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.