Berlin Football Club Offers Sweetener to Keep Creditors Onside

Hertha BSC Verwaltung GmbH has increased the amount of interest it is offering to pay bondholders if they agree to extend the maturity of its notes, after the football club was relegated to Germany’s second division.

(Bloomberg) — Hertha BSC Verwaltung GmbH has increased the amount of interest it is offering to pay bondholders if they agree to extend the maturity of its notes, after the football club was relegated to Germany’s second division. 

Hertha says it is looking to extend its €40 million ($43.5 million) bond coming due Nov. 8 to meet its liquidity planning for next season. The note originally paid a 6.5% coupon, but in May the club offered 8.5% in exchange for holders’ consent to extend the maturity by 2 years when the process was launched. Hertha has now increased this offer to 10.5%, it said in a statement late Wednesday. 

The club said it is embarking on cost reduction measures, citing the impact of the pandemic on revenues and “an expensive playing squad that did not perform according to expectations.” Relegation after 10 seasons in the top flight is also likely to reduce broadcasting revenue. 

It couldn’t start a refinancing process before mid-May due to negotiations regarding a change of the investor in the club earlier this year, hence why it chose the route of amending and extending the notes instead of other financing options, Hertha said in a presentation.

Miami-based 777 Partners LLC agreed a deal to buy a majority stake in Hertha from the fund manager Lars Windhorst in November, for an undisclosed sum. Windhorst paid about €375 million for his stake in the club.

Josh Wander, managing partner at 777, joined the club’s managing director Thomas E. Herrich on the investor update call that took place in May 30. The American investment firm already owns stakes in teams including Genoa Cricket and Football Club — which just won promotion to Serie A—, CR Vasco da Gama in Brazil, Belgium’s Standard Liege, and Spain’s Sevilla FC, which won the UEFA Europa League this year. 

A representative for 777 declined to comment beyond the public statements.

Hertha was granted a license to play in the second division of the Bundesliga earlier this week, the club said on Wednesday. After the change in ownership it has initiated an economic turnaround program targeting to be profitable in the 2024/25 season. 

For now, the club has received the consent of its two largest bondholders, which hold about 22% of the nominal amount of the bonds, it said in the statement. Noteholders have until June 19 to vote on the new terms and extend, and will be paid a 1% fee for consenting.  

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