Michael Dell’s investment firm is a new force in football financing

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While players compete against each other in empty stadiums, clubs avoid conspicuous signings and once fat TV revenues are shrinking, an unusual new force has emerged in English football: a US company that invests part of the assets of PC pioneer Michael Dell.

Last year MSD Partners gave Southampton Premier League team nearly € 80 million.

MSD’s first foray into English football came before the pandemic, but the crisis has helped create an opportunity for the investment firm as the sport faces an unprecedented financial crisis and other lenders pull out. The Premier League, the richest football competition in the world, estimates that every month with no fans in the stadiums combined costs English teams £ 100 million.

“Clubs need cash, and MSD has cash,” said Kieran Maguire, a football finance scholar at the University of Liverpool and author of The price of football. “Commercial banks won’t touch soccer clubs. It is perceived as a high risk. “

MSD that recently hired senior Goldman Sachs banker Gregg Lemkau running the company isn’t the only financial institution getting into the sport. Private equity firms are trying to buy into Serie A, Italy’s top football league.

Founded in 2009, MSD, along with the Dell Family Office, manages approximately $ 19 billion in investments in public stocks, real estate, private equity and credit. Not only does it invest some of Dell’s assets, it also manages significant amounts for other investors.

Helping sports team owners make money is nothing new to MSD. His borrowers include the US National Hockey League clubs St. Louis Blues and the Dallas Stars. In 2017, it was part of funding the $ 1.2 billion purchase of the Miami Marlins baseball team by a consortium that includes Derek Jeter, one of the sport’s most famous players.

MSD Partners has loaned £ 80million to Premier League team Southampton © Andy Rain / AFP / Getty

The new source of funding for English football was used by an industry that high street lenders had largely distanced themselves from even before Covid-19.

Since the crisis, Arsenal and Tottenham Hotspur, two of the “Big Six” teams in the Premier League, have borrowed nearly £ 300m at extremely low rates from an emergency loan program run by the Bank of England. But smaller Premier League clubs and those in lower leagues have complained about the battle for funding.

MSD’s willingness to lend over longer periods of time has made MSD more attractive. Historical, Loans to clubs have often been relatively short-term or subject to annual renewal, especially for those outside the upper echelons of the Premier League. According to someone familiar with the matter, the company has loaned a total of around £ 170 million to English clubs.

“Typically, banks provide short-term working capital cash flow. These guys are long-term strategic money, ”said a banker with knowledge of MSD’s business. “For the most part, they do not finance purchases, but only ensure long-term stable financing. . . they offer something that doesn’t exist. ”

However, this has its price. The most recent accounts of St Mary’s Football Group, Southampton’s holding company, showed that the £ 78.8 million loan due for repayment in 2025 carries an annual interest rate of 9.14 percent. This rate is in line with what MSD charged other clubs, according to those familiar with the matter.

While MSD is writing checks for the sport during a historic crisis, there are concerns that the high costs involved could penalize borrowers.

Trust in English Football

The English Football League, which runs the professional divisions below the Premier League and looked for funding last year to help troubled clubs, looked into funding from MSD, but ultimately borrowed £ 75m through the BoE facility.

“We don’t pay 9 percent,” said one of the EFL’s top managers.

MSD’s foray into English football was spearheaded by Robert Platek, a former fixed income portfolio manager and global head of credit for the company, and Managing Director John Licciardello. It started with Newcastle United, the team led by British retail billionaire Mike Ashley.

When the possibility of a deal with Newcastle failed, MSD was approached through local rivals for the Northeast, Sunderland, a club whose bouts were featured in Netflix documentaries Sunderland ’till I die. Although MSD decided against a deal, a group of partners granted Sunderland a loan in 2019, according to two people familiar with the matter.

The company, which has no offices in New York and Santa Monica, Calif., Is confident that the local appeal and global reach of English football will remain largely unscathed by the pandemic. Despite the crisis, MSD did not raise rates compared to pre-crisis loans, according to a person familiar with the matter.

Mel Morris, the owner of Derby County, told the Financial Times that clubs were facing a lack of funding options, especially those that did not qualify for the government’s coronavirus emergency loan programs.

“We took out a loan with MSD while the pandemic was raging,” said Morris, who has part of his fortune with the Candy Crush Video game and reached an agreement in principle on the sale of the club late last year. “In strange times, thank god, there are people like MSD because they have certainly helped us get through a sticky spot.”

MSD not only invests part of Michael Dell’s assets, but also manages significant amounts for other investors © Michael Nagle / Bloomberg

MSD may require clubs to provide substantial assets, including property, as collateral for the loans. Derby’s Pride Park Stadium was part of the security for the loan, Morris said.

The specter of drawing on a football club loan or confiscating assets has long been a deterrent to commercial banks choosing to fund teams, according to Maguire of the University of Liverpool.

“From a reputational point of view, commercial banks don’t want to take this on and put themselves in the uncomfortable position of collecting the debt and turning the fan base into weapons,” said Maguire.

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According to people familiar with the matter, MSD has no interest in taking on any of the loaned teams, a customer of the PC manufacturer.

MSD’s final English football bet was sealed on New Years Eve when it helped fund the US investment firm ALK Capital’s purchase of Burnley, which has been an integral part of the Premier League for the past five seasons.

Alan Pace, managing partner of ALK and former CEO of the US Major League Soccer team Real Salt Lake, told the FT last month that the financing of the acquisition was “very sensible and, in our opinion, sustainable” and that MSD is a ” brilliant partner ”.

As MSD’s entry into English football continues to gain momentum, the pressure to continue to live up to that bill will mount.

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