The Hindu Business Line : Wimbledon Debentures — A passage to the Centre Court

"FOOLS lend; greater fools repay," goes a Chinese proverb. Borrowing of course is an age-old practice and it has been serving mankind as an admirable and handy tool to tide over pressing needs. But it is not an unmixed blessing; it has an inconvenient and, to many, dark and sinister side to it: What is borrowed is to be returned! Money lending, however, has always been viewed in a negative light. Moneylenders are portrayed as greedy, hard hearted and usurious Shylocks who demand a pound of flesh. As Shakespeare in Hamlet says: "Neither a borrower nor a lender be; loan oft loses both itself and friend; and borrowing dulls the edge of husbandry."

The world has come a long way from such sound but impractical sentiments; lending and borrowing have become a powerful actuator of economic activity leading to the formation of capital markets where governments and businesses raise the money required to fund their activities. Among debt securities, bonds and debentures are the most widely used means of raising funds in the capital market by governments and businesses for financing investments that will generate public benefits and profits respectively.

The size of the bond market worldwide is over $36 trillion. Bonds and debentures, classified as fixed income securities, are often thought of as dull and low-risk instruments ideal for conservative investors who look for safety of capital and regular income. Equity-linked or convertible bond or debenture is a type of security which confers on the investor an option to exchange it for the issuer's shares at a predetermined time, price and conversion ratio and hence its price is normally more volatile.

It is the money raised through debentures that enabled the All England Lawn Tennis and Croquet Club to create the magnificent Wimbledon tennis complex occupying more than 42 acres in London. Wimbledon Debentures today are a different cup of tea. They are unquoted and illiquid; they give no interest; they are an unsecured debt; and they carry a high premium. Each Debenture, however, entitles the holder to a free reserved seat in the Centre Court Stadium along with some fringe benefits.

It all started after the First World War when life returned to normal and Wimbledon resumed play. The appearance of two magnificent and charismatic players — Suzanne Lenglen of France and William Tilden of the US — created an overwhelming demand for tickets at Wimbledon. The All England Lawn Tennis Club, with admirable foresight, decided to build a more spacious and modem tennis complex to meet the growing demand for tickets. So, in 1920, Wimbledon `A' and `B' Debentures of £50 each came into being to raise £1,00,000 to acquire land and build new facilities at Church Road, Wimbledon. The `A' Debenture carried an interest of 7.5 per cent per annum with the right to purchase one seat in the Centre Court Stand. The `B' Debenture carried no interest but conferred on the holder the right to one seat in the Centre Court Stand without payment.

Now, Centre Court Debentures are issued every five years to raise funds required for enhancing and refining upon the facilities in the superb tennis complex. The Wimbledon Championship has grown to an enormous stature from the humble beginnings and the demand for its tickets far exceeds the supply. A large number of tickets for the Centre and the First Courts are sold through a public ballot and a limited number issued for the day of playing to those queuing at the ground. All the same, the premium now charged on its Centre Court Debentures takes one's breath away.

The All England Lawn Tennis Ground p1c, jointly owned by the All England Lawn Tennis Club and The Lawn Tennis Association, issued 2300 five-year (2001 to 2005) Centre Court Debentures at £23,150 each made up of £2000 nominal value (returnable on August 1, 2005), £18,000 premium and VAT (Value Added Tax) of £3,150 and thus raised £41.4 million through premium. For each debenture held, the holder is entitled to a free seat in the Centre Court Stand for each day of the championships for five years comprising 65 match-days. Thus, the cost of debenture seat per match day works out to £325.

The price of normal Centre Court ticket announced for the ensuing championships ranges from £30 (first day) to £75 (men's final). The debenture holder enjoys the status of a privileged spectator with access to exclusive lounge, bar and catering facilities apart from being eligible to enter a ballot for a car parking space on payment of a small fee. Debenture tickets are the only Wimbledon tickets that are legally transferable. Barclays Capital Ltd. and UBS Warburg act as market makers for the current series of Wimbledon Debentures.

For the benefit of the public, the prices at which the latest transactions in the Debentures have taken place are advertised in the London Financial Times on the first Saturday of each calendar month. Price of Debenture fluctuates widely and it has now firmed up because the 2004 championship is round the comer. Details of the three most recent transactions in the Centre Court Debentures reveal that they have been traded at an average price of £23,166 each, which reflects a premium of £12,706 or 121 per cent over the pro-rata adjusted issued price. At this rate, each Centre Court Debenture seat will cost, on an average, £ 814 per match day. In 2001 and 2002, Debenture seats for the men's singles final were reportedly traded at £3,000 each in the fond expectation of Tim Henman, the British star, reaching the final and he is still very much around. Buoyed by the success of Centre Court Debentures, Wimbledon started issuing from 1997 First Court Debentures with more or less the same features but at a lesser premium.

In a recent press release, Wimbledon announced that it will be issuing up to 2300 five-year (2006 to 2010) Centre Court Debentures on the same terms as applicable to existing series. This issue is going to be momentous for the proceeds thereof will be partly used for constructing over the Centre Court a new, modern and lightweight retractable roof, which will enable all-weather play on that court.

Grass, Royalty and rain are central to Wimbledon tradition and, of these, in a few years, rain along with the sea of umbrellas in bewildering colours and designs will cease to be relevant as far as the Centre Court is concerned.

(The author, a former Davis Cup player, is Vice-President, Tamil Nadu Tennis Association.)