Focus on Italy

Elio Andrea Palmitessa – www.taxingartsports.com

The Covid-19 pandemic put on hold  Serie A, Italy’s top football (soccer) league, from March to June, and the season returned under strict conditions with matches taking place behind closed doors. The impact of the outbreak could be tremendous for football clubs and returning to competition will not prevent Italian clubs from soon being gripped by a financial crisis, brought on by the following:

• a drop in commercial revenues caused by the requirement to play without spectators
• a renegotiation of sponsorship and rights  agreements due to the loss of advertising and subscribers’ income suffered by pay-tv companies
• a decrease of squad value with potential negative impacts on UEFA Financial Fair-Play compliance
• the lack of an official agreement on wage reductions between the Serie A and the Professional Footballers’ Association for the period when Serie A was suspended

In simple terms, the world of football in Italy is under threat. In order to facilitate a faster recovery, Serie A has opened discussions with private equity groups over Serie A media-rights investments, while some of these firms are also considering offering direct loans to clubs to help them to meet their short-term needs.

The Italian government tried to tackle the liquidity shortage through a number of actions. It introduced a credit facility guaranteed by an intergovernmental body aimed at covering up to 90% of the principal amount of the financing; it provided for the exemption from certain tax payments; and it also excluded specific corporate losses from a capital maintenance rule and encouraged shareholders to provide rescue funding to clubs. 

Italian football clubs could also raise capital and increase liquidity through alternative instruments:

An initial public offering: This way stocks can be offered to the general public and be acquired by institutional or retail investors (though bearing in mind that investing in football involves risks to capital and returns are not guaranteed). Clubs such as Juventus, Roma and Lazio are examples of listed clubs already operating in Serie A.

Issuing corporate bonds: Also named “soccer bonds”, the recent winner of the (ninth consecutive) Serie A title, Juventus, have previously raised EUR 175m in debts markets, while Inter Milan sold a five-year secure bond for EUR 300m in 2017. 

Fan investment: Such investments involve a substantial number of retail investors who are representative of the clubs’ fan base. Those investors, unlike institutional investors, may be inclined to invest in mini-bonds or subscribe to crowdfunding campaigns since the financial aim is to maintain the clubs’ sustainability, which in turn makes the fans more willing to support their favourite team. To date, only Serie B clubs have considered raising money through this investment opportunity. Pescara Calcio and Frosinone issued mini-bonds to finance the development of the clubs’ training centres, paying 5% gross interest annually in cash plus 3% gross in club credit to be spent on season matchday tickets or club merchandise. Pordenone Calcio launched an equity crowdfunding campaign involving 270 investors and 40% of the capital equity.