"City's Going Down with a Billion in the Bank": Could a Harsh Manchester City Penalty Benefit the Football Industry?
In this commentary, we discuss the industry-wide implications of the English Premier League’s (PL) allegations of inaccurate financial reporting and breach of Union of European Football Association’s (UEFA) Financial Fair Play regulations against Manchester City Football Club (City).Key highlights include:
-- UEFA recently changed its financial rules and appears to be enforcing them more strictly, handing out harsher penalties for violations.
-- A harsher penalty system that is consistently enforced will ultimately benefit football clubs' credit risk profiles.
-- We believe a sanction causing a City relegation is unlikely as this could (1) reduce the quality and popularity of the PL product and (2) revive the creation of the European Super League.
“UEFA and individual European football leagues have always had financial rules in place, but were lenient in terms of imposing penalties for clubs in violation. This could be changing. If the PL uses City as an example and enforces a harsh penalty on any proven offence, this could set the tone for football clubs going forward and result in more prudent financial management, healthier balance sheets, and improved credit profiles” said Michael Goldberg, Senior Vice President of Sports Finance at DBRS Morningstar.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
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