KBRA Affirms and Changes the Outlook from Stable to Developing for the BBB+ Rating to Olympique Lyonnais’ (OL or the Club) EUR320 Million Financing for the Groupama Football Stadium.
5 Dec 2024 | Dublin
KBRA affirms and changes the Outlook from Stable to Developing for the BBB+ rating for Olympique Lyonnais’ (OL or the Club) Groupama Stadium financing. The affirmation reflects FCT OL StadCo’s (StadCo’s) financial performance for the 2024/2025 season, which has been robust due to OL’s participation in the Europa League as it provides additional matchday ticketing and other revenues. KBRA also considers the provisional announcement by Direction nationale du contrôle de Gestion's (DNCG) to relegate OL to Ligue 2 in its affirmation of the rating. KBRA considers the various potential liquidity sources presented by the Club, including 1) player sales across the multi-club roster; 2) disposal proceeds from the sale of a 45% stake in Crystal Palace; 3) proceeds raised from the initial public offering of Eagle Football Holding (EFH); and 4) shareholder equity, as likely to be sufficient to address the Club’s debt burden.
Key Credit Considerations
(-) Provisional Relegation
The DNCG recently announced that OL has been provisionally relegated to Ligue 2 due to the club’s unsustainable financial position, given debt levels which now exceed EUR500 million. Additionally, the Club has been handed a transfer ban and its payroll is under supervision. While KBRA notes this is a temporary decision at this time, there have been precedent cases. In mitigation, KBRA considers the various forms of potential funding presented by the Club as likely sufficient to cover the funding requirements.
(+) StadCo Financial Performance
StadCo performance has been robust throughout the 2024/2025 with secured revenue generation improving due to increased matchday ticketing and other revenue as a result of OL’s participation in the Europa League. KBRA expects actual FY 2025 secured revenues will be higher than the KBRA rating case.
(+) OL Performance and Possible Player Sales
OL’s recent on-field performance for the 2024/2025 season has been stronger than the previous season both domestically and in Europe. The appointment of the new Head Coach, Pierre Sage, has had a positive impact on the performance on the team to date. However, in KBRA’s view, OL will have to carefully balance which players to sell as part of its fund-raising exercise given on-field performance is directly linked to the quality of players available to the team.
Rating Sensitivities
An upgrade is unlikely as the issuer and relatedly the Club are indefinitely exposed to the risk of relegation.
A rating downgrade could occur in the event OL is unable to raise the required funding to address the DNCG’s financial concerns and the decision to relegate OL to Ligue 2 is upheld, which ultimately has a material impact on the project’s ability to generate revenues. Additional downward pressure may arise if there are any changes in ownership, commercial strategy and/or poor performance in Ligue 1 or otherwise which leads to relegation and/or future StadCo revenues being diminished including lower attendances, sponsorship opportunities, events, or merchandising.
ESG Considerations
Environmental Factors
During the 2021/2022 season, OL was certified as a “Committed Club” by Fair Play for Planet, due to efforts to reduce its environmental impact. This included focusing on energy and water consumption; transport and accessibility; and waste management.
Social Factors
The Groupama Stadium is used to support social projects, making the stadium a valuable, regional resource as a Community Innovation Centre. The stadium regularly hosts employment forums and job seeking events in partnership with Pole Emploi, the French national employment office, and Nes & Cite, a company that promotes social integration.
Governance Factors
OL is owned by Eagle Football Group which acquired 77% of the share ownership from Mr. Jean Michel Aulas in 2022. Eagle Football are an experienced football Club owner, with various stakes in different Clubs. Notably, 2.84% of OL Groupe is traded publicly on the Euronext Paris, which provides a more stringent level of oversight than some privately owned teams. KBRA understands there are no immediate plans to delist OL Groupe. The remaining ownership consists of 1.23% Treasury Shares and an 8.23% minority shareholding by Mr. Aulas via his holding company, Holnest.
Rating Rationale
Under KBRA’s rating and stress cases, the secured revenues are sufficient to repay debt service. The rating is based on a KBRA Project Risk Score (KPRS) of Strong and a sound financial risk profile. Under the KBRA rating case, aggregate average and minimum debt service coverage ratios (DSCR) are 2.84x and 2.54x, respectively, which along with fully amortising debt and strong cashflow resiliency supports a BBB+ rating on the notes.
Outlook
The Developing Outlook reflects StadCo’s robust financial performance in 2024 which is expected to continue for 2025 based on higher ticketing revenues following OL’s participation in the Europa League. However, KBRA views the recent announcement by DNCG to provisionally relegate OL to Ligue 2 as a development which could ultimately lead to a possible future downgrade if not addressed. While KBRA expects the Club will be able to raise the required liquidity to ensure the provisional decision is reversed, this is noted as a key focus for KBRA to continue to monitor in the short term.
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