubs, whereby the Northern clubs have stronger financials and lower credit risk than the Southern clubs
“Especially since the 2014 FIFA World Cup, ‘following the team’ has taken on a whole new meaning as foreign billionaire owners, bank lenders, large corporate investors, and even day-trading stock pickers are monitoring the share price and financial standing of clubs,” comments Pavle Sabic, Director, Credit Market Development at S&P Capital IQ. “Our three credit indicators provide investors with a set of essential signals to monitor improving or declining credit strength in football clubs.”
The first of the methodologies used was a proprietary model, Market Signal Probability of Default (PD). Looking at 17 publicly-listed clubs, S&P Capital IQ has found that a club’s match performance relates to the equity market’s view of its creditworthiness. For example, during the 2014 pre-season period, the uncertainty surrounding who would be Manchester United’s manager led to a raised PD of 1.12%. Following the appointment of Louis Van Gaal as manager just before the start of the season, apparently renewed confidence in the team led to a lower PD of 0.05%, as of 16 August 2014. However, with the team’s hugely disappointing start to the season, winning only one game, Manchester United’s PD has risen to 0.18%, as of 19 September 2014. The higher the PD, the greater the risk of the club’s default on its financial obligations.
When assessing the publicly-listed clubs’ financials through a second proprietary model, CreditModel® (CM), S&P Capital IQ found that no clubs have a CM score in the 'investment grade' section (above bb+*). Indeed, at bb+, Arsenal has the highest CM score in Europe. S&P Capital IQ believes this could be a result of their consistent match performance, increased revenue from the Emirates Stadium, and could indicate that Arsenal controls its finances in a more conservative way than the other large football clubs - something perhaps mirrored by its manager Arsene Wenger’s historically and comparatively frugal transfer policy.
Borussia Dortmund (XTRA:BVB) also boasts high match attendance at its stadiums and consistent match success. This leads to high revenues and places the club among those with the highest credit scores. In comparison, Juventus, whose low credit model score of ccc in 2011 was a direct result of the infamous Italian match-fixing scandal and the club’s relegation to Serie B, has seen recent title successes and its credit model score recover to b+, one of the highest in Europe.
However, in order to complete a true Credit Football League, private clubs must also be assessed. S&P Capital IQ used a third proprietary tool, Credit Health Panel®, to show a relative-financial ranking, in terms of Operational, Solvency and Liquidity metrics, of the 17 publicly-listed and an additional 27 private clubs – 44 clubs in total. The results show that, while match success is clearly important, it is by no means the only factor which should be considered. St Etienne, a regional privately-owned French club with little history of major match success, scores in the top quartile of S&P Capital IQ’s Credit Football League, while the 2010 Champions League and Serie A winner, Inter Milan, appears at the bottom of the list. In these cases, the financial structure and ownership models have superseded match performance in the club's scores.
The data, credit risk metrics and tools used to complete this analysis are available via Credit Analytics suite on the S&P Capital IQ platform. The proprietary models and their outputs are independent from Standard & Poor’s Ratings Services.
* Lower-case nomenclature is used to differentiate S&P Capital IQ CreditModel scores from the credit ratings issued by Standard & Poor’s Rating Services.
ABOUT S&P CAPITAL IQ
S&P Capital IQ, a business unit of McGraw Hill Financial (NYSE:MHFI), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. S&P Capital IQ provides a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Capital IQ Valuations; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need. For more information visit: www.spcapitaliq.com.
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