THE BOND SUBSCRIBED IN “BLACK AND WHITE”

Juventus is preparing for its Champions League assault, with Coach Allegri gearing up his team for the upcoming double encounter against Atletico Madrid in the competition’s Round of 16. Meanwhile, what’s happening behind the scenes?

The club announced its first issuance of a “senior unsecured non-convertible bond” for an amount of €175 million, maturing on February 19, 2024.

If you have no idea what that bolded phrase means but want to understand it better, don’t worry, let’s break it down together.

Bond Features
With the issuance of a bond, a company or enterprise aims to raise financial resources immediately, committing to pay the counterparty periodic interest (referred to as coupons) and to repay the full principal at maturity.

Senior unsecured: These are bonds that occupy the highest level of security. In simple terms, if the company were to go bankrupt, holders of this type of bond would be the first to be reimbursed. Of course, as with everything in life, unfortunately, low risk means low return. The term “unsecured” means that the bond is not backed by collateral, meaning that if the company fails, creditors cannot claim company assets. Juventus’ board decided not to include collateral to send a clear message: stability.

Non-convertible: Some bonds, called “convertible,” can be transformed into shares, which may alter corporate governance. Juventus deemed this unnecessary in order to maintain good relations with shareholders.

The bond offers an annual yield of 3.5% and was listed in “Irish territory,” on the Dublin Stock Exchange, which is a global leader in bond issuances, making it attractive to international investors. Are you a die-hard Juventus fan wanting to support your team, or are you just interested in pocketing some interest? Too bad—you can’t subscribe to this bond! Only qualified investors can. This operation is intended for “qualified investors,” which are those authorized to operate in financial markets (investment funds, banks, pension funds, collective investment schemes, etc.).

Why Issue a Bond?
The goal can be found in the statement issued by the board: “To provide the company with financial resources for its activities while optimizing the structure and maturity of the debt.” The objective is to optimize debt management, diversifying sources of financing that have traditionally come from banks but are now expanding to the international market. By extending the debt maturity, the club plans its investments more effectively. Yes, the term “planning” is crucial in business practices, and Juventus’ leadership has demonstrated remarkable expertise in this area, as evidenced by tangible results both on and off the field. Another goal of the management is to ensure cash availability to continue investing both in the transfer market and in various extra-sporting activities. Bank analyst IMI Alberto Francese views the club’s decision positively, stating that “It is a sign of corporate growth, in line with an industrial model not solely based on sport.”

Is It All That Glitters?
As of June 30, 2018, Juventus had net financial debt of €310 million, nearly double the previous year’s amount. The situation worsened after the summer transfer campaign, which saw a negative balance of €163 million (including the purchase of Cristiano Ronaldo). Additionally, the current Chief Financial Officer of the club, Marco Re, expects to close the 2018-2019 financial year with a loss. Should we be worried?

Some believe that the newly issued bond is aimed at supporting the not-so-rosy financial situation at Juventus, but the management remains confident.

Be careful, Juventus—don’t stretch things too far. Remember, in this world, unfortunately, Murphy’s Law prevails: “Anything that can go wrong, will go wrong!”