Creditreform Rating has affirmed the solicited SME issuer rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. at B-. The outlook for the rating changed from stable to positive. For more details regarding the rating, please refer to the rating summary below.
Creditreform Rating has confirmed the SME issuer rating of the football club Gelsenkirchen-Schalke 04 e.V. hereinafter also FC Schalke 04 or S04 - with B- in its annual rating update. The previously negative outlook was raised to stable.
The entity´s creditworthiness is still seen as low and continues to indicate corresponding risks for the highly indebted and equity-weak professional club. However, according to the analysts' assessment, since the last rating action in March 2021, the S04 has succeeded in implementing and settling important measures and tasks to overcome the adverse effects of the pandemic and the relegation to the Bundesliga 2.
These include the extensive restructuring of the squad to adjust salaries to the Bundesliga 2 level and the associated transfer revenues, recognizable cost discipline, the profitable sale of the Esport spot in the "League of Legends" European Championship, the foreseeable orderly completion of the Berger Feld II construction project and the acquisition of sponsoring contracts and credit lines. Another positive factor is that FC Schalke 04 timely repaid its bond tranche of around EUR 15.9 million due in July 2021 and was able to raise almost EUR 10 million by issuing a new bond, mainly from the club´s stable membership base. Since the last rating, the pandemic conditions for the S04 have improved in such a way that it is now possible to return to almost normalized match operations with spectators, merchandising and catering. However, the renewed increase in the number of infections indicates that there are still high exogenous risks for the S04.
Management's financial policy includes the objective of further debt reduction. The club has financial options of a relevant magnitude to compensate, at least temporarily, for any financial bottleneck that may arise. Based on an already highly negative equity, the annual loss expected by the analysts for the current fiscal year 2021 has a limiting effect on the rating. The stable outlook reflects our expectation that key financial indicators will remain relatively flat in 2021 compared to previous year. The further economic and financial development of S04 remains largely determined by the athletic success of the professional team. Although represented in 5th place in the top section of the Bundesliga 2 after 13 match days of the 2021/2022 season, the athletic development does not currently lead the analysts to expect either a further deterioration (relegation to the Bundesliga 3) or a direct re-promotion of the S04. These circumstances also stabilize the rating at the current level.
Without deriving any impact on the assigned rating from this so far, the analysts note positively that the S04 has implemented and initiated measures and actions in terms of improving its sustainability, which relate to the environment, social responsibility and governance.
Creditreform Rating has adjusted the SME Issuer Rating of the football club Gelsenkirchen-Schalke 04 e.V. - hereinafter also referred to as S04 - from B to B- with a negative outlook. This means that the rating is on the threshold of a barely sufficient creditworthiness. We thus note increased credit risks with regard to S04. Significant for the downgrade is the deterioration in the financial development and the rating-relevant financial key figure analysis - already apparent in advance - and proven by the audited consolidated financial statements 2020, as well as the constant uncertainties arising from the COVID-19 pandemic. In addition, the club's athletic and financial prospects have deteriorated further with the likely relegation to the 2nd Bundesliga. Revenue, cost and financing components remain dependent to several variables in relation to the coming season, which determines the outlook of the rating. The asset, financial and earnings situation of the already financially weak club could be adversely affected by an unfavorable development of these variables. S04 is currently working on courses of action in order to be able to implement them in the event of negative developments and to compensate for the financial effects.
Creditreform Rating has downgraded the SME Issuer Rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. from B+ to B with the addition Watch NEW.
Due to increased uncertainties regarding the athletic perspectives and further developments of FC Schalke 04´s assets, financial and earnings position beyond the current 2020-2021 Bundesliga season, we have adjusted the Rating downwards as well as withdrawn the negative outlook and replaced it by the addition Watch NEW (watch negative).
Creditreform Rating has downgraded the SME Issuer Rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. from BB- / Watch NEW to B+ with negative outlook. With the present rating FC Schalke 04 is attested to have a moderate level of creditworthiness. The downgrading of the rating is mainly due to the significant impairment of operating activities from the COVID-19 pandemic, which is an additional burden on FC Schalke 04's assets, financial and earnings position, which has already deteriorated in 2019. The Corona-related decline in sales and earnings has resulted in a noticeable need for liquidity, which has so far been compensated by cost-cutting measures and the use of existing credit lines. However, the financial room is very limited, especially since short-term liquidity foresees further borrowing, which contractual completion is nearing finalization. A deficiency guarantee required for this from the State of North Rhine-Westphalia was issued on 27 July 2020. The limited financial room and the fact that FC Schalke 04 failed to qualify for an international competition once again has a negative impact on its sporting outlook and thus also on its future business outlook. We have a particularly critical view of this considering the current and in the following years increasing debt, which derives from the investments in the infrastructure project Berger Feld II, whose investment budget was significantly increased at the end of 2019. Due to the continuing uncertainties with regard to the further development of the asset, financial and earnings position, we consider the outlook to be negative.
Creditreform Rating has assigned the SME Issuer Rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. (BB-) the addition "Watch NEW". The reason for this are the negative effects of the COVID-19 pandemic, which is spreading very dynamically and has already led to a three-week interruption of the Bundesliga until at least April 2, 2020. Based on current information, the Bundesliga is to be suspended until at least 30 April 2020. Since the date for a continuation of the 19/20 season - also in the form of matches without spectators - is currently not foreseeable, FC Schalke 04 is facing a significant impairment of its operating activities with corresponding consequences for its assets, liabilities, financial position, and profit or loss. The extent of these adverse effects cannot be adequately estimated at the moment and will depend on the duration and severity of the pandemic, but also on governmental and institutional guidelines and supportive measures.
Creditreform Rating confirmed the SME Issuer Rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. with BB-. The outlook is stable. Decisive factors for the long-standing stable risk assessment have been the good market and brand positioning, the continuing popularity of football and the good youth development, which forms the basis for a long-term stable development. The successful 2018 financial year led to a significant improvement of key financial figures as well as the financial and liquidity position and thus had a positive effect on the rating. However, the weak performance in the Bundesliga season 18/19 and the weak forecast for the current fiscal year dampened the rating assessment, especially as the increased volatility of the sporting and therefore economic development of FC Schalke 04 implies additional uncertainties.
Creditreform Rating has confirmed the corporate rating of Fußballclub Gelsenkirchen-Schalke 04 e.V. at BB- with stable outlook. Despite a positive development of the major operative revenue sections, FC Schalke 04 registered a significant decline in revenue and a net loss in the financial year 2017. This was mainly caused by reduced transfer income and one-time effects in the course of the restructuring of the coaches and the team. Due to the simultaneous increase in debt, the financial ratios have deteriorated. The successful 2017/2018 season and the participation in the Champions League in the next season give reason to expect a positive business development in 2018, so that we take into consideration the leveling of the effects in the rating. In addition, the positive industry development and the good market and brand position of FC Schalke 04 have a stabilizing effect on the rating. The planned conversion of the club grounds (Berger Feld) with an investment volume of EUR 95m comes along with an increased financial liability which makes a stable sporting and economic development necessary.
Creditreform Rating has confirmed the corporate rating of Fußballclub Gelsenkirchen Schalke 04 e.V. at BB-. The outlook is stable. With this, the positive annual result in 2016 and the reduction of the financial debt have been acknowledged. On the other hand, the negative equity and high indebtedness as well as the risks related to the business model have a dampening effect on the ratings. Due to these reasons and the fact that the club will not participate in any international competition in 2017/2018 it was not possible to improve the assessment.