Financing of sports businesses under the Covid Corporate Financing Facility
Co-authored by Jessica Sorah.
On 4 June 2020 Tottenham Hotspurs Stadium Ltd (THS) announced that it had issued £175 million of commercial paper under the Bank of England’s Covid Corporate Financing Facility (CCFF). THS advised in its press statement that the funds made available to it under the CCFF would be used for working capital purposes only and not player acquisitions. The significance of THS’ announcement is that it confirms that the CCFF can be used by football and other sports businesses.
The CCFF is intended to provide short-term liquidity funding to large companies who can demonstrate that they were in sound financial health prior to the economic “shock” arising from the COVID-19 pandemic. The minimum size of an individual security that the Bank of England will purchase from an individual participant under the scheme is £1 million nominal. To qualify for the scheme, applicants need to:
- Make a material UK contribution
- Be investment grade rated by a credit rating agency (or equivalent) as at 1 March 2020
- Not be PRA or FCA regulated
- Not be a public undertaking
There is also no requirement for applications to have previously issued commercial paper. Companies that do not have a public investment grade rating may alternatively demonstrate that they are equivalent to investment grade using either banks’ internal ratings of corporates to assess credit status or obtaining a private credit assessment from the credit rating agencies. The use of a private credit assessment from the credit rating agencies is generally viewed as less attractive due to the time and expense involved of obtaining a formal credit rating. In the case of THS, it is not a rated company and so it is likely that it would have satisfied the criteria for the CCFF on the basis of internal ratings provided by banks.
As at 16 June, approximately 60 businesses had outstanding commercial paper held by the CCFF with THS being the only sports related business currently recorded as obtaining funding under the scheme.
A client briefing on the CCFF is available here and the Bank of England’s webpage providing information on the CCFF can be found here.