Secure Financing Options For Football’s Intense Transfer Window
Fri 7th Oct 2016 | Money & Finance
Sport Value Credit Management (SVCM) has once again been very active during this summer’s transfer market closing many transactions with Champions League and/ or listed clubs.
Leveraging on a strong positioning as a licensed and regulated broker, SVCM speaks to fcbusiness about its unique credit rating software for football clubs.
FC: On what type of transactions have you been involved this summer?
SVCM: We have structured financing lines by discounting transfer or sponsorship fees, raised credit lines secured by TV rights payments and put in place trade credit insurance covers. Clubs we’ve worked with have been based in England, Spain, France or South America and counterparties (buying clubs for transfer fees discounting) in England, Italy, Spain or Germany. So far in 2016, we have closed a volume of € 135 million in financing and € 25 million in trade credit insurance.
These are pretty impressive numbers are you satisfied by this volume of activity?
Yes we are, and especially satisfied to meet our objectives one after the other whilst maintaining our position as one of the most transparent actors within the industry. Our results and the trust granted by the clubs we are working with as well as by our financing partners and insurers give us the opportunity to lift our development to the next step leveraging on our credit rating software, FIRST.
It seems very interesting indeed. Could you give us more details about this credit rating software?
We have developed the software to have a system which can assess the credit risks associated with football clubs in a format close to what banks and insurers use in other industries, and that is objective, rational and standardised. It came from our observation that banks and insurers were hesitant to work with football clubs as the economic model is very specific and the investment in resources to assess it internally are too high versus the volume of expected transactions.
Thus, we decided to develop this software to help banks and insurers in the process of assessing the risks linked to a transaction, and to gather a large panel of data about clubs in order to provide a comprehensive understanding of their credit drivers. Finally, our credit scoring provides a probability of default indicators to help to structure transactions and to prevent future non-payment litigations that can be thus anticipated. We are convinced that our software adds value to the industry by helping to structure and standardise the market by providing relevant independent data.
Our business model is to provide banks and financial institutions with objective and rational information which we are not compelled to market. We are exclusively dedicated to creating the right environment so that clubs can access bank finance with the highest standards of transparency and rationality.
How do banks and insurers use the reports issued from your software?
Our team of expert analysts issues a specific credit report for each transaction or portfolio of exposures. We send such reports exclusively to banks and or insurers concerned by the transaction. Those reports are not made public and we never disclose to clubs a report that concerns another club.
In addition, we are not remunerated for these reports in order to avoid any conflict of interest. Our reports contain an in-depth credit analysis of the counterparty football club’s credit risk in relation to the transaction. Banks and insurers can find far in advance of their final credit decision all the information that they deem necessary to assess correctly the proposed transaction. Banks with regulatory requirements can also find a way to evaluate their exposures and calculate the right level of equity they have to front.
The information used to compile the rating takes into account the macro and micro environment in which the club plays (country risk, championship specificities, TV rights distribution…), financial information on the club itself (solvability, liquidity, indebtedness…) and extra financial information (shareholding structure, corporate governance, risk management policy...). This is a compounded quantitative analysis based on around 200 indicators.
How do you get the information necessary to build your rating and analysis?
Around 60% of the information is public and the other 40% is obtained by us direct from the club itself. We are in contact with C level executives in key areas such as financial, legal or executive direction as well as with the shareholders when they play a key operational role. We are strictly committed to the highest level of confidentiality and security about all data provided to us in compliance, and as required by our status of licensed and regulated brokers.
Posted by: Aaron Gourley
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