Gunners need on-pitch success to pay off bond

The link between financial security and performance on the pitch has become even more important than normal for Arsenal after the announcement that it would be refinancing its new 60,000 capacity stadium at Ashburton Grove.

The refinancing has been secured against future ticket sales, which will make it essential for the club to succeed on the field to maintain robust attendance at matches.

Arsenal is refinancing its stadium with a £200m bond issue, accompanied by a £60m loan note, in order to retire bank loans that funded the construction of the new ground. The bond issue will be managed by Royal Bank of Scotland and Barclays.

Harvey Hoogakker, assistant director of debt advisory services at Ernst & Young, said securing a bond against ticket receivables was a common practice in the UK and Europe, but warned that it was important for any club doing so to succeed and keep fans coming through the turnstiles.

‘Lazio, Real Madrid, Leeds United and Leicester City have all used this type of asset-backed bond. It is not an unusual practice, but if a club does not perform well and attendances drop, it will battle to repay debts,’ Hoogakker said.

The bond issue will provide Arsenal with more flexibility in how it manages its debt, providing the FA Cup holders with a longer tenor to repay arrears. Bank loans typically have a life of three to five years, but bond issues can last in excess of 10 years, which reduces the pressure to make repayments.

Hoogakker said bank loans were usually used as a ‘bridge’ to bond issues, which typically take longer to put in place.

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