DBRS Morningstar Assigns Ratings to Futbol Club Barcelona at BBB with Stable Trends
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.
ESPAI BARÇA
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.
OUTLOOK
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.
