How a $4.2 billion JPMorgan-backed soccer venture ended up a giant mea culpa

  • The European Super League, a breakaway soccer competition, came and went in less than a week.
  • JP Morgan lent $4.2 billion to support the initiative, only to call it a misjudgment on Friday.
  • Nine of the 12 founding clubs backed out after fans and politicians opposed the league.
  • See more stories on Insider’s business page.

The European Super League’s precipitous rise was only matched by its stunning fall.

This week, the breakaway men’s soccer league involving Europe’s biggest sporting names fell apart just days following its unveiling. Nine of the 12 founding clubs reversed their decision to participate in the initiative after fans protested in the streets of London, while soccer pundits and politicians voiced their opposition all week. The Super League was designed to compete alongside the popular Champions League, currently the continent’s highest-ranking club competition.

JP Morgan had committed to fund the clubs’ upfront costs for the league with a €3.5 billion ($4.2 billion) loan that offered between 2% and 3% in interest and would have matured over 23 years.

But in a u-turn on Friday, a spokesperson for the US bank said it “clearly misjudged how this deal would be viewed by the wider football community and how it might impact them in the future. We will learn from this.”

This followed numerous fans calling for a boycott of JP Morgan for funding the Super League.

Typically, a loan of this size and stature would have been structured with a breakup fee for JP Morgan, but the spokesperson declined to comment on the matter.

The US bank had pondered taking the deal into the syndicated loan market to spread the fundraising among other banks, but was also prepared to remain the sole lender if its peers weren’t comfortable with the risk, according to sources familiar with the financing.

“The secret sauce at the top level is all about advertising, broadcast, and merchandising revenue,” said one senior banker that opposed the initiative. “I don’t like it, but it’s a numbers game.” 

An untried and untested league was expected to be a tough sell in the bank or bond market. Public outrage aside, credit experts questioned a new deal with few comparable transactions, clubs with heavy debt levels, and little clarity over cash flow potential from broadcast rights or advertising, sources said.

“Could the Super League fund itself in the bond market? I’m not so sure,” said a second senior banker. “Highly depends on how much leverage they want to put on.”

It’s not uncommon for soccer clubs to raise funds in the international bond market. Manchester United, the wealthiest club in England, has done so, but not even an institution with such a bank balance can escape criticism.

“That had a strong brand, history. Things this doesn’t have,” the second banker said when comparing potential deals between Manchester United and the Super League.

And given the public backlash, a syndicated loan or a bond deal could have proved a public relations disaster for those involved.

‘Amen brother’: A victory for the fans

A third banker monitoring proceedings rejoiced “Amen, brother,” as the clubs started backing out of the initiative this week. A fourth, pondering the financing, hoped the clubs had negotiated a ‘no deal-no fee’ structure with JP Morgan.

While the Super League sought to pad the pockets of its founders, rival soccer clubs, fans, and UK Prime Minister Boris Johnson vehemently opposed the formation of the breakaway tournament.

The founders would have been guaranteed a place in the Super League each season, while a further five would be granted entry through qualification. The Champions League allows any European team to qualify through successful performances in their respective domestic competition.

On Tuesday, all six founding English Premier League clubs — Manchester United, Manchester City, Chelsea, Liverpool, Tottenham Hotspur, and Arsenal — backed out of the Super League, while Italian clubs AC Milan and Inter Milan, and Spain’s Atletico Madrid followed suit on Wednesday.

Liverpool’s owner John Henry apologized for the disruption, while Arsenal said in a statement that it “made a mistake” and apologized for it.

Tottenham Chair Daniel Levy said “we regret the anxiety and upset caused.”

The Super League’s three other founders —Spain’s Real Madrid and Barcelona, and Juventus of Italy — have not formally withdrawn from the league, but believe the project will not immediately proceed.

Eleven of the 12 founding clubs – Barcelona, Real Madrid, Manchester United, Liverpool, Manchester City, Chelsea, Tottenham, Juventus, Arsenal, Atletico Madrid, and Inter Milan – were listed in the top 20 of Deloitte’s 2021 Money League, an annual analysis that profiles the financial performance of the highest revenue-generating European soccer clubs.

“There are 30 baseball teams. Can you imagine if the top 10 teams just broke away? The Yankees, Boston or Dodgers,” the first banker said. “The small market teams just get squeezed out. No matter if they’ve won a World Series. It’s just crazy.”

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