Global Sport Group (GSG) the sports investment section of CVC Capital Partners is one of the major players in the sports industry.
GSG holds stakes in a vast number of some of the world’s leading sports organisations and leagues such as the Six Nations Rugby, the United Rugby Championship, Premiership Rugby, La Liga, Ligue 1, Women’s tennis and Gujarat Titans – the IPL franchise team. GCG has a portfolio valued at around $14 billion.
Recently, GSG has commenced a $3.15 billion debt raising process in order to accelerate its acquisition strategy across the sports world.
Whilst not all sports acquisitions are quite this significant or quantify such large numbers, it is useful to consider what key factors may be relevant when considering acquisitions in sport, and specifically, how they can be financed.
Key legal considerations in debt and equity financing
When a sports investment group such as GSG undertakes a financing initiative, particularly of this scale, there will be important legal considerations, which extend across the world of debt and equity financing.
Debt and equity financing are not decisions that should be undertaken lightly. They can have vast challenges and specialist advice should be sort. Sports organisations looking at debt and financing options should consider these challenges and obtain the necessary legal advice where required.
1. Complex structuring
Financing of this scale often involves a mix of mechanisms and documents including term loans, revolving credit facilities, and high-yield bonds alongside the private equity investment. Each area requires clear legal documentation and precise drafting, whether that be loan agreements, security documents or equity subscription documents. Tailoring this drafting not only to the client’s needs but also to the complex area of sports organisations is a key area for legal advisers to understand.
2. Security and Intercreditor Agreements
If assets are spread across numerous leagues and jurisdictions, robust security agreements will likely be in place to protect lenders and investors. This is common in the sports sector. Intercreditor agreements become critical to define priority rights between debt holders, equity holders and original investors. Drafting these agreements requires precision, with commercial considerations and adherence to legal requirements.
3. Exit and restructuring strategies
The inclusion of private equity partners in many transactions suggests future exit intentions. Legal frameworks must anticipate these exits, ensuring flexibility for refinancing or restructuring without breaching existing covenants or investor rights. Legal advice will also be required on the eventual exit, whether that be securing and protecting the exit through mechanisms in the share purchase agreement or a subsequent reinvestment.
