Published by Financial Times.

Leicester City Football Club, the team which won the Premier League against all the odds in 2016, uploaded a new filing to Companies House on Friday.

The document highlights a trend in the upper echelons of football: transfer fee factoring. A common practice at industrial companies, factoring is where a bank effectively helps a supplier to get paid early, by lending against payments due from a customer.

In this case, the product being sold was Riyad Mahrez, in a £60m transfer of the player from Leicester City to Manchester City in August. Australian investment bank Macquarie, provided the factoring.

It was a lot of money for Leicester, who in the financial year to May 2017 recorded £80m of profit, according to their most recent accounts. As that year included Leicester’s sole foray into the Uefa Champions League, which along with operatic theme music brings higher television revenues, it is likely 2018 profits were lower.

The club wasn’t due to get all the of the £60m up front, however. The deal was structured in instalments, with Manchester City due to pay £36m in two £18m tranches, on 31 July 2019 and 2020, respectively.

Cue Macquarie, who have provided a secured borrowing facility against the £36m of receivables. Leicester gets access to the money up front, and Macquarie will receive the transfer fees directly from Man City.

Typically in factoring the money received by a club is at a discount to the receivables due, so the funding party receives some compensation from taking on the repayment risk. Macquarie declined to comment, and no one at Leicester was available to comment. According to Richard Price of sports financiers New Century Finance, the discount is often in the 4 per cent to 5 per cent range.

In Man City’s case, the risk of non-payment (and hence the fee) is likely to be lower than for many clubs due to the backing of Sheikh Mansour, the Abu Dhabi royal.

Transfer factoring has been commonplace in English football since the early 2000s, according to Price. Since then, transfer fees in English football have exploded, with rising television revenues and ticket prices often cited as reasons.

Yet arguably, factoring has also played a part. Stretching payments into the future has perhaps encouraged clubs to think they can pay more for players, and those selling to accept longer instalment plans in the knowledge an investor will turn the deal into an immediate payday.

So with television revenues set to rise for the foreseeable future, according to Deloitte, it seems a drop in transfer fees is a still a long way off.