DBRS Limited (DBRS Morningstar) assigned an Issuer Rating and Senior Secured Notes (the Notes) rating of BBB to Futbol Club Barcelona (FCB or the Club) with Stable trends. The ratings reflect the Club’s iconic brand strength, diversified sources of predictable revenue, the favourable market and geographic trends in Barcelona, and the benefits of FCB’s investment in its stadium renovation project. The ratings also consider the importance of on-field performance, the increasing costs and investment to remain competitive, project execution risk, and the Club's relatively high degree of financial leverage. The Notes are secured by a first-priority interest in FCB’s media rights revenues and the bank account into which the media revenues are deposited. The Notes also have recourse to the Club on an unsecured basis.
FCB is one of the most popular franchises in the world’s most popular sport. Founded in 1899, the Club has won a total of 83 national and international trophies, including 26 LaLiga titles and five Union of European Football Association (UEFA) Champions League (CL) titles. This success has led to a large and passionate global fan base with more than 140,000 members (socios) and more than 400 million social media followers worldwide. The Club plays its home matches at Spotify Camp Nou (Camp Nou or the Stadium), the largest stadium in Europe with a capacity of 99,354.
FCB’s success on the pitch and ability to monetize its brand led to strong and consistent revenues prior to the onset of the Coronavirus Disease (COVID-19) pandemic in 2020. Revenue grew to EUR 854 million in F2019 compared with EUR 620 million in F2016. Profitability remained relatively stable throughout this period as the Club continued to invest in its squad. EBITDA, excluding gains on player transfers, was EUR 71 million in F2019 compared with EUR 92 million in F2016. Including gains on player transfers, adjusted EBITDA reached EUR 171 million in F2019 from EUR 139 million in F2016. Key credit metrics were strong through F2019 as the Club held minimal debt.
During the pandemic, FCB’s credit profile weakened because the Club played many of its matches with capacity restrictions, which significantly affected revenues. With a relatively high pre-coronavirus payroll, FCB sustained significant losses in F2020 and F2021. Following the appointment of the new board, the Club underwent a thorough audit and took measures to reduce payroll costs by selling players such as Lionel Messi, restructuring contracts, and issuing the Notes for liquidity. The Club has since taken additional steps to improve its balance sheet, including selling 25% of its share of LaLiga audiovisual rights for the next 25 years for EUR 518.8 million as well as repaying EUR 125 million of debt. Furthermore, because the Spanish government lifted capacity constraints for the 2021–22 season, DBRS Morningstar expects FCB to have positive net income in F2022.
In a separate transaction, FCB will undergo a major stadium renovation (the Project). The Club intends to spend up to EUR 1.5 billion over the next three years to upgrade Camp Nou and the surrounding campus. The Project will expand the Stadium’s capacity to 105,000; include a double VIP ring between the second and third seating tiers; add a new roof; and feature improved food and beverage options, among other developments on campus. The Project will significantly increase the Club’s revenues from new stadium sponsorships, including the recently announced naming rights agreement with Spotify, as well as additional premium seating, restaurants, and museum admissions. While DBRS Morningstar expects the anticipated debt financing of up to EUR 1.5 billion associated with the Project to be ring-fenced from the Club, DBRS Morningstar has taken the Project into account in its analysis. As such, DBRS Morningstar uses F2026 as the basis for its financial risk assessment, when all of the Project-related debt is outstanding and the revenue and cash flow from this investment begin to materialize. DBRS Morningstar notes that FCB expects to play its home matches away from Camp Nou in the 2023–24 season to facilitate the Stadium construction, which will have a temporary negative impact on revenue.
DBRS Morningstar expects that FCB’s earnings profile will strengthen following the completion of the Stadium renovation and will support the current ratings. DBRS Morningstar forecasts that revenues will increase significantly higher than EUR 1.0 billion in F2026, driven by matchday growth associated with the Project, rising broadcasting contracts set to take effect, and new sponsorship agreements. DBRS Morningstar’s revenue forecasts assume that the Club qualifies for the CL every year and reaches the quarterfinal stage. DBRS Morningstar expects that FCB’s player costs will continue to decrease to a more sustainable level at approximately EUR 500 million in F2023 and then grow in line with revenues thereafter. As a result, DBRS Morningstar believes that EBITDA, excluding gains on player transfers, will grow to more than EUR 200 million in F2026.
In its consolidated debt assumption, DBRS Morningstar includes the Notes, EUR 1.5 billion of Project-related debt, and approximately EUR 150 million of revolving credit facilities at the Club. On a consolidated basis, DBRS Morningstar expects debt-to-EBITDA to be approximately 8.5 times (x) in F2026 (2.6x excluding Project debt) and improve steadily thereafter because of growth in EBITDA as well as principal amortization on the Notes and Project debt. While debt-to-EBITDA is high relative to peers in a similar rating category, DBRS Morningstar believes that FCB’s low degree of debt relative to its franchise value, which Forbes estimates to be USD 5.0 billion, mitigates this risk.
The rating on the Senior Secured Notes applies to the following Private Place Numbers: E5444# AD6, E5444# AE4, E5444# AF1, E5444# AG9, E5444# AH7, and E5444# AJ3.
If credit metrics become stressed because of weaker-than-expected operating income or increased debt from cost overruns or debt-financed player transfers, DBRS Morningstar may consider a negative rating action. Once the stadium renovation is complete and the Club has repaid some of the principal on the Notes and Project debt, DBRS Morningstar may consider a positive rating action.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
All figures are in euros unless otherwise noted.
The principal methodology is Rating Sports Franchises and Stadium Financings (February 3, 2022), https://www.dbrsmorningstar.com/research/391882/rating-sports-franchises-and-stadium-financings, which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at firstname.lastname@example.org.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:
This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
Lead Analyst: Michael Goldberg, Senior Vice President
Rating Committee Chair: Arthi Sambasivan, Managing Director
Initial Rating Date: August 9, 2022
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-- Rating Sports Franchises and Stadium Financings (February 3, 2022), https://www.dbrsmorningstar.com/research/391882/rating-sports-franchises-and-stadium-financings.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.