The finances of clubs promoted to the Premier League is a topic that seems to come up every summer.
Given the ever-widening gap between the top two divisions of English football, newly promoted teams must find creative ways to bridge this financial chasm between themselves and a league where revenues are growing year on year.
Bournemouth, preparing for their sixth Premier League campaign, are no different.
On Monday morning, the club registered a charge on Companies House detailing a deal with Australian bank Macquarie that will see them borrow money against future Premier League television revenue.
The loan is secured by broadcast revenue which Bournemouth are expected to achieve by August 2024 – essentially for the next two seasons. This means that if Bournemouth are relegated next season they will have to pay Macquarie what they owe from their parachute payments, which will make their immediate survival in the Premier League all the more important.
This is a common practice and not only with the consideration of television rights. Wolves, Sheffield United and Crystal Palace have also borrowed money ahead of their future transfer fee installments so they can have cash to spend in a process called transfer fee factoring.
Leicester City did just that with the £60million sale of Riyad Mahrez ahead of the construction of their new training ground. His transfer, in July 2018, was structured so that Manchester City paid the first £36m in two installments of £18m, in July 2019 and 2020. Leicester used a loan from Macquarie to secure effectively that money earlier, with their new facility in mind.
Although the amount Bournemouth have borrowed from Macquarie is not specified, it will not be two years worth of Premier League television money, which would be more than £ 150 million even if they finish bottom of the ladder. next campaign.
By securing the loan against two seasons of prime TV revenue, Bournemouth is giving Macquarie plenty of security, perhaps with a view to securing a more favorable interest rate. Macquarie typically charges 6-7%.
Who are Macquarie?
Macquarie, known as “Vampire Kangaroo”, is an Australian bank that has come under fire for its ruthless pursuit of profit in recent years. Their nickname is a play on US investment bank Goldman Sachs’ “Vampire Squid” and relates to both companies’ reputations for buying companies, or stakes in them, and lending a lot of money. money – essentially by putting them into debt.
Macquarie once specialized in utility companies and infrastructure projects like Thames Water and the M6 toll road: vital institutions with reliable revenue streams but also with cash flow problems. Yet it now appears that the bank sees football clubs in the same way.
Bournemouth have borrowed from Macquarie before and this new loan is the club’s fourth from the company since August 2019. They have borrowed transfer fee-secured money for the sales of Tyrone Mings, Lys Mousset and Arnaut Danjuma. The first two charges have been paid but that of Danjuma, taken in September last year, is still being paid.
Bournemouth are by no means the only club doing business in this way. West Ham borrowed money from Macquarie last year secured against Sebastien Haller’s transfer payments ahead of his move to Ajax while Watford borrowed £50m from Macquarie secured against Vicarage Road last year. Southampton and Swansea City have also followed suit since 2017.
Why is Bournemouth doing this?
For Bournemouth, it is more about alleviating the cash flow problems they are likely to face in the near future. Their view is that it’s best for them to have the money now so they can access it when needed, and the club is happy to pay a premium (i.e. the interest they must pay to Macquarie) for this immediate access.
In a nutshell, the club has agreed to borrow money it expects to receive from future TV revenue – a cash advance for a small fee. With the resumption of construction of the Canford Magna training complex and a summer transfer window to navigate, it is easy to understand why Bournemouth want the money now. As Kieran Maguire, author of The Price of Football, put it Athleticism in 2019, clubs no longer have to wait two to three years for the money to arrive in their bank account.
“Banks like Macquarie and others saw this as a gap in the market,” Maguire said. “They know you’ve got clubs that want to spend money, quite often on other projects, and they’ll tell clubs, ‘We’re ready to loan you out on the basis that when the installments come in, they’re basically paid. right in front of us. So there is a cash flow advantage for the club basically taking into account these debts.
What does this mean for Bournemouth?
On the one hand, this loan deal reduces the club’s reliance on interest-free loans from owner Maxim Demin – which the club has always said was the only debt it owed. Bournemouth have borrowed over £200m from the Russian and it is understood he never asked to withdraw a penny from the club.
Although it would be ideal for Demin to continue loaning interest-free money to Bournemouth, the emergence of this deal with Macquarie suggests that Demin is no longer willing or unable to continue supporting the club in this way – pushing Bournemouth find another lender.
Is this a good or a bad thing?
The only positive to take away from the deal is that Macquarie are happy to continue loaning money to Bournemouth as the club have shown they are in a healthy enough financial position to repay it.
But it puts a bit more pressure on their chances of surviving in the Premier League beyond this season. While access to the top flight will grant Bournemouth a much larger budget, it is also the only thing that will allow them to build a legacy away from the pitch.
As far as the club is concerned, this agreement with Macquarie is the best way to achieve this.
(Photo: Kieran Cleeves/PA Images via Getty Images)