09 July 2001 12:00 [GMT] | Search Again
LEEDS UNITED TO ISSUE GATE RECEIPT BONDS
Institutional investors gave the thumbs up to Leeds United’s plans to raise £50million ($70.4m) by securitising the income from its ticket sales to finance the construction of a new stadium.
“To securitise gate receipts is not an extraordinary or high risk option…It will cost them [Leeds] less than going to shareholders. Raising money from shareholders is value destructive and equity capital is more expensive than debt capital. In any mature business, you always go for debt before equity,” a leading analyst told sportbusiness.com
Leeds Sporting, the English Premiership club’s holding company, made a profit of £1.2m ($1.7m) in the year ending June 30 but the amortisation of player costs is expected to send it £4.7m ($6.6m) into the red. The company’s shares (worth about 10p each) are about a third of their value 15 months ago. Leeds received about £15.5m ($21.8m) in gate receipts last season and the securitisation is expected to involve payments to bondholders of about £5m ($7m) a year.
The news comes just one week after Scottish Premier League champions Celtic offered investors guaranteed dividends as part of its plan to raise £25m ($35.34m) in a convertible share issue.
On Friday, sportbusiness.com reported that an HSBC analyst warned delegates at a conference on sports events and sports rights in Paris that some European soccer clubs are on the verge of bankruptcy because soccer clubs are not attractive to investors. “If wages for soccer players continue to rise in Europe, some clubs may find themselves in financial ruin. Unless there is a cap on wages, a string of bankruptcies will be declared from clubs which would trigger shock waves throughout the whole soccer industry,” she said.
Shares in Leeds Sporting rose 5 percent in early trading.
