Soccer debentures in Brazil have introduced an innovative financing mechanism tailored for corporate entities, particularly Brazilian soccer clubs organized as “Sociedade Anônima do Futebol” (SAF) or “Football Corporation” in a free translation, bringing a fresh approach to the financial management of sports teams. This initiative was established under Law No. 14,193, enacted on 6, August 2021.
Debentures are financial instruments issued by corporations to raise capital directly from the market. In the context of soccer, “Football Debentures” (Debêntures-Fut) arise as a new alternative to mitigate the financial challenges that Brazilian soccer clubs often encounter. Given the cultural significance of football as a national passion, clubs incur substantial expenses in sustaining their teams, infrastructure, and player salaries. Due to the seasonal nature of revenue streams, clubs may experience periods of cash flow difficulties.
The concept of football debentures revolves around clubs issuing debt securities, which investors in the financial market then purchase. The capital raised from these football debentures is intended for the advancement of club activities or for settling expenses, costs, or debts pertinent to the standard operations of the SAFs (football corporations). As compensation, investors earn interest on their invested capital, thereby becoming creditors to the clubs. These interest rates must at least match the updated yield of savings accounts and are to be disbursed at regular intervals.
The issuance of debentures, as stipulated by the Law 6,404/76, requires approval from the company’s general assembly. This body also determines the terms of the issue, including:
- (i) the total amount of the issuance and its limit;
- (ii) the quantity of debentures and their face value;
- (iii) the provision of any guarantees, where necessary;
- (iv) terms for monetary adjustment, where applicable;
- (v) options for conversion into shares;
- (vi) the schedule for maturity, amortization, or redemption;
- (vii) the timing and terms for disbursing interest, profit participation, and redemption bonuses, where relevant; and
- (viii) the procedure for subscription or sale, as well as the classification of the debentures.
In the particular context of SAFs, the interest payments must not be lower than the annualized yield of a savings account rate, with an added provision for variable compensation tied to the performance or assets of the SAFs.
Additionally, these football debentures are required to be recorded in a registry system sanctioned by either the Central Bank of Brazil or the Securities and Exchange Commission of Brazil (CVM), within their respective regulatory domains.
This measure has the potential to establish a more consistent source of financing, less reliant on the volatility of the player transfer market. Furthermore, the fiscal transparency required for the issuance of debentures could lead to more prudent management of resources by the clubs.
The widespread adoption of football debentures will rely on various factors, such as the clubs’ reputation, their financial management capability, investor interest, and the overall economic stability of Brazil. The successful deployment of this financial instrument could spell a more secure future for Brazilian football, ensuring the clubs’ stability while simultaneously enhancing private sector engagement in the governance of the nation’s most cherished sport.