3.4 Management of Working Capital 67the standard securitisation structure, the latter require permanent managerial
involvement on the part of the originator. It is also possible to distinguish between
traditional true sale securitisation and synthetic securitisation.
Example: English football clubs. The choice of the securitisation structure
depends on the nature of the firm and its business, among other things. This can be
illustrated by the securitisation structures used by English football clubs (Burns
2006).^162 The securitisation model employed by them differs from the standard
asset-backed securitisation and can therefore help to understand the factors that
influence the choice of the securitisation model in general.
English football clubs have chosen a different securitisation model because of the type of
cash flow selected by the clubs to pay off the debt. Clubs do not tend to have a significantly
large static asset pool of contractual debts to securitise. Instead, their main source of
revenue tends to come from ticket sales. This means that the traditional asset-backed
securitisation structure, which tends to be based upon a discrete pool of existing revenue
generating assets (for example, contractual obligations), would not be appropriate.
In most football securitisations, the most important selected cash flows are the
anticipated future gate receipts, usually supplemented by hospitality income. The utilisation
of such cash flows by the club makes sense financially because the long-term future
revenues would be helping to pay off the low cost, long-term finance that the club has
raised to fund modernisation or expansion of the club’s stadium.
The particular models of securitisation that have been selected by the football clubs as
being the most appropriate models for utilising anticipated future cash flow are the so-
called secured loan securitisation model and the whole business securitisation model.
Secured loan structure. The secured loan structure is typically chosen where a true
sale transfer of the revenue generating assets to a SPV would not be possible
because of the nature of the cash flow. The lack of a true sale transfer increases
risk for investors, unless the cash flows associated with the asset can be effectively
ring-fenced from the claims of the originator’s other creditors and the asset can
effectively be used as collateral.
In a secured loan securitisation, the company that owns the revenue generating
asset can create a subsidiary to hold title to the asset. The parent then leases the
revenue generating asset from its subsidiary. The subsidiary pays for the asset that
it buys but receives lease payments for its use by the parent. The subsidiary
borrows the required sum of money for the securitisation from a SPV.
The loan is secured in favour of the SPV. The subsidiary grants security over
all its assets. The security is supported by a guarantee from the parent. Also the
parent guarantee is secured; for example, shares in the subsidiary company would
be used as collateral.
Like in all securitisations, the SPV has been set up to issue bonds or notes in
the capital markets. The SPV would grant a security over all its assets in favour of
a trustee for the investors.
Whole business securitisation structure. An alternative to the secured loan
structure is the whole business securitisation. The whole business securitisation
(^162) Burns T, Structured Finance and Football Clubs: An Interim Assessment of the Use of
Securitisation, Entertainment and Sports L J, December 2006.