City Football Group pulls off huge debt deal

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Premier League club Manchester City F.C. (UK) parent company – the City Football Group – has raised $650 million (€550 million) in one of football’s biggest ever debt deals as it seeks to step up investment in its international network of football clubs.

‘The Irish Times’ stated that City Football Group (CFG), the Abu Dhabi-controlled holding company that owns the English Premier League champions alongside clubs in the US, Australia and India, recently raised the loan, which will come due in July 2028, according to multiple people familiar with the transaction.

The City Football Group Limited is a British-based holding company that administers association football clubs. The group is owned by three organizations, of which 78 percent is majority-owned by the Abu Dhabi United Group, 10 percent by the American firm Silver Lake and 12 percent by the Chinese firms – China Media Capital and CITIC Capital.

The Manchester City Football Club is an English football club based in Manchester (UK) that competes in the Premier League, the top flight of English football. Founded in 1880 as St. Mark’s, it became Ardwick Association Football Club in 1887 and Manchester City in 1894.

‘The Irish Times’ further stated that the debt deal beats the €525 million debt refinancing arrangement between the investment banking company Goldman Sachs and Spain’s LaLiga club FC Barcelona agreed in June. It is roughly the level of England’s Premier League team Tottenham Hotspur F.C. which borrowed £637 million in 2019 from several banks to build its new stadium – the 62,850-capacity Tottenham Hotspur Stadium.

The City Football Group intends to use the money to fund infrastructure projects such as a new stadium for its Major League Soccer franchise New York City FC, which has been mooted for years but still requires the nod from local authorities.

But the Group has shown an appetite for rapid growth, having either taken full ownership or bought minority shares in 10 clubs worldwide over the past decade.

The seven-year loan was underwritten by Barclays, with HSBC and KKR Capital Markets helping arrange and distribute the debt, according to people familiar with the deal.

Separately, the City Football Group has also organized a revolving credit facility worth £100 million with the same finance providers, though a person close to the Group said it had no immediate intention to draw down on the facility.

The City Football Group declined to comment. People close to the deal said its executives had opted for raising debt, believing it to be a cheaper route to cash than selling more equity.

The City Football Group sold a 10 percent stake to US-based private equity firm Silver Lake Partners for $500m two years ago, which valued the group at $4.8billion – then a record valuation for a sports group. A further 12 percent is owned by the China Media Capital, a venture capital group.

The majority owner is Sheikh Mansour bin Zayed al-Nahyan, a billionaire member of the Abu Dhabi ruling family, who bought Manchester City in 2008.

He has spent an estimated £1 billion on transforming the club into one of the most successful sides in English football.

Critics have suggested such spending has skewed competition in England and Europe, while human rights activists say it is part of a “sportswashing” project designed to clean up the global image of the United Arab Emirates who have been charged with severe human rights violations issues particularly pertaining to women. Sheikh Mansour’s brother is Sheikh Khalifa bin Zayed al-Nahyan, the Gulf nation’s de facto ruler.
 

COVID pinch

The new debt deal ties the group closely to western financial institutions. A year after Silver Lake’s investment in the City Football Group, it secured $2 billion from Mubadala, Abu Dhabi’s sovereign wealth fund which is run by Khaldoon al-Mubarak, who is also Manchester City Chairman.

The money will help prop up the loss-making group whose finances have been hit hard during COVID-19 whose Delta variant is now baring its fangs on the world.

The City Football Group’s annual revenue dropped to £544 million in the financial year ended June 2020, down almost 14 percent year on year because of nil gate-related earnings and broadcast revenue. The group’s annual net loss widened to £205 million from £84 million a season earlier.

Manchester City’s revenue fell to £478 million in the 2019-2020 seasons, down from £535 million the year before. The club swung to a net loss of £126 million from a net profit of £10 million. It had previously been the only profit-making club within the City Football Group’s global network.

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