Abstract
Securitisation is a financing technique that rests upon a complex legal foundation. Its purpose is to allow companies to raise low-cost finance from the capital markets. This technique has been used successfully in a range of businesses over many years, but it was only adopted by football clubs in much more recent times. Between late 1999 and 2003 there were a number of football securitisations and these raised many millions of pounds for the clubs. The technique appeared to be successful and as a result of this more clubs expressed an interest in securitisation. However, instead of seeing a continuing growth of securitisations in the football sector, the process came to sudden halt in late 2003. A series of insolvencies among football clubs revealed certain weaknesses in the legal and financial structures of football securitisations. These weaknesses resulted in financial losses for some investors and it had the effect of discouraging others from risking their money in future securitisations. This led to speculation that there was little or no future for securitisation in the football sector. However, it is possible that the recent improvement in football finances and the current benign climate for bond investors may encourage a revival of the technique, particularly if the lessons of past mistakes can be absorbed. Arsenal instigated the largest football securitisation to date, in July 2006, to raise £260 million and there has been press speculation that other clubs may follow Arsenal’s lead. Under these circumstances it may be useful to make an interim assessment of the use of securitisation in football. The paper shall examine why securitisations were popular with clubs and why they came to a sudden halt in 2003. It shall then seek to discover what lessons can be learned from football’s initial, but traumatic, experience with this financing technique. Finally, the paper shall consider whether there is a realistic possibility that more football clubs might be able to reassure investors that it will be safe to participate in football securitisations in the future.
Highlights
Everton, Manchester City, Ipswich Town and Norwich City were able to raise funds through securitisation by means of private placements with a limited number of large investors, and this could be regardless of their private company status
John Deacon gives one of the clearest definitions of securitisation as a concept (Deacon, 2004). He defines securitisation as: (T)he process of converting cash flows from underlying assets or debts due to the originator into a smooth repayment stream, enabling the originator to raise asset-backed finance through a loan or an issue of debt securities—generically known as assetbacked securities or ABS—which is limited recourse in nature to the credit of the receivables rather than that of the originator as a whole, and with the finance being self-liquidating in nature (Deacon, 2004, p. 1)
The basic arrangements that are normally required to create a successful securitisation involve the 7 originator selling the receivables to a bankruptcy remote special purpose vehicle (SPV), which in turn pays for these rights by issuing bonds or commercial paper on the capital markets
Summary
John Deacon gives one of the clearest definitions of securitisation as a concept (Deacon, 2004). In the standard asset-backed securitisation structure used by most businesses, the originator will seek to 8 ensure that the special purpose vehicle is insolvency remote from the originator by incorporating the SPV as a separate company and avoiding or minimising the organisational links between the two entities. This strategy normally works efficiently because in the UK, the principle of the separate personality of a. In the case of football, the securitisation model that has been employed differs somewhat from the standard asset-backed securitisation described above The reason for this stems largely from the type of cash flow selected by the clubs to pay off the debt.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
