Tottenham Hotspur: A $175 Million Problem

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Friends,

Tottenham Hotspur, who has long been considered a model of financial consistency in the Premier League, reported a massive loss in their latest financial report — as the fallout from the COVID-19 pandemic has continued to impact the north London club.

From a high-level, Tottenham reported an $85.5 million loss for year ending June 30, 2020 — compared to a profit of $91.8 million over the previous 12 months.

The worst part?

Should stadiums remained closed due to the COVID-19 pandemic, Spurs Chairman Daniel Levy estimates that the club could see an unprecedented loss of over $175M next year.

For Tottenham, a club that made almost $100M last year in profit and recently built a $1.5 billion stadium, that’s a massive number.

With clubs across Europe like Manchester United, AC Milan, Juventus, and Roma all seeing record quarterly declines in revenue, the COVID-19 pandemic has put unprecedented pressure on an already fragile sports ecosystem — but for Tottenham, it couldn’t have come at a worse time.

Tottenham Hotspur Stadium, a new privately-financed stadium costing the club more than $1 billion, opened in 2019 but has largely remained empty since.

Here’s how they financed the stadium (Source):

• A ~$400 million financing facility was arranged in May 2017.

• As construction costs continued to rise, Tottenham was forced to borrow an extra ~$280 million — increasing the financing facility to ~$680m.

• The debt was scheduled to be repaid over a 23-year period at ~$35 million a season, but in order to reduce debt-servicing costs and improve cash flow, ~$625 million of the debt was refinanced by issuing 15-30 year bonds.

• Bank of America Merrill Lynch arranged the refinancing and also provided a ~$133m loan.

What’s their plan to pay for it?

Along with smaller line items like concessions, merchandise and advertising, Tottenham was expecting over $100 million in annual ticket sales—a 100% increase form their old stadium—to fund the majority of their debt servicing costs.

Which brings me to my next point…

Due to their abundance of long-term debt, especially considering the sources they planned to pay for it with, Tottenham is inherently impacted to a greater degree with no fans in the stands than other sports teams around the world.

Don’t believe me?

Get this — despite fans attending only 14 of their 19 home games last year, Tottenham’s Premier League matchday revenue increased from $76.3 million in 2018-19 to $97.3 million (Source).

Furthermore, with the average Premier League home game bringing in ~$7 million—had those 5 additional games be played with fans—their total matchday revenue would have came in over $130 million — most likely breaking the Premier League record (Source).

That’s not even to mention the $25-$50 million they’ve lost from concerts, boxing matches, and an NFL game being cancelled or postponed.

Point being — for an expensive stadium that was built on the premise of maximizing event-related revenue 365-days-a-year, Tottenham is having a difficult time.

What’s their plan to fix it?

The north London club secured a ~$200 million loan from the Bank of England in June due to “the loss of expected revenue streams,” but there is only so much they can do through financing. Eventually, they need to fill the seats with paying customers.

Here’s what Spurs Chairman Daniel Levy had to say (Source):

He’s right — a $175 million loss, for a club that pulled in almost $100 million in profit just two years prior and has $35 million in debt payments due each year, would be an “irrecoverable loss of income.”

The bright spot?

When crowds return to Tottenham Hotspur Stadium, should the club be able to keep their finances in check in the meantime, Tottenham is set up to be a financial powerhouse with a consistent stream of $135 million in annual matchday revenue.

Only time will tell how this shakes out, but with Daniel Levy running the show—one of the most powerful men in English football—I think they’ll be alright.

The financials for this article were pulled from a broader piece by The Athletic — you can check it out here.

P.S. — Since I assume most won’t be checking their email, I’ll be off tomorrow and Friday.

Enjoy the holiday and we’ll talk Monday :)

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Extra Credit

Now that we’ve talked about the finances, let’s check out the stadium.

Today’s extra credit gives you an inside look at Tottenham Hotspur Stadium — enjoy!

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