Buying the debt of a sports team is notoriously risky, even for institutional investors, as several English and Italian football club securitizations have demonstrated.
In the early 2000s, deals for Italian club Fiorentina and English clubs Ipswich Town, Leicester City and Leeds United all ran into difficulties.
The first UK retail offerings by sports clubs, from the Jockey Club and Lancashire Country Cricket Club, have meanwhile favoured the lightly regulated ‘mini-bond’ format.
But these so-called bonds are more like individual unsecured term loans; they are non-transferable, and can only be redeemed when the bond matures.
What’s more, investors in ‘mini-bonds’ are often not even paid the interest in cash. Jockey Club bondholders, for example, are paid partly in Rewards4Racing points, which can only be used to make purchases on the websites of the Jockey Club Racecourse or York Racecourse.
In contrast, Wasps has put much more emphasis on financial credibility with its bond, which will be fully tradable and listed on the London Stock Exchange’s Order book for Retail Bonds (ORB), and is secured on the Ricoh Arena in Coventry, which it bought last year.
This is not to say that there’s no risk involved — on the contrary, market participants have noted Wasps’ history of making losses, which has so far continued even after the purchase of its new home.
A debt of £25m-£35m, which the size range Wasps is targeting with the bond, is large for a loss-making company embarking on a turnaround.
But because the bond is being issued with a full prospectus which meets UK listing authority rules, investors are at least able to find out what they’re getting themselves in for, and can get themselves out, too.
