COVID-19: Impact on the UK’s sports sector COVID-19 ALERTS COVID-19: IMPACT ON THE UK’S SPORTS SECTOR Table of contents Introduction .......................................................................................................................... 3 Availability of financial support in the UK for businesses affected by COVID-19 .......................................................................................................... 4 State aid implications in the context of European sport regulations ....................... 6 Competition law ................................................................................................................... 6 Directors’ duties and insolvency considerations ........................................................... 7 Impact on sports .................................................................................................................. 9 Football ................................................................................................................................10 Horse racing ........................................................................................................................11 Rugby union ........................................................................................................................12 Relief efforts by governing bodies .................................................................................13 How we can help: DLA Piper’s sports credentials .......................................................14 Key contacts ........................................................................................................................16 Contributors ........................................................................................................................16 2 • 14 April 2020 WWW.DLAPIPER.COM COVID-19: IMPACT ON THE UK’S SPORTS SECTOR Introduction Sporting events around the world are being postponed or cancelled by governing bodies in a bid to prevent the spread of coronavirus. A range of sports have taken action, with the Football Association suspending the 2019-2020 professional football season, UEFA delaying Euro 2020 until the summer of 2021 and Formula 1 postponing a number of races with a view to announcing new race dates later on in the 2020 season. Similarly, The Championships, Wimbledon was cancelled for the first time since 1945 and the International Olympics Committee has decided to postpone the Olympic Games Tokyo 2020 to the summer of 2021. This will have a profound impact on the governing bodies of the sports and their respective participants in particular as the measures remove matchday revenues (such as ticketing, food and beverage, car parking and VIP/corporate hospitality revenues) and adversely affect commercial and broadcasting revenues as some broadcasters elect not to pay their broadcasting rights instalments. There are some estimates that UEFA will suffer a loss of EUR 300 million as a result of postponing Euro 2020 meanwhile the Premier League recently warned that the league could lose as much as GBP 1 billion in revenue because of the indefinite postponement to the season. Similarly, the Rugby Football Union (“RFU”) is facing estimated revenue losses in the region of GBP 45-50 million as a result of the disruption from COVID-19 and losses in horseracing are estimated at GBP 50 million a month as a result of unexpected falls in the Levy – racing’s central funding system. The effects of COVID-19 is likely to have a more profound impact on sports clubs that are heavily reliant on matchday revenues as their main source of income. Unless those clubs use government support, employee wages will continue as a significant expenditure meanwhile losing their main source of income. It is therefore of critical importance for these clubs to understand how to act and the options that are available to them before encountering financial difficulties. This note sets out the position as at the date of publication and we continue to monitor the situation as it develops and the measures implemented by the Government, regulators of the sport and clubs which are evolving on a daily basis. 3 • 14 April 2020 WWW.DLAPIPER.COM COVID-19: IMPACT ON THE UK’S SPORTS SECTOR Availability of financial support in the UK for businesses affected by COVID-19 By a series of recent announcements, the UK Government has confirmed that HM Treasury will provide an unprecedented level of support for UK corporates in response to the economic impact of COVID-19. The total value of the package initially made available was GBP 330 billion, 15% of UK GDP, however additional measures continue to be announced, such as the Coronavirus Self-Employment Income Support scheme to assist the self-employed and the new Coronavirus Large Business Interruption Loan Scheme, details of which were publicised on 3 April 2020. The UK Government’s package now includes three principal • Coronavirus Large Business Interruption Loan Scheme mechanisms for businesses to access finance. The two most (“CLBILS”) – to ensure that more firms are able to benefit likely to be utilised by those in the sports sector are: from government-backed support during this difficult time, the UK Government announced the CLBILS which will provide • Coronavirus Business Interruption Loan Scheme a government guarantee of 80% to enable banks to make (“CBILS”) – loans for smaller businesses (turnover below loans of up to GBP 25 million to firms with an annual turnover GBP 45 million) have been made available through the CBILS of between GBP 45 million and GBP 500 million. The Treasury which will be delivered by the British Business Bank (“BBB”) has stated that loans backed by a guarantee under CLBILS (a government owned business development bank) from will be offered at commercial rates of interest. Lenders will 23 March 2020. The maximum facility amount is set at still be expected to conduct their usual credit risk checks. GBP 5 million and may be in the form of a term facility, This scheme allows lenders to specifically support businesses an overdraft, invoice finance facility or an asset finance that were viable before the COVID-19 outbreak but now face facility. A term loan facility or an asset finance facility under significant cash flow difficulties that would otherwise make the scheme will be for a maximum term of up to six years their business unviable in the short term. The new scheme where as an overdraft or an invoice finance facility made is expected to support a wide range of businesses to access available under this scheme will be for a maximum term of finance products including short term loans, overdrafts, up to three years. The first twelve months of the facility will be invoice finance and asset finance. Businesses will remain interest-free for borrowers as the UK Government will cover responsible for repaying any facility they may take out. that first twelve months’ interest for them. It is expected that the scheme will be delivered through commercial lenders. Following consultation with businesses, further details of the scheme will be announced later this month and it may be that some of its original features (ie lending threshold) are revised. COVID-19: IMPACT ON THE UK’S SPORTS SECTOR Eligibility criteria: CBILS: CLBILS: Broadly, in order to be eligible for the CBILS your To be eligible for the CLBILS, your business must: business must: • be UK based in its business activity; • be UK based in its business activity; • have an annual turnover of between GBP 45 million and • have an annual turnover of no more than GBP 45 million; GBP 500 million; • generate more than 50% of its turnover from • be unable to secure regular commercial financing; trading activity; • have a borrowing proposal which the lender: • have a borrowing proposal which the lender would • would consider viable, were it not for the consider viable, were it not for the COVID-19 pandemic; COVID-19 pandemic; • self certify that it has been adversely impacted by • believes will enable the business to trade out of any COVID-19; and short-term to medium-term difficulty; and • not be a bank, building society, insurer, reinsurer or • not be a bank, building society, insurer, reinsurer or public sector organisation. public sector organisation. There are 40 accredited lenders able to offer the scheme, The new scheme will launch later this month. We anticipate including all major banks. it will be available through a range of accredited lenders. The UK Government package also includes business rates 2020 on any type of contract, including full-time and part-time relief for retail, hospitality and leisure businesses and grants employees, employees on agency contracts and employees on for small business and businesses in the retail, hospitality and flexible or zero-hour contracts. The scheme will cover employees leisure sector. We would expect that rates relief is likely to be who have been made redundant since 28 February, provided the most common and tangible relief for those businesses. they are re-hired and then furloughed. Certain football clubs and Premiership rugby clubs have begun to take measures to reduce The UK Government has also announced the Covid Corporate their employee liabilities by making pay reductions and placing Financing Facility ("CCFF") for larger investment grade some of their playing and non-playing staff on furlough. businesses pursuant to which the CCFF will purchase commercial paper of up to one-year maturity, issued by firms Although the CBILS and