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‘If the club goes under, you don’t get money back’ – Examining fans’ bond schemes

Amid the gloom of falling short in the League One play-offs last month came a timely sweetener for Bolton Wanderers. A club with aspirations to reach the Championship had reached out to its supporters for financial support and within a week had raised £3.5million ($4.33m) to accelerate its plans for growth.

The scheme, launched on May 11, is known as the Wanderers Bond. It has been sold as “an exciting opportunity” to invest in the League One club and invites fans to purchase five-year bonds for a minimum price of £500. In return will come an attractive annual interest rate of 8.5 per cent, as well as a 10 per cent bonus if Bolton were to be a Championship club from 2024-25 onwards.

Handsome dividends but also a warning explicitly delivered within the promotional output. “This is a high-risk investment and you are unlikely to be protected if something goes wrong,” says the small print.

Not that it dissuaded many. Bolton say “hundreds” of fans agreed to part with money during a priority investment period, before more joined in a public investment period that remains open. Among them is Dougie Mercer, owner of soon-to-be stadium sponsors Toughsheet, who has invested £250,000 in the Wanderers Bond.

Bolton’s initial funding target of £4million is set to be reached with ease, ensuring they now have the resources to begin a number of capital projects, including training ground upgrades and improvements made to their now 26-year-old home, the University of Bolton Stadium, that the club have called “long overdue”.

“As ever, we have the very best interests of the club at heart in every decision we make and we hope this bond offers a new and exciting way for supporters to further connect with Bolton Wanderers and play an invested part in its future,” said chief executive Neil Hart at the point of launch.

Bolton have joined a growing list of EFL clubs to seek financial support from its fans in the shape of a bond scheme offering high returns over a fixed period. Stevenage were said to be trailblazers when raising £500,000 in 2017 to build a new North Stand at their Broadhall Way stadium. A year later, Norwich City sourced £5million to fund a new academy building.

Queens Park Rangers then borrowed £6.8million inside 10 days to fund a new training ground in 2021. The next year it was the turn of Peterborough United, who raised £2.5million for a new safe-standing area and sports bar at their London Road home. “We won’t be shafting our supporters,” promised chairman Darragh MacAnthony.

Tifosy, the sports finance advisory firm co-founded by former Italy and Chelsea striker Gianluca Vialli, who passed away this year, has overseen all of those projects. It has now been called on by Bolton to do the same.

They are the middle man, operating under the umbrella of the Financial Conduct Authority (FCA) but bringing no guarantees to those investing. Trust in the club’s ownership is a must, along with an acceptance that an illiquid, unprotected investment might eventually leave you short.

Bolton’s Wanderers Bonds will be used to improve the club’s stadium (Photo: Andrew Kearns – CameraSport via Getty Images)

Football clubs would rather not borrow from their own but it has been the sins of their fathers that have sent them down this road. Banks have been burned once too often by clubs in distress and borrowing money from traditional lenders has grown onerous. Premier League clubs can manage it, reaching agreements with the likes of Macquarie and MSD, but those loans, sometimes with interest as high as nine per cent, are typically mortgaged against the vast future TV revenues.

There are no such riches to be found in the EFL, a playground that has seen a number of clubs fighting for survival in recent years. Bolton, who were rescued by their current owners Football Ventures, were among them when coming perilously close to extinction in 2019. Banks, with good reason, have grown wary of football’s inherent risks.

AFC Wimbledon, a League Two club owned entirely by its supporters, found themselves unable to source the borrowing in late 2019 that was needed to conclude the construction of their Plough Lane home. A funding hole of between “£7million and £10m” threatened to force the sale of a stakehold in the club until a group of fans devised a bond scheme that was eventually closed with £9,770,904 raised.

“It looked as though the ownership of the club was in peril at that point,” explains Charlie Talbot, one of four fans that first set up the Plough Lane Bond through the Dons Trust. “Not completing the stadium would’ve been a disaster.

“We felt there was demand to fund this from our fanbase. It was a relatively fractious first meeting but within three or four days we felt it was worth giving it a go. Four of us set it up in December (2019) and it brought in £5million within six weeks.

“At that point, it was the biggest single bond set up by a football club and meant we could keep the building of the stadium on track. We got a bridging loan for the final part of it but subsequently removed that with the second round of bonds. The first round was £5.6million, the second round was £4.1m. All of our debt is now friendly debt.”

The Plough Lane Bond was an enormous success and is the reason AFC Wimbledon were able to plant roots at a purpose-built home in November 2020. Altruism, rather than personal financial gain, was commonly the motivation for joining, with investors able to set their own rates of interest. The original bond offering gave a choice of interest between zero and four per cent and such were the investors not wishing for anything in return, the interest paid on that first £5million was 2.7 per cent. Some of the bonds sold even ran to 20-year terms.

AFC Wimbledon’s Plough Lane was built, in part, through supporter bonds (Photo: James Chance/Getty Images)

That, essentially, illustrates why so many supporters choose to overlook the risks attached to a bond. The emotional ties are what draw in investors. Whether it is with funding a new training ground, academy or stadium, there is a willingness to help their club when it asks. It has been estimated that only a fifth of bonds sold by Tifosy schemes go to investors outside of the fanbase.

“We had an existential problem,” adds Talbot. “When we launched the original bond, no bank would’ve lent us the money.

“Banks hate football, understandably. As an industry, it’s got an appalling track record. You have to be very clear on what the potential risks are.

“You’ve got to be aware that if you go to any independent financial advisor and say you want to do this, they’d all say ‘Absolutely not’.”

So The Athletic did just that. We approached Alan Lee, the former Republic of Ireland international and now a fully qualified advisor at Bexley Independent Financial Services, with a question: football club bond schemes, good thing or bad thing?

