Mohamed Salah of Liverpool will be challenged by Isco of Real Madrid during the UEFA Champions League quarter-final second leg between Liverpool FC and Real Madrid at Anfield on April 14, 2021 in Liverpool, England. Both clubs take part in the new European Super League. Photo: Shaun Botterill / Getty Images

The announcement of a breakaway league at the top of European football has put one of the world’s largest banks in the spotlight.

JPMorgan Chase (JPM), the American financial goliath, is behind the funding of the European Super League, the controversial new football competition made up of the continent’s most famous clubs. The budget for the new competition is expected to be between USD 3.8 billion (GBP 2.7 billion) and USD 5 billion.

A spokesman for the bank confirmed it was working on the deal but declined to provide details.

The transaction is a coup for JPMorgan. It’s likely the biggest sports finance business of 2021 and should fetch heavy fees. The Financial Times reported that the bank will charge an interest rate of 2% to 3% on the debt.

Tim Bridge, a director at Deloitte who produces an annual report on football’s finances, said the funding deal was “one of the greatest of all time” and “a pretty seismic shift”.

The JP Morgan logo at the entrance to a glass office building in Midtown Manhattan, New York, USA on January 23, 2020. Photo: Nicolas Economou / NurPhoto via Getty Images

The sports business has been a rapidly growing market for the past several decades as TV distribution deals have skyrocketed into the billions. The growth of the market has drawn private equity investors, sovereign wealth funds, and bankers eager to lend money.

“That’s been most noticeable in the last three or four years,” Bridge told Yahoo Finance UK. “The interest we see from private equity firms and banks in looking at sport as an investment opportunity – there are a lot of people who do.” bet on the further growth of the sport in the coming years and hope so. “

JPMorgan is America’s largest bank, with over $ 3 billion on balance sheet. Its extensive business encompasses everything from retail banking – under the Chase brand – to investment banking and corporate loans.

CONTINUE READING: Juventus and Manchester United share rally according to plans of the European Super League

JPMorgan’s sports finance team was formed in the late 1990s and grew out of his private bank’s work with wealthy team owners. The team is still based in JPMorgan’s private bank – a division tailored to meet the needs of the extremely wealthy.

The story goes on

One of the biggest customers is Stan Kroenke, the billionaire of Arsenal FC, Los Angeles Rams and Denver Nuggets. JPMorgan has loaned Kroenke $ 2 billion to fund the Rams’ Inglewood Stadium project. This is according to a profile of Brian Kantarian of JPMorgan recently published in the New York Business Journal.

Stan Kroenke, owner of the Los Angeles Rams and the largest shareholder in English Premier League soccer club Arsenal, stands on the pitch ahead of an NFL soccer game against the Arizona Cardinals at Twickenham Stadium in London on Sunday, October 22, 2017.  (AP Photo / Matt Dunham)

Stan Kroenke, owner of the Los Angeles Rams and the largest shareholder in English Premier League soccer club Arsenal, stands on the pitch ahead of an NFL soccer game against the Arizona Cardinals at Twickenham Stadium in London on Sunday, October 22, 2017. Photo: AP Photo / Matt Dunham

“Given the capital-intensive nature of sports ownership, it is imperative to understand the financial interplay between the team and the individual owner,” Kantarian, a member of JPMorgan’s sports finance group, said on the bank’s website.

The bank promises to “help sports teams and owners … secure the tailored funding you need for team acquisitions, stadium or arena construction, working capital, or any other liquidity needs.”

JPMorgan is an attractive partner for the European Super League due to its many years of experience in the sports finance market. So is the fact that the bank is American.

It is unlikely that the tiered league system traditionally favored by European sport – where teams are relegated and promoted each season – will have permanent members in the new Super League who cannot be removed from the competition.

WATCH: Juventus and Manchester United share rally on European Super League deal

The structure is much closer to American sport, where the teams that make up Major League Baseball, the National Basketball Association, and the National Football League are all set. JPMorgan will be very familiar with this type of line-up as it has worked extensively with American leagues and teams.

Bridge said the structure appealed to club owners for reassurance about revenue and “investment security”.

“If you own the owners of Liverpool this season and you don’t qualify for the Champions League, you will have a significant impact on your earnings for the next season while taking part in this competition will likely give them the security they crave . ” to preserve the value of their investment, “he said.

The shares of Manchester United (MANU) and Juventus (JUVE.MI) – two of the Super League’s founding members – rose Monday after the news broke.

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According to reports, the European Super League has held talks with Amazon among others about possible broadcasting agreements. Photo: zz / John Nacion / STAR MAX / IPx / AP

“Founding” clubs of the new European Super League – which include Barcelona, ​​Liverpool, Arsenal and Real Madrid – will each acquire a stake in a new company that will run the competition.

This top company will borrow billions from JPMorgan secured against future broadcast rights, the Financial Times reported. Early discussions about broadcasting agreements were with Amazon (AMZN), Facebook (FB), Disney (DIS) and Comcasts (CMCSA) Sky.

“It sounds like there will be some element of debt funding to give the clubs the guarantees first, but ultimately you’d expect a utility vehicle to be used to sell broadcast and sponsorship rights,” said Bridge.

The move for Europe’s biggest to break away from the national leagues comes amid a COVID financial crisis in football, against which even the top teams were not immune. According to Deloitte, the 20 largest sports teams recorded a drop in sales of 12% to 8.2 billion euros last year.

Bridge said the European Super League has the potential to increase revenue for top clubs but cautioned of risks.

“There is still a long way to go before you get there,” he said. “You have to develop a competition that doesn’t exist right now. Yes, there are all the biggest teams out there so it should certainly add value, but there are no guarantees and if you look at the fan base reaction today then honestly it is not particularly positive. “

Watch: London football fans react to the Super League project