Tottenham Hotspur is set to gain much-needed financial breathing room after reportedly reaching a deal to refinance hundreds millions of pounds of bank debt, which the club took on to help build Spurs’ state-of-the-art new stadium.
According to a report in The Athletic, Bank of America - one of several banks that had provided Spurs with loans up to £637million for development work and construction of their new home - has agreed to work with the club to refinance as much as £400million of bank debt.
The club is currently on the hook to pay back this money that it owes to banks in April 2022; but by refinancing its debt, it will be able to kick repayments further into the future.
The Athletic says Spurs are raising the money via a bond issue in the US markets, with Bank of America helping lead the placement.
Simply put, bonds are another way for corporations to raise money, outside of going to banks or drawing from their own cash flow.
Bonds are a form of private placement, as opposed to a share offering to the general public, typically offered to a select group of - usually very wealthy - investors.
Typically the bond issuer - Spurs in this case - offers to pay back the money it receives from the bond holder - the individual or corporation loaning the money to Spurs - on a specific date, while also making periodic interest payments: once or twice a year, in most cases.
The maturity date of these bonds - the date Spurs must pay back the investor who has given Spurs the money - is said by The Athletic to range from 15 to 30 years.
The money raised by the bond issue will be used to partly pay off the bank loans, which have a much earlier maturity date.
Another advantage of the bond over bank loan is that interest payments on them are typically lower than those stemming from bank debt.
Spurs’ success in tapping the bond market shows the club’s growing clout in recent years, the club now being a Champions League regular and appearing in its first final back in June.
The news chimes with an update Spurs provided over its financial liabilities in October last year, when the club announced, “Working with our banking partners and our financial advisor, Rothschild & Co, we shall be converting [our] development facility [i.e the loans to develop the stadium], which currently expires in April 2022, into notes with a mixture of debt maturities.”
At 30 June, 2018, the club had net debt of £366million stemming from its new stadium.
The practice of issuing bonds to raise money is seemingly on the rise in football.
Earlier this year, Juventus revealed it had gone to the international bond market in order to raise around €175million, which it would pay back in five years, to help manage its debts and continue investment in its squad.
Serie A rivals Inter Milan have also gone down this road in recent years.
