CVC Capital Partners’ $2.4 billion deal to boost Spain’s top-flight soccer league LaLiga has entered a new phase, with the Belgium-based private equity firm releasing $882 million (€850 million) in bonds to finance a portion of the investment. Fitch, however, gave these bonds a rating of BB earlier this week.
CVC is financing the project through equity and debt. The firm has partnered with Loarre Investments S.à.r.l to market the bonds. Goldman Sachs is acting as global coordinator and bookrunner for the Loarre’s 7NC3 fixed (€500 million) and 7NC1 floating-rate (€350 million) tranches. According to Bloomberg, the initial offering, released on Wednesday, is lower than the unofficial guidance in an attempt to lure investors into the deal.
In an email to Sportico, Fitch said the BB rating “reflects Loarre’s stable revenue under its silent partnership agreement with LaLiga but is weighed down by loose debt structure features and the high leverage.”
The only asset backing up the bond is the 50-year contract between CVC and LaLiga for 8.2% of the league’s broadcast revenues. CVC could not acquire stakes of LaLiga, an association, but instead, the league formed Boost LaLiga, a separate entity to commercialize its valuable broadcast revenues. Some 97% of LaLiga’s revenues in 2021 were generated through the sale of broadcast and media sales. The league has agreed to sell its domestic broadcast rights to Movistar and DAZN for $5.59 billion (€4.95 billion) over five years.
CVC and LaLiga have encountered various obstacles since the deal was proposed. Three of the major clubs, Real Madrid, Barcelona and Athletic Bilbao, as well as the Royal Spanish Football Federation, have expressed their disapproval of CVC’s investment and have challenged the transaction in the courts. To date, 38 of the 42 clubs in the top two divisions have agreed to the deal.
According to Fitch’s key rating drivers, Loarre’s debt structure is riskier than the NFL’s league-wide funding program, Football Funding LLC. Fitch rated that program A/Stable, due to the NFL’s structural and governance strengths. The NFL’s leverage is also significantly lower (below 2.0x) compared with Loarre at 5.0x, Fitch said.
In January, Italian soccer giants Inter Milan brought a similar structure to the market, issuing $430 million in bonds at 6.75% via a bankruptcy-remote particular purpose vehicle holding intellectual property, media rights and sponsorship revenues, rated B+/Stable. Investing in a team has significantly more operational risk than investing in a league from a bond investor perspective.
LaLiga believes the financing for the project is fully committed. “For us, the most important part is that Boost LaLiga is full steam ahead,” Joris Evers, the chief communication officer of LaLiga, said. “This bond issue is a CVC matter that has no bearing on the actual project of our work with LaLiga clubs to fast-forward our growth.”
CVC declined to comment for this story.