Hertha’s call for help shows the true extent of the financial debacle
As of 10:53 a.m
Goodbye from the Bundesliga for a long time? A scenario that relegated Hertha BSC will end up in the regional league next season instead of in the 2nd division cannot be ruled out
Those: pa/contrastphoto/O.Behrendt
In search of economic stability, Hertha BSC is even forced to extend a bond worth millions. If that doesn’t work, a grim scenario looms. The club writes openly about total loss, bankruptcy and license withdrawal.
EIt’s not looking good for Hertha BSC, and maybe that’s even an understatement. The Bundesliga relegated team, which has gotten into financial difficulties, now wants – or rather has to – extend a bond of 40 million euros by two years to save the second division license. This was announced by the Berliners. A process has been initiated to extend the bond issued in November 2018 to November 8, 2025.
“With this extension, we would be able to stabilize and improve Hertha BSC’s financial situation next season. In addition, it would be an important and central building block in the DFL’s licensing process. That’s why quick approval and support would be of great importance to us,” explained Managing Director Thomas Herrich. According to the “Berliner Morgenpost”, the DFL has requested that this bond be extended, i.e. that a repayment be postponed. Hertha’s other plans to reduce costs, “especially in relation to player transfers – the DFL rejected because they could not be planned,” the article says.
How critical Hertha’s financial situation is, according to a report by “Kicker”, that passage in Monday’s bond investor update, with which Hertha points out to the bondholders the urgency of the intended term extension, makes it clear. It is “the most important outstanding financial component for Hertha to obtain the DFL license,” it says: “Due to the long-lasting negotiations with the new majority investor 777 Partners, the bond was not refinanced earlier.”
At the same time, the bondholders are informed of the possibility of a license withdrawal and total loss and the new deadline at the DFL is June 21: “With regard to the bond, the DFL licensing committee requires the issuer (Hertha BSC, d.Red.) that it will extend the term of the bond until June 21, 2023, as proposed. If the term of the bond is not extended by then as proposed, the issuer would have to prove to the DFL Licensing Committee by June 21, 2023 alternative financing or guarantees/sureties in the same amount as the nominal amount of the bond, which Hertha is currently working on however, are currently unavailable.”
And further: “In addition, the issuer will need further financing commitments or proceeds (eg from player transfers) in order to prove that it can meet its financial obligations in the next season. If the issuer fails to meet these requirements, it is likely that the DFL will not grant the license to the issuer.”
Investors are threatened with the following scenario: “If one or more of the framework conditions described above for the economic turnaround are not achieved or are not achieved in time, the issuer may become insolvent. In this case, the bondholders could lose all or part of their invested capital.”
Hertha lures shareholders with interest rate increase to 8.5 percent
The extension of the bond is to be accompanied by an increase in the interest rate from 6.5 percent pa to 8.5 percent pa from the interest payment date of August 8, 2023, as well as a reorganization of the liability structure permitted under the bond terms, the statement said. In addition, the repayment amounts are to increase until the final maturity, staggered by date. The voting period runs from May 26 to June 19, 2023. The result of the process will be published on June 19, 2023.
In the club’s calendar of duties, however, there is a neuralgic date much earlier. Hertha has to meet the economic requirements of the German Football League (DFL) by June 7, 3:30 p.m. in order to get the license for the second division. The club must prove its economic ability to act. The entry of the new investor 777 is also thoroughly checked for its compatibility with the 50+1 rule. The 100 million euros that Hertha is to receive from the US investment company are of existential importance. If the Berliners do not meet the requirements, there is a risk of falling into the regional league.
In the course of this, the club must significantly reduce personnel costs, which will happen, among other things, through the automatic salary reduction due to relegation. In addition, eight contracts are expiring, including those of Kevin-Prince Boateng (end of career), Stevan Jovetic and captain Marvin Plattenhardt. But the Berliners also urgently need to generate transfer income. Clear candidates for sale are Dodi Lukebakio and Lucas Tousart. Florian Niederlechner and Marton Dardai should and want to stay. For many other professionals, the future is open.
The Berlin way proclaimed in the spring means: more economical and with a focus on the strong own youth work. But sports director Benjamin Weber recently made it clear: “You will not play with eleven youth players in the second division. The mix is important there.” Experienced players will also be needed. Nevertheless, talents like Derry Scherhant, Julian Eitschberger and Pascal Klemens are firmly planned. Striker Jessic Ngankam, another homegrown player, is also to be retained.
The question is also where the Berliners will complete their almost six-week preparation. Larger trips to training camps in England and the USA, like last season, seem unlikely given the strict austerity measures. The only thing that is certain so far is that the second division will start on the weekend of July 28th to 30th – whether with Hertha is uncertain for the time being.
