Spurred On: Tottenham Hotspur refinance stadium debt

October 2, 2019

2 min read

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What's going on here?

Tottenham Hotspur (Spurs) have refinanced loans used to build their new £1.2b stadium. They borrowed the money from Goldman Sachs, Bank of America and HSBC to help construct the stadium and were expected to pay it all back by early 2022. Instead, roughly £525m has been converted into bonds with maturities between 15-30 years.

What does this mean?

A bond is essentially an IOU whereby the club will be paying back their creditors in small sums at various intervals (interest) until the maturity date (where a final payment is made), or solely a lump sum when the bond matures. As the maturity dates have been set far in the future, these bonds have given Tottenham Hotspur a large amount of time to be able to pay the money back.

The club’s chairman, Daniel Levy, said this move was to limit the club’s debt-servicing costs and to continue to compete with Europe’s best teams. It follows that, the less money Spurs has to spend paying back the stadium’s loan, the more they will be able to invest into better players for the club and marketing, amongst other things.

Levy also stated he wished to make the stadium the “Madison Square Garden in London” and hold a variety of events. The new stadium has already agreed to host two NFL matches a year for the next decade as well as a Saracens rugby union game in each of the next five seasons.

By hosting a variety of sporting events throughout the year, Tottenham shouldn’t have too much trouble paying back their loan.

What's the big picture effect?

Usually, bonds are seen as a method of debt security used primarily by governments. Its use within the sporting world is fairly new and may start to become a viable method of refinancing loans for other similar companies. Juventus gained €175m with a 5-year bond it placed into the Dublin Euronext market. The use of bonds in general may therefore see an increase following the news from these two clubs.

There is also something to be said about the lenders and their willingness to extend the deadline for the repayment of the loan from 2022 to potentially 2034. It could be argued that it was a decision in order to have a more secure and definite way to get repayment if the 2022 deadline was not able to be fulfilled, or to ensure that there was the potential to gain more money back over the longer term.

Given how much freedom the restructuring of loan repayments has given Spurs, it seems likely that this strategy will become more widely available to other companies as private lenders start to make increased use of bonds.

Report written by Harina Chandhok

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