“There’s no yes or no answer to that,” says Lee. “As a financial advisor, we would not be advising clients to invest in these schemes. And for a number of good reasons.

“They’re not part of the Financial Services Compensation Scheme (FSCS). They’re highly illiquid, so even though you’re able to trade, if things go wrong then the value of what you hold plummets. You’d find it very hard to sell.

“I look at what these typically pay out, and it’s around the eight per cent mark. You compare that to an easy-access savings account and you might be looking at 4.25 per cent currently. But with that 4.25 per cent, there’s no risk involved. Anything under £85,000 in a bank account, it’s covered by the government’s FSCS.

“With a bond, there’s that risk that, if the club goes under, you don’t get any of that money back. You’re putting your money at risk.

“But behind all that is a fan’s viewpoint. As a fan, you might be willing to say ‘You know what, I want to help out my club’ and put in £500. You’d be prepared to accept it’s not covered and it is risky, but you’re doing a good thing for your football club. I think that’s the way you have to approach it. So long as you’re not putting in money you can’t afford to lose, you can see why it appeals to supporters.”

It was in the spring of 2018 that Norwich City launched their Canaries Bond with the promise of building a state-of-the-art academy at their Colney training site. An initial target of £3.5million was secured within weeks via almost 700 fans contributing anything from £500 north. Norwich even found themselves in a position of rejecting bond applications once their upper threshold of £5million was reached.

And the story could hardly have wanted a happier ending. The following season saw Norwich promoted to the Premier League as Championship title winners under Daniel Farke, triggering a 25 per cent bonus on top of annual interest rates that included five per cent cash and three per cent in club credit.

That meant a supporter investing £1,000 was repaid £1,250, as well as £80 in interest. What was initially designed to be a five-year bond was settled using the club’s Premier League windfall just over a year later.

Sophie Leney, a Norwich fan of 50 years, was among those to be rewarded and had no qualms about investing. “I know that, as always with these things, your capital was at risk. But actually, it was such a safe bet because I just thought there was no way on earth the club would run with the money. It seemed like a really safe investment and a very good return.

“The other thing was, it just felt like a really good way to support the club; to do something that they could probably do in time, but they could do quicker by me investing.”

The level of trust in the ownership group at that time was key. That diluted any sense of risk for Leney. “Well, we’re not run by a bunch of charlatans, are we?“ she says. ”It felt to me that they wouldn’t let their supporters down because it would have been so bad from a community point of view. I couldn’t see that happening.”

Gary Field was another to see his £1,000 investment vindicated. A high-interest rate — and potential for that promotion bonus — carried obvious appeal but it was an emotional attachment to Norwich that made it a more palatable choice.

“There was the element of that,” Field says. “If the worst scenario happens, then at least you’d help the football club out to achieve its objective in terms of actually rebuilding the academy.

“It came with quite heavy caveats — in terms of your money being at risk, you might not get it back.

“It does sound a bit blase, but if the worst happens, then you know it was money I could probably afford to lose, which has probably got to be a lot safer than putting it on a horse.”

If Norwich offered the best of a bond scheme with wins all around, it is worth looking towards rugby union for the pitfalls. Wasps, an institution of the English domestic game, aimed beyond big with a bond scheme launched in 2014, seeking £35million in investment to help fund their relocation to the Coventry Building Society Arena.

Bondholders had been due to be repaid in full 12 months ago, but Wasps gradual descent into financial disarray have ensured there is now a legal fight to reclaim investments that were not protected by the FSCS. The demise of a club has had deep financial implications for some of its fans.

Norwich used a bond scheme to help fund their training ground redevelopment (Photo: Stephen Pond/Getty Images)

No one can say supporters have not been warned of the potential for heavy losses. Tifosy’s website is headed by a pop-up risk warning, outlining how bonds can reduce in value and, ultimately, become worthless in the worst-case scenario.

“Investors in these shares or bonds can lose 100 per cent of the money they invested and the investments should be regarded as high-risk,” they make clear.

It instead becomes a question of faith in those at the helm; an investment in the owners as much as the club. They are ultimately the ones whose decisions will define how robust the investment becomes over the course of five years.

Will the club — be that QPR, Peterborough or Bolton — be in a position to pay back bondholders when the time comes? A £4million scheme at 8.5 per cent, for example, will need £5.7m to be handed over to investors over the course of five years. Add in promotion bonuses and the liability climbs again.

“This is a very expensive way for clubs to raise money, and if there was a way to do it elsewhere, they’d be doing it cheaper,” says Lee. “I’d be looking at the reasons why any club is trying to raise it. If it’s to cover the ongoing costs and keep it afloat, that would worry me.

“But if they’re using it for capital projects, whether that’s investing in the training ground or the stadium, you’d take a different view on it. That’s when fans understandably see this as a chance to help their club.”

And bond schemes have undeniably done that. AFC Wimbledon have a new home because of one. Norwich City, meanwhile, built an academy site that will serve them well for decades. Bolton, too, have promised to use their new income for the club’s benefit. Behind the good intentions, though, there is the stark caveat that every penny could theoretically be lost.

“If you’re confident in your club’s ownership and putting your trust in them, it can be a good route forward,” says Talbot. “But you have to go in with your eyes open.

“Marcus Evans (the former Ipswich owner) is your best-case scenario for a beneficial millionaire. He lost £10million a year as Ipswich owner and, at the end of it, was prepared to write off the £100m and walk away.

“What you’re asking fans here is if the £10million goes belly up, is the next owner going to be willing to cover that? You’d think a new owner would be reluctant. It wouldn’t be his problem. You’re effectively asking people to write this off if it goes wrong and the track record of football clubs is not great.

“I love football but I wouldn’t lend money to anyone else’s club.”

(Top photos: Getty Images)

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