While players compete against each other in empty stadiums, clubs avoid flashy signings, and revenue from once fat televisions shrink, an unlikely new force has emerged in English football: a US company investing part of the fortune of PC pioneer Michael Dell .

Last year MSD Partners loaned Southampton Premier League team nearly £ 80m, financed a £ 200m takeover of rival Burnley and a loan to Derby County, a historic English club.

MSD’s first foray into English football preceded the pandemic, but the crisis has helped create an opportunity for the investment firm as the sport faces an unprecedented financial crisis and other lenders pull out. The Premier League, the richest football competition in the world, estimates that every month without fans in stadiums combined costs English teams £ 100 million.

“Clubs need cash and MSD has cash,” said Kieran Maguire, a football finance scholar at the University of Liverpool and author of The Price of Football. “Commercial banks will not affect football clubs. It is perceived as a high risk. “

MSD, which recently hired Goldman Sachs senior banker Gregg Lemkau to run the company, isn’t the only financial institution devoted to the sport. Private equity firms are trying to buy into Serie A, Italy’s top football division.

MSD was founded in 2009 and has approximately $ 15 billion under management. Investments include public stocks, real estate, private equity and loans. The company not only invests a portion of Dell’s assets – and works with the tech company’s family office – but also manages significant amounts for other investors.

Helping sports team owners with bankrolls isn’t new to MSD. The company has borrowed from the US National Hockey League clubs St. Louis Blues and Dallas Stars. In 2017, it was part of the funding for the $ 1.2 billion purchase of the Miami Marlins baseball team by a consortium that includes Derek Jeter, one of the sport’s most famous players.

MSD Partners has loaned Southampton £ 80 million to Premier League team. © Andy Rain / AFP / Getty

The new source of funding for English football was used by an industry that lenders had largely stayed away from before Covid-19.

Since the crisis, Arsenal and Tottenham Hotspur, two of the “Big Six” teams in the Premier League, have borrowed nearly £ 300 million at extremely low rates from an emergency loan program operated by the Bank of England. But smaller Premier League clubs and clubs in lower leagues have complained about the battle for funding.

MSD’s willingness to lend over longer periods of time has made it more attractive. In the past, loans to clubs were often relatively short-term or renewed annually, especially for those outside the upper echelons of the Premier League. According to a person familiar with the matter, the company has loaned English clubs about £ 170 million in total.

“Typically, banks provide short-term cash flow from working capital. These people are longer term strategic money, ”said a banker with some understanding of MSD’s business. “For the most part, they do not finance purchases, but only offer stable long-term financing. . . They offer something that doesn’t exist. ”

That has a price, however. The latest reports from St. Mary’s Football Group, Southampton’s holding company, showed that the £ 78.8 million loan, due to be repaid in 2025, has an annual interest rate of 9.14 percent. That rate is what MSD has charged other clubs, according to those familiar with the matter.

While MSD is writing checks for the sport during a historic crisis, there are concerns that the high costs involved could prove a punishment for borrowers.

Trust in English Football

The English football league, which runs the professional divisions below the Premier League and looked for funds last year to help the clubs affected, looked into funding from MSD, among other things, but ultimately borrowed £ 75m through the BoE facility.

“We don’t pay 9 percent,” said one of the EFL’s top managers.

MSD’s foray into English football was spearheaded by Robert Platek, a former fixed income portfolio manager and global credit director for the company, and General Manager John Licciardello. It started with Newcastle United, the team led by British retail billionaire Mike Ashley.

When the possibility of a deal with Newcastle failed, MSD was approached about the Northeastern team’s local rival, Sunderland, whose struggles were captured in the Netflix documentary Sunderland ‘Til I Die. Although MSD decided against a deal, a group of associates of the company granted Sunderland a loan in 2019, according to two people familiar with the matter.

The company, which no longer has offices in New York and Santa Monica, Calif., Is confident that the local appeal and global reach of English football will remain largely unscathed by the pandemic. Despite the crisis, MSD has not increased interest rates compared to pre-crisis loans, according to a person familiar with the matter.

Mel Morris, the owner of Derby County, told the Financial Times that the clubs are facing a lack of funding opportunities, especially those that are ineligible for the government’s emergency coronavirus loans.

“We took out a loan with MSD while the pandemic was raging,” said Morris, who made some of his fortune from the Candy Crush video game and reached an agreement in principle to sell the club late last year. “In strange times, thank god, there are people like MSD because they have certainly helped us get through a sticky spot.”

In addition to investing some of Michael Dell’s assets, MSD also manages significant amounts on behalf of other investors. © Michael Nagle / Bloomberg

MSD may require clubs to provide substantial assets, including property, as collateral for the loans. The Derby Pride Park Stadium is part of the security for the loan, Morris said.

University of Liverpool’s Maguire said the specter of borrowing from a football club or confiscating assets has long been a daunting prospect for commercial banks considering finance teams.

“From a reputational point of view, commercial banks do not want to take on that and put themselves in an uncomfortable position of collecting the debt and arming the fan base,” said Maguire.

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According to those familiar with the matter, MSD has no interest in taking on any of the teams it has loaned out. This was confirmed by Morris, who recalled having been visited by Dell himself in Derby in the early 1990s when one of his business ventures was a customer of the PC manufacturer.

MSD’s latest English football bet was sealed on New Years Eve when it helped fund the purchase of Burnley by US investment firm ALK Capital, a fixture in the Premier League for the past five seasons.

Alan Pace, managing partner of ALK and former managing director of US Major League Soccer team Real Salt Lake, told the FT last month that the financing for the acquisition was “very reasonable and, in our opinion, sustainable” and that MSD is one “brilliant partner”.

As the MSD outbreak into English football continues to grow, the pressures to continue to live up to that bill will mount.