Signs of the Times: Why English Clubs Are Going on High-Interest US Loans | Football

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The sale of Burnley to US investors at the turn of the year after 139 years of local ownership in Lancashire marked a sign of the times for football when Turf Moor, one of the 12 original football league sites, was mortgaged to US private investment firm MSD Capital.

Three other clubs – Southampton, Derby and Sunderland – had several million pounds in loans from MSD or MSD’s senior partners, and their stadiums, which were a little newer than Turf Moor, were also mortgaged. Of these four clubs, only Southampton has publicly stated the cost of MSD’s borrowing, paying 9.14% interest on a £ 78.8 million loan taken out during the pandemic last June: £ 7.2 million Interest per year.

MSD describes itself as a private investment firm, primarily based in the Olympic Tower on 645 Fifth Avenue in New York, that manages the assets of tech billionaire Michael Dell, founder of Dell Technologies, and his family. The company’s mission statement is: “The purpose of MSD Capital is to make investments that deliver superior absolute risk-adjusted returns over the long term.”

The football secured loans, which MSD’s partners made to Sunderland for the first time in 2019, got the nerves in the game, as ordinary banks, whose interest rates don’t fluctuate well above zero, can now be cautious about lending to clubs. When the pandemic froze the game and its revenues, it became difficult for everyone but the biggest clubs to borrow to cover the resulting shortfalls. A source familiar with MSD told the Guardian that the company began extending loans – funded by other investors as well as Dell – at a time when other funding providers were pulling out of football. Inevitably, there is a cost to borrowing, and high-profile footballers fear that more clubs will borrow more high-yield loans as the financial impact of the pandemic continues to twitch.

Sunderland’s $ 12 million loan was raised in November 2019 by owner Stewart Donald, who at the time was actively trying to sell the club. The loan was made by FPP Sunderland LLC, a Delaware corporation, the preferred state for US corporations; it had a charge over the stadium of lights and the club’s other assets. FPP’s directors are Glenn Furhman, John Phelan and Robert Platek, each chairman, chief investment officer and partner of MSD Capital. The source familiar with MSD said the partners had granted the Sunderland loan themselves and that it was not a loan from MSD itself. When 23-year-old Kyril Louis-Dreyfus finally completed his club takeover last week, the loan was paid off.

The loan to Burnley, which is to buy up about 60 million ”. This loan, as well as the loan to Derby and Southampton, were made by MSD UK Holdings Limited, registered in the UK and owned by MSD through a Cayman Islands tax haven company.

Derby and Sunderland did not answer the Guardian’s questions about their loans in detail, but since they have modern stadiums and infrastructure, the loans appear to have been taken out to cover running costs, which for all clubs is mostly player salaries . Southampton has made it clear that they have borrowed in anticipation of further losses due to the pandemic.

Derby’s first £ 30 million loan was taken out on August 6th and secured at Pride Park; then the club took out another loan in October, which was secured on the training grounds of the Moor Farm. Derby owner Mel Morris, who bought Pride Park from the club for £ 81 million in June 2018, has agreed to sell Derby to a company, Derventio Holdings, which is Sheikh Khaled Bin Zayed Bin Saquer Al Nahyan from the ruling family of Abu Dhabi heard. Reportedly passed by the EFL in November, the acquisition is still ongoing. Derby did not publish its accounts for 2018-19 due last June and paid players late in December.

Wayne Rooney speaks to his derby players at Moor Farm’s training ground, where a loan was secured last October. Photo: Andy Clarke / Shutterstock

Derby boss Stephen Pearce said last month he was confident the takeover would close; A derby spokesman told the Guardian that Morris is still funding the club and that the MSD loan was taken out by the company that owns the stadium, not the club itself.

Southampton’s £ 78.8 million loan was taken out on June 29, and the Cayman Islands MSD company has a mortgage on the St. Chinese utility and property developer Gao Jisheng bought the club from Catherine in 2017 for a reported £ 210 million Liebherr, who said at the time that Gao and his daughter Nelly “share our values ​​and ambitions”. However, it was widely reported that Gao put the club up for sale last March; borrowing from MSD followed three months later.

Saints’ accounts for the year ended June 30, 2020, which covered three and a half months after the Covid-19 shutdown, saw a $ 23 million decline in sales, with salaries, mostly for gamers, roughly the same as the previous season before Covid : 114 million pounds. The club said the £ 78.8 million loan from MSD just prior to the 30th reporting date. Gao is still in negotiations with potential buyers to sell the club.

Ashley Brown, head of governance at the Football Supporters’ Association, said the MSD loans secured on club property signal general concerns about the game’s financial health.

“Covid-19 has put financial pressures on football clubs but the unsustainability problem at certain clubs has built up over several years and will remain until action is taken,” he said. “Reform is needed to protect our clubs, our heritage and our football assets.”

MSD declined to comment on or approve the rates charged by Burnley, Derby and Sunderland, but the source familiar with the company insisted that it supports the clubs during troubled times.

However, when Pride Park, St. Mary’s and the Stadium of Light were built in the Premier League era as milestones for a better future for football, it was never really thought that the Cayman Islands tax haven would bring them to a U.S. Lenders being mortgaged would help pay the bills.

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