(Bloomberg) -- Manchester United Plc’s surprise announcement this week of plans for a new 100,000-seater stadium was the easy bit. Now it needs to find the money.
Bankers are debating how difficult it might be to borrow the £2 billion ($2.6 billion) needed to build the giant venue. Lenders could provide between £1 billion to £1.5 billion of debt, according to people familiar with the market for funding. That would leave a void that might need to be filled with equity, they said, asking not to be identified because any deal would be private.
However, a number of recent stadium developments — such as Barcelona’s Spotify Camp Nou — have been fully funded by debt, and a club the stature of Manchester United should be able to raise the capital it needs, separate people said. There’s also the potential for funding from a new UK government keen on projects to spur economic growth.
Manchester United’s CEO Omar Berrada has said it will consider all options on financing. While the club has been struggling on the pitch in recent years and is already loaded up with at least £1 billion of debt, the club is unlikely to be short of financiers willing to help, given it’s considered one of the world’s biggest football teams.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are two banks most likely to be in the mix when it comes to figuring out solutions, the people said, given they helped co-owner Jim Ratcliffe fight off opposition in the battle to win control of the club last year. Bank of America Corp. is another likely candidate as an existing lender to the club and a financier of new stadiums for other teams such as Tottenham Hotspur and Real Madrid, they added.
Manchester United has yet to talk to lenders formally, and the structure of any funding could change depending on credit markets, potential government funding, and the club’s performance on the pitch, the people said.
“Stadium transactions, if conservatively structured, are more attractive to investors than the teams themselves,” said Manuel Gutierrez, vice president of corporate ratings at Morningstar DBRS. “Revenues generated by the stadium tend to be more resilient than at the clubs, where they might be relying on player sales or other fluctuating items.”
The challenge is that credit markets have changed since Manchester United last raised debt. Borrowing has become more expensive after the surge in inflation in recent years, even though central banks are now bringing interest rates back down.
The club is also expected to refinance its existing debt as part of any deal to raise funds for the stadium, and that will see its interest payments basically double — making lenders more wary of overloading it, the people said.
It’s also unclear where any equity, if needed, would come from. Ratcliffe spent about $1.5 billion to acquire almost a third of Manchester United and has since been cutting jobs and staff perks as he tries to get costs under control. Meanwhile the Glazer family are still the majority owners.
Manchester United, Goldman Sachs, JPMorgan and Bank of America declined to comment.
Football clubs are increasingly focusing on their stadiums due in part to a softening in earnings from the media rights market, along with the impact of regulations that tie player spending to revenues. Stadium redevelopments are also shaking up club financing, Morningstar DBRS said in a note earlier this year.
“Structures from top-tier clubs can achieve an investment-grade credit rating,” said Morningstar DBRS’s Gutierrez and Michael Goldberg, “provided the financing entity is a special purpose bankruptcy remote entity (StadCo).”
Creative Options
Such a separate entity, secured by ticket sales on the new stadium, could be an option, the people said. The expectation is the club will have to raise the debt through a variety of different means, such as project finance loans, third party units, municipal support — which the local mayor is keen on — and long-dated private placements all mentioned so far, they said.
In 2015, the club raised $425 million in bonds due in 2027, paying 3.79% when benchmark interest rates were historically low. It has $225 million in loans from Bank of America, plus around £300 million of additional revolving credit facilities. It also owes roughly a further £300 million to clubs for players.
The owner of local rival Manchester City pays 7.4% on some loans sold in US credit markets and lenders are unlikely to offer Manchester United terms below 6%-7%, one of the people said.
On the plus side, revenues at clubs that have renovated or built stadiums in the past decade, such as Atletico Madrid, Tottenham Hotspur and Juventus, saw their matchday and commercial revenue streams grow 2.3 times faster than the average team in the big five European leagues, according to Morningstar. Manchester United’s matchday revenues were £137.1 million in the 2023/24 season.
Ratcliffe has already hiked ticket prices and the club has warned fans they may need to rise further. Such news comes at an inopportune time: the team currently ranks 14th of 20 teams in the highest tier of English football — which would be its worst finish in 50 years if that level holds at the end of the season in May.
The plans for a new stadium, which will take years to build, are an attempt to catch up with modern facilities built by some of Europe’s biggest clubs. Ratcliffe has talked of building a “Wembley of the North,” a reference to the home of the England national team in London. Once it’s complete, a refinancing on more attractive terms could happen, the people said.
