British racetracks reluctant to take on more debt
The reluctance of racetracks to take on more debt, and in some cases restrictions on their ability to do so, have meant that UK races are expected to receive only about half of the £ 40million made available to them during the race. the winter phase of government. sport survival package.
Instead, as part of a tailor-made arrangement for the race, a £ 21million loan is now being borrowed by the Levy Board to help fund the sport during the pandemic. It will pay for previous expenses such as race day integrity costs and health and safety expenses, and allow the board to continue its program of financial support and funding for the industry.
The government had initially earmarked £ 40million for races, which were to be targeted at racetracks, of the £ 300million made available in November for major spectator sports severely affected by the coronavirus restrictions.
However, the chains had refused to take on more debt, having had to settle their own credit agreements in the months leading up to the government’s announcement last fall.
Racecourse Association CEO David Armstrong said on March 29: “There were structural challenges which meant in particular that it was very difficult for racetracks to borrow money. does not generate a return to pay it back.
“However, the bigger problem was that a lot of racetracks didn’t want to take financing because they already had significant debt on their balance sheets, and they increased that debt during COVID by significant enough to help them survive.
“What they didn’t want was to take on more debt with more repayment obligations in the future, which would have made life very difficult for them. In some cases, they couldn’t, there was restrictions in their existing borrowing rules which meant they could not take out new loans. “
Armstrong said the £ 21million figure reflected the Levy Council’s spending since October in areas outside of cash prizes, such as integrity costs, veterinary research and human welfare.
He added: “One aspect was that the government was not too keen on giving away funds from this pot that went directly into cash prizes. This is to replenish the Levy Board. for the amount of money they’ve spent since the beginning of October. “
British Horseracing Authority chief executive Julie Harrington expressed the sport’s gratitude to Sport England, the Department of Digital Culture, Media and Sport, and the Treasury, for agreeing to the funding, unlike other sports, or in fact paid to another government agency. in the form of the Levy Board.
Harrington added: “We also thank the Horserace Betting Levy Board for accepting our proposal and borrowing this money to support the central funding of the races.
“This money will help ensure that the races continue behind closed doors despite the lack of income for spectators. This will benefit our racetracks, our participants and their communities, and the vital role racing plays as an employer and contributor to the rural economy.
Julie Harrington, Managing Director of the BHA
Alan Delmonte, Managing Director of the Horserace Betting Levy Board, added: “The loan provides additional flexibility and a cushion for the Levy Board. This short-term benefit outweighs the cost of interest on the loan, which will be incurred and owed. be repaid at the same time as the loan amount in the years to come. “
A new £ 300million summer sports survival program was announced in the latest budget, which ministers said would help sports like cricket, tennis and running. The government said further details of the program will be announced by Sport England in the coming weeks.
Culture Secretary Oliver Dowden said of the latest support package: “We have promised to stay away and protect our core sports-spectators when we have to postpone the return of fans.
“Through our Sport Survival Program and existing business support programs, we have helped hundreds of clubs survive this difficult winter time. As the turnstiles begin to open over the next few weeks, players, staff and supporters across the country can now expect a full return to action with confidence. “
The key questions:
How and when will the £ 21million be deployed?
The Levies Council has not yet received the money from the government. The loan is given to replenish expenses that the board has already made and should be treated as a recharge of its reserves. It is likely that the races will make a recommendation to the Levies Council in the coming weeks with proposals on how the money should be spent. The Levy Board has already made funding commitments until the end of June, so a question will be whether the loan money will come into play at that time.
Will this mean an increase in prize money?
While race proposals have not been finalized, it is expected that a significant chunk of the £ 21million will be made available for cash prizes at a time when, even with the hope that the crowds are starting to return, the finances of the racetrack will always be under pressure. The fact remains that the money will have to be repaid.
What is the interest rate and over what period will it be repaid?
The standard terms of the loan are that it has a 10-year term with a two-year leave and eight-year repayments at an interest rate of 2%. Debt and interest incurred will have to be repaid from future income from direct debits.
Will there be more loans under the summer program?
As a result of the budget, it was announced that running was one of the sports ministers had in mind that could apply for new loans as one of the sports affected by the coronavirus restrictions during summer. However, Armstrong said the sport had yet to receive guidelines for the latest package and was unable to assess how best to access additional funding.