SAD will have to add an addendum to the prospectus to clarify the president's situation. Investors have until the 16th to revoke buy orders.
The news of the arrest of the president of Benfica came in the week that the €35 million bond issue by the SAD was launched. This situation will force the Portuguese club to provide additional information to investors and may stir their appetite for the operation. Orders can be revoked until July 16.
Issuers, Benfica SAD, always have to list the risks that investors face. And, in this case, there already feature the cases in court, which have been frequent in recent years. In the prospectus, Benfica warns that “any lawsuit of a judicial, arbitral or administrative nature pending or that may be filed in the future against the Issuer, taking into consideration, namely, aspects such as its relevance and duration, may have effects on the Issuer’s reputation and image and may imply adverse consequences at several levels in the development of its activities.”
Luís Filipe Vieira’s arrest on Wednesday, on suspicions of qualified fraud, aggravated abuse of trust, falsification of documents, money laundering and qualified tax fraud, is a materialization of the risk mentioned in the prospectus.
The relevance of the situation forced the SAD to issue, still on Wednesday evening, a statement, informing that an addendum would be made to the emission’s prospectus, whose subscription period ends on July 23.
Investors, who have already given a buy order, have until 3 p.m. on Friday the 16th of next week to cancel it if they choose to do so.
Lower investor appetite?
Clubs’ bond issues are usually competitive, with orders exceeding the amount of the offer, allowing the issuer to increase the overall value. That was what happened in the previous operation, in July 2020, when Benfica increased the amount from 35 to 50 million. This time, the latest news may stir the appetite of savers, as they see it creating noise about the future management of the club. On the stock market, SAD bonds retreated yesterday by 5.5%, in the biggest drop since March 2020, and by another 0.7% on Thursday.
From the statements of Benfica’s CEO in an interview with TVI24/ECO, the SAD’s intention would be, also this time, to increase the offer, since it considers that the 35 million would be the initial value. “We will try to move forward with this bond loan at the beginning of next week, there are still small details to be settled, but the initial value of the offer is €35 million and it will have an interest rate of 4%”, said Domingos Soares de Oliveira. The possibility of increasing the amount can be exercised until the 13th.
The operation is important for the SAD since it has to repay, on July 16, €19.98 million of a 2018 issue, which in December 2019 had been subject to early repayment of €25.02 million. The liquidity achieved may also be relevant for the period of player transfers, allowing to have cash on hand between payments and receipts.