FC Porto ended the 2023-24 season with a loss of 21 million euros. Now, it manages to raise 115 million euros by issuing bonds in the United States.
FC Porto’s SAD placed 115 million euros (M€) in bonds on the United States (USA) market, with a maturity of 25 years and an annual coupon rate of 5.62%, the entity announced this Thursday.
The operation was carried out through its subsidiary Dragon Notes, and carried out through a private placement with institutional investors, according to information provided by the ‘blues and whites’ to (CMVM).
“This is an operation that we are very proud of, it is a historic step for FC Porto”, highlighted president André Villas-Boas on the ‘dragões’ website, adding that it is essential for the club to “grow at an operational, commercial level and sports” and to “deal with everyday life in a different way”.
The bonds will pay annual interest during the first three years in November of each year, and, from November 2028 to November 2049, they will be repaid by constant installments (capital and interest), which represents a weighted average maturity of 16 .5 years.
“It is an operation with which we are very satisfied. There were seven long months of negotiations with international banks and it is important for us to have our credibility recognized as a club, but also as an administration”, highlighted André Villas-Boas.
FC Porto welcomed the high demand registered in this issue, which was around €170 M, as well as the “high quality” of the institutional investors who participated in the operation, as a result of Dragon Notes’ credit quality, evidenced by the ‘ investment grade’ assigned by the rating agency DBRS (long-term credit rating of ‘BBB Low’), as a result of a “resilient and growth-prospective” business model on the part of Porto Stadco.
Dragon Notes is the subsidiary that holds FC Porto’s entire stake in Porto Stadco, corresponding to 70% of the economic rights of that company, and Dragon Notes’ obligations will be guaranteed in the first place by the dividends to be paid by Porto Stadco to Dragon Notes , and any excess, after debt service, will be distributed to FC Porto after meeting certain conditions.
“In this operation, no real guarantees were granted to the bondholders, namely the mortgage on the Estádio do Dragão or player passes”, highlighted the ‘blues and whites’, revealing that “the Dragon Notes operation is intended to refinance the existing liabilities and the finance FC Porto’s global activity” and which represents “a decisive step in the implementation of FC Porto’s financing strategy”.
According to SAD led by Villas-Boas, this issue allows the extension of the average debt maturity, and the reduction of the entity’s average cost of debt.
“This operation was also based on the renegotiation of the partnership with Ithaka concluded in August by the current Board of Directors to, among other aspects, foresee the possibility of FC Porto being able to issue debt based on the 70% of Porto Stadco’s economic rights that will continue to stop”, highlighted the Porto society.
In this transaction, the North American bank JP Morgan acted as placement agent for the bonds and Key Capital Partners as FC Porto’s financial advisor, and Clifford Chance and PLMJ acted as legal advisors. The total costs of these entities, as well as the rating agency, represent 0.26% per year of the total value of the issue, specified the SAD of the ‘dragons’.
“In reality, it is a debt contracted to pay off debt, but it allows us to grow at an operational, commercial and sporting level, above all, over the next 25 years.”
