French football clubs use state guarantee to borrow

To pass the course until a possible start of the 2020-2021 season in August, the French football clubs Ligue 1 and Ligue 2, two championships now completely stopped, decided, Monday, May 4, a collective loan guaranteed by the State. Meeting in a general assembly, they accepted the proposal made to this effect by the Professional Football League (LFP). This loan will be in the amount of 224.5 million euros and the LFP will subscribe and must repay this amount, which will be distributed among the different clubs.

Meeting on May 4, the General Assembly of @LFPfr adopted a resolution allowing the LFP to contract with … https://t.co/NE2tVH2FrB

– LFPfr (@ Professional Football League)

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  What does this loan consist of?

This involves using the State Guaranteed Loan Facility (PGE). Set up at the end of March by the government, it offers companies in difficulty due to the coronavirus epidemic to take out a loan that can represent up to three months of 2019 turnover.

The State is committed to guarantee up to 300 billion euros in loans: for each loan, its guarantee relates to 70% of the amount (90% for SMEs). Repayment must be made over a maximum of five years.

• Why are clubs forced to borrow?

The goal for Ligue 1 and Ligue 2 clubs is to swell the treasuries when, after the games are stopped, revenues fall or fall short while expenses are still there.

Ticket sales are non-existent today, sponsorship contracts have been revised and, most importantly, a large part of the television rights will not be paid. However, the latter weigh relatively heavily in budgets.

With the definitive end of the current season, Canal + and BeIN Sports will not pay the 243 million euros that remained due (to which must be added 35 million BeIN for international distribution).

The clubs also have to wait a bit before starting to receive the sums linked to the new contract concluded with Mediapro, which will take effect at the start of next season.

"Thanks to this loan, the LFP will be able to pay the Ligue 1 and Ligue 2 clubs all of the sums still to be collected for audiovisual rights for the 2019-2020 season", assured the LFP.

• Have clubs taken any other action?

The first "shock absorber", which almost all clubs have used, is short-time working, which cuts salary costs by paying only 70% of gross monthly salary and benefiting from exemptions from employee and employer contributions.

No agreement on player salary cuts has been made to date, as has been the case in several clubs in Germany, Spain and Italy. Club leaders and players' union agreed in early April on a "Possible" drop "Provisional" salaries. Possible because it was based on volunteering; provisional because it involved part of April's salary being paid later in the season. To date, only Stade Rennes has implemented this agreement.

A number of clubs have also already used government guaranteed loans on an individual basis. Montpellier is in this case. "We will recover between 5 million and 8 million euros, which will take us through June and July. We will have some cash to advance until August ", explained its president, Laurent Nicollin, in an interview with Figaro, 1^er may.

• What are the risks to the clubs?

Borrowing, alone or collectively, is a short-term measure, warned Jean-Michel Aulas, president of the Lyons Olympics: "This is cash, it has nothing to do with television or sponsorship revenue. Cash only allows you to survive, especially those in poor health ”, he noted in an interview with The team, Monday, May 4.

"Hopefully the championship will resume at the end of August, or at the very beginning of September so that Mediapro can take over and make us a first payment in August. If we don't have that, it will start to get complicated, " explained Mr. Nicollin. "I can last two, three, four months, but not indefinitely", he added regarding Montpellier.

In mid-March, Bernard Caïazzo, who is both chairman of the supervisory board of AS Saint-Etienne and president of Premier League, the union of clubs, had expressed concern that French football "Ends up with nearly 1 billion de losses »Financial.

In an interview at World, April 10, if he said he did not see "Clubs in difficulty at the end of the current season", these having "Reserves to be mobilized as well as borrowing capacity", Mr. Caïazzo, however, said he dreaded the 2020-2021 season. Citing, in addition to television rights, the risks to the transfer window and marketing revenues, he considered that "If the commitments are not all kept, we can have, from October or November, clubs in serious difficulty".