DBRS Morningstar Finalises Provisional Credit Ratings on FCT Olympique Lyonnais StadCo

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional Issuer Rating of BBB on FCT Olympique Lyonnais StadCo (FCT OL StadCo or StadCo) and its provisional credit rating of BBB on its Senior Notes (the Notes). All trends are Stable.

FCT OL StadCo is a French special-purpose securitization vehicle (fonds commun de titrisation) governed by, inter alia, articles L.214-166-1 to L.214-175-8, L.214-180 to L.214-186, L.231-7 and R.214-217 to R.214-235 of the French Monetary and Financial Code (Code monétaire et financier) and represented by Pristine SAS, a French portfolio management company (société de gestion) duly licensed by the French Financial Markets Authority (Autorité des marchés financiers) under No. 16000035. StadCo is independent of the corporate structure at Olympique Lyonnais SASU (TeamCo), which owns the football club Olympique Lyonnais (OL or the Club). Olympique Lyonnais Groupe owns TeamCo.

The 5.83%, 20-year Notes of EUR 320 million will have mortgage-style amortisation and the proceeds will be on-lent to TeamCo to refinance its existing debt, as well as provide for general corporate purposes and funding a Debt Service Reserve Account.

FCT OL StadCo is structured to issue the Notes with Noteholders' recourse limited to the first-lien perfected security in (1) substantially all of the revenues generated from stadium operations which shall be assigned by way of security by the Club in favour of FCT OL StadCo and (2) a mortgage interest in Groupama Stadium (the Stadium). The Notes will be serviced by secured revenues, including those from (1) 50% of all Club and Stadium sponsorships, naming rights, and advertising; (2) Club merchandising revenues; (3) general and season ticketing; (4) VIP/premium seating; (5) meetings and events; (6) concessions; (7) food and beverage; and (8) parking. The secured revenues will be collected in specially dedicated accounts which will benefit from the FCT regime with the Club as servicer and lawful agent of the management company Pristine SAS (acting in the name and on behalf of OL FCT) to carry out the administration, recovery and collection of these revenues in accordance with the provisions of article L.214-172 of the French Monetary and Financial Code and a Receivables Services agreement.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings are based on OL's popularity and brand strength, the strong economic fundamentals in the City of Lyon (Lyon; rated AA (high), Stable, by DBRS Morningstar), and StadCo’s diversified revenue streams and high degree of contractually obligated income. The credit ratings also consider the importance of on-field performance; the competition for fans, ticket sales, and sponsorships from other football clubs; and an expected lack of support from Ligue 1 if the Club goes through a period of financial distress.

OL is one of the top football teams in Ligue 1, France's premier football league. The Club has been consistently successful, winning Ligue 1 seven times and qualifying for the Union of European Football Associations (UEFA) Champions League (CL) in 16 of the last 23 seasons. The Club has a large, passionate fanbase and the third-highest attendance among Ligue 1 clubs over the last 22 years.

CREDIT RATING DRIVERS
If the minimum debt service coverage ratio (DSCR) decreases toward 3.0 times (x) because of weaker-than-expected revenues or OL's failure to consistently qualify for European competition, StadCo's credit ratings could be pressured. Conversely, while unlikely, if the minimum DSCR increases above 5.0x over the medium term because of stronger-than-expected revenue growth, DBRS Morningstar may take a positive rating action.

CREDIT RATING RATIONALE
Under the flow of funds, 100% of the secured revenues are available for debt service prior to any unrestricted distributions to the Club. Following a strong year in F2023, DBRS Morningstar expects that the secured revenues will remain stable in F2024 even though OL did not qualify for the CL or the UEFA Europa League (EL), bolstered by event revenues from hosting the 2023 Rugby World Cup and from music concerts for artists such as Taylor Swift and Coldplay slated for 2024.

In F2025, DBRS Morningstar expects revenues to grow with the renewal of sponsorship contracts at higher values, robust demand trends in ticketing, and already booked events, such as the 11 football matches from the 2024 Olympics that will be hosted at the Stadium. DBRS Morningstar does not forecast that the Club will qualify for European competition in F2025.

In F2026, DBRS Morningstar forecasts that event revenues will return to normalised levels and all other revenues should grow in the low-single digits. DBRS Morningstar's medium-term forecast is for the Club to qualify for the EL in each season, major sponsorship contracts to be renewed with inflationary adjustments upon expiration, attendance to remain in line with historical trends, and ticket prices and suite premiums to increase with inflation.

Based on an expected Notes issuance of EUR 320 million, DBRS Morningstar's base case assumptions provide a projected minimum DSCR of 3.5x in F2026.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 (4 July 2023), https://www.dbrsmorningstar.com/research/416784.

DBRS Morningstar notes that this press release was amended on 20 December 2023 to correct the disclosure confirming that this is the first DBRS Morningstar credit rating on this financial instrument.

DBRS Morningstar notes that this press release was amended on 9 January 2024 to incorporate the disclosure confirming that this credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Notes:
All figures are in euros unless otherwise noted.

DBRS Morningstar applied the following principal methodology: Global Methodology for Rating Sports Franchises, Leagues and Stadium Financings (28 February 2023), https://www.dbrsmorningstar.com/research/410378.

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223.

The primary sources of information used for these credit ratings include StadCo’s audits, the Note Purchase Agreement, TeamCo Facility Agreement, financing term sheet, financial model, StadCo presentations, and discussions with management and their advisors. DBRS Morningstar considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

This credit rating concerns a newly issued financial instrument. This is the first DBRS Morningstar credit rating on this financial instrument.

DBRS Morningstar does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

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 credit 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://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://www.dbrsmorningstar.com/research/425119.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Gaurav Purohit, Vice President
Rating Committee Chair: Arthi Sambasivan, Managing Director
Initial Rating Date: 20 October 2023
Last Rating Date: Not applicable as there is no last rating date.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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