Question

Read below the attached newspaper article on the Foreign Exchange losses of the UK Premier whether a forward selling of projected sales and conversion to pounds or a collection of options contracts would have solved their exposure problem and describe what kind of foreign exchange risk they face.

Travel & leisure English Premier League faces record £312m loss MURAD AHMED, ROGER BLITZ AND PHILIP STAFFORD - LONDON The Premier League is set to announce a record loss after new accounting rules and the declining, value of sterling forced it to declare the cost of protect- ing itself from the currency risk attached to its lucrative TV contracts. The organisation behind the top tier of English football will reveal a pre-tax loss of £312m when it releases annual results, according to documents seen by the Financial Times. Next week, Companies House will publish the Premier League's filing for the financial year ending July 31 2016, which covers the 2015-16 season. For many years the TV contracts that have fuelled the league's boom have been paid in sterling, dollars and euros with the company paying the league clubs in sterling and using derivatives to manage the exchange rate risk. Last summer was the first time the league was required to present results under new UK accounting standards that changed the reporting for deriva- tives. Companies using hedges to insure against unexpected or adverse moves in currencies had to value contracts annu- ally at market prices, instead of making a final record once deals had matured. Premier League may crystallise its On the last day of the Premier losses when they run out. League's financial year, July 31, the The UK's Financial Reporting Council pound stood at $1.32, a 12 per cent has warned companies they face com- decline since the EU referendum. Thatplications surrounding the reporting of turned what would have been a gain of results following the Brexit vote, such as £638,000 under the old standards into a the effect exchange rates may have on £250m paper loss, the Premier League financial instruments. said. It insisted that the figure had no The Premier League gains substantial impact on its real income or operations, income in US dollars and euros, mainly or on its ability to pay the clubs. through the sale of international broad- The Premier League has a number of casting rights. This season, clubs in the hedging contracts lasting for periods up league will benefit from their split of an to three years and maturing at different estimated £3bn from overseas rights times. Some of these remain open. If deals. exchange rates remain stable then the Revenues continued to increase, reaching £2.04bn, up from £1.99bn. It will have more cash this year, thanks to its £5.1bn domestic television rights deal with Sky and BT. The English group's earnings outstrip rivals across Europe. Last June, Ger- many's Bundesliga signed a four-year broadcasting deal with Sky and Eurosport for €4.6bn-a record for Ger- many's top division. The Premier League distributes the vast majority of its income to its 20 member clubs, as well as making other On target: the UK top tier's earnings payments to support "the English foot- outstrips rivals across Europe ball pyramid", which includes lower leagues and grassroots football.

Answer 1

The GBP and EUR exchange rates represent the indulges between the two biggest economies in Europe: the Eurocurrency zone and the United Kingdom. These areas are much more sensitive to changes in monetary policy between the Bank of England and the European Central Bank.

The confidence in the economy of the euro-area has grown for the fourth consecutive month in March and has reached its highest level since July 2011, according to data from a monthly survey by the European Commission.

As fall in value of Pound is expected , to a noticeable financial impact on English Premier League football clubs in this year’s January transfer window. The UK currency is at its lowest level against the US Dollar since 1985 following the Brexit vote with pressure being maintained ahead of Brexit negotiations.The implication for international transfers has been notable as Brits lose purchasing power on the global market.

Does forward selling of projected sales and conversion to pounds or a collection of options contracts would have solved their exposure problem ?

As per the English premier league challenge the deal with the half run contracts and some hedging contracts may be use for the nearby loss set-off . The loss will not create a impact on the premier to pay its debts and routinely expenses including footballers pay-off.

SO how does it impact the currency exchange ?

As the loss occured is very large s compared to exchange data it will create a downfall and some risks including currency loss but the impact will notlast long as the contracts for future losses will set off any duly currency defict.