    
 SOCCER INVESTOR WEEKLY
Issue 114
24 September 2002
Schalke 04 seals €85m bond
First securitisation deal on gate receipts by Bundesliga club sealed by Schechter & Co
Bundesliga club Schalke 04 has agreed a €85m (£53.5m), 23-year securitisation deal, the first bond for a club in Germany and the largest club bond in Europe so far.
The bond was arranged by Schechter & Co, which was founded by Stephen Schechter earlier this year.
Previously in his time at Schroders and then Lazard, Schechter had arranged bonds for Newcastle United (£55m over 17 years), Leeds United (£60m over 25 years), Southampton Leisure (£25m over 25 years), Ipswich Town (£25m over 25 years) and Leicester City (£28m over 25 years).
The funds raised, which are securitised against gate receipts, will serve the club's existing debts (estimated last year to be around €22m), will allow it to expand its academy and to raze its old stadium, on which it plans to build its own new rehabilitation centre.
Schechter told Soccer Investor that the deal was unique, not only due to the fact that it was the first ever euro private placement for a club, but that the bond was subordinate to a 15-year, €115m first mortgage that already exists on the club's Arena AufSchalke stadium.
The 62,000-capacity (54,000 seats) stadium was finished in August 2001 and is managed by a company, under the name of FC Schalke 04 Stadion-Beteiligungsgesellschaft GmbH & Co, in which Schalke owns a 38% stake. The stadium has a retractable roof and a retractable pitch as well.
Average attendances last season, when it competed in the UEFA Champions League and won the DFB Cup, came to 56,729, the second largest in Germany.
The bond was taken up by four major financial institutions in the UK and the US and is estimated to have base points in the high 200s.
Schalke specified that it did not wish German institutions to be involved as some have sponsorship deals with Bundesliga sides. Schalke's main sponsor is Viktoria insurance company.
This year, Schalke, which received over Sfr25m (£10.7m) in prize money from the UCL last year, is competing in the UEFA Cup.
In April 2001, Schalke general manager Rudi Assauer, in an interview with German magazine Capita, revealed plans to list the club in three years' time at the earliest.
Schalke finance director Josef Schnusenberg elucidated further the club's philosophy.
"We would not go the market in order to just buy new players or to raise cash in a holding company," he said.
Rather, he said the IPO would be to raise the club's working capital and to finance its youth set-up or new business ventures.
Currently, only one Bundesliga club, Schalke's local rivals Borussia Dortmund, is listed on the Frankfurt Stock Exchange.
Schnusenberg claimed that Schalke were the league's richest club, "based on land and buildings".
Schechter said that he had an exclusive deal with Schalke, but it is thought that other Bundesliga clubs may now seek to raise finances in a similar manner.
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Schechter & Co. Limited