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.

COMPANY REPORTS

FTSE100
Private equity firm 3i will be implementing the IAS27 despite reports to the contrