It was once dubbed the “vampire kangaroo” and accused of “feasting on Britain’s creaking infrastructure” after investing in companies such as Thames Water and avoiding tax through a legal but controversial web of subsidiaries in Luxembourg and the Cayman Islands. But Macquarie Group Limited is a growing influence on English football, underlined on one day last month by Leicester and Wolves extending sizeable loans with the Australian investment bank that are mortgaged against future TV earnings.
Now with a portfolio that also includes Bournemouth, Crystal Palace, Middlesbrough, Sheffield United, Southampton, Swansea City, Watford, West Brom and Wolves, a company estimated to manage almost £288bn worth of assets has emerged as the second-biggest lender, behind Barclays bank, in an industry where owners continue to chase the dream. Since 2013, and encouraged by increased transparency in the game following the introduction of Uefa’s financial fair play regulations, Macquarie estimates that it has completed more than $1.5bn in loans across Europe’s major leagues, specialising in “transfer financing” and “media and sponsorship rights monetisation”.
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Any club that uses such a facility must register a charge – security against the loan – with Companies House. The latest arrangement with Wolves, registered on 13 January, extends their £50m lending facility until March 2021.
That means part of the credits of future TV income – worth £130m a season under the latest deal – have been transferred to Macquarie in exchange for their capital, although it is not known how much interest Wolves will pay to receive the money in advance.
The latest charge registered by Leicester was also added on 13 January. But rather than being evidence of more borrowing, this was because the arrangement has to be ratified every six months by the Premier League, which distributes TV rights from its central fund.
“Every time [a club] renew, effectively they are extending the length of the overdraft and it means that Macquarie are entitled to the money from the next tranche of TV money from the Premier League,” explains Kieran Maguire, who is a senior teacher at the University of Liverpool’s Management School and specialises in football finance. “There’s an awful lot of clubs doing this and it makes a lot of sense. The broadcasting payments are made three or four times a year but you’ve got all of the overheads going out in between, including the wage bill.
“I understand that a lot of banks are providing similar services but, because they are not formally registering a charge, we don’t see the documentation because nothing is going through Companies House. It’s a risk in the same way that if you take out a mortgage and it helps from a cash flow point of view.”
View image in fullscreenMacquarie Group Limited estimates that it has completed more than $1.5bn in loans across Europe’s major leagues. Photograph: David Gray/Reuters
Leicester’s relationship with Macquarie began in October 2018, three months after Riyad Mahrez joined Manchester City for £60m. As is common in most modern transfers, Pep Guardiola’s side were due to pay in instalments, with the final £36m due in two tranches by the end of July this year. Enter Macquarie. In exchange for the £36m, Leicester agreed a secured borrowing facility that means the transfer fee will be paid to Macquarie instead.
A similar service is provided by XXIII Capital, the company which has financed several multimillion transfer deals including Antoine Griezmann’s €120m move to Barcelona and that of his replacement at Atlético Madrid, João Félix.
Known in the business as “transfer factoring”, it has become an increasingly popular way of raising finance quickly to enable clubs to compete in the transfer market and deal with spiralling wage bills. But with interest rates estimated to be at least 6%-7%, the risks are clear.
Leicester’s latest loan does not specify how much they can borrow from Macquarie, although it is the sixth time they have entered an arrangement with the lender.
The second – made in December 2018 – has been satisfied but was reported at the time to be larger than the first arrangement over Mahrez and had been earmarked to help fund a new training ground and expand the King Power Stadium.
Two more are outstanding, although Maguire does not believe there is any evidence of financial difficulties at a club on course to qualify for the Champions League.
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“What will often happen is that you might have separate charge arrangements over separate assets belonging to the club,” he says. “It could be something as simple as that – I don’t think there is anything Machiavellian in it.”
Macquarie says it is selective about who it does business with. It has been marketing its services directly to English clubs and many have jumped at the opportunity to improve their cash flow.
Southampton, who previously borrowed money from the mysterious Vibrac Corporation that came under scrutiny from MPs in 2016, have a long-established relationship, having first taken out a loan in November 2016 secured against future TV rights. They have since returned annually and filed a new charge in the summer.
View image in fullscreenMacquarie purchased half of the credits owed to Crystal Palace from the £45m transfer of Aaron Wan-Bissaka to Manchester United. Photograph: Peter Cziborra/Action Images via Reuters
Meanwhile, Macquarie purchased half of the credits owed to Crystal Palace from the £45m transfer of Aaron Wan-Bissaka to Manchester United last summer. Courtesy of the bank, Bournemouth received the £12m then owed by Aston Villa for the England defender Tyrone Mings 12 months earlier than scheduled. Even Craig Dawson’s £5.5m move to Watford in the summer led West Brom to take out a £2,395,300 loan, corresponding to the amount of the fee they were due to be paid in June 2021.
Swansea’s first loan with Macquarie after they sold the Spanish midfielder Roque Mesa in June 2018 was satisfied last week, although the Championship club have two outstanding arrangements made almost 18 months ago. High-interest repayments from what Maguire describes as “boutique lenders” have become a feature of the multibillion-pound industry that is modern football but he does not think it necessarily spells trouble.
“Any form of borrowing comes with an element of risk,” he says. “But fans might also take the view that if the club borrows and invests that on the pitch with players then that is likely to reduce the risk of relegation, therefore assuring the club of another year’s TV money. It’s a double-edged sword.
“In an ideal world I think most fans would prefer that the club owner takes on the form of a benevolent dictator and gifts the club the money through an interest-free loan, like Farhad Moshiri has done at Everton. But they are always much harder to find.”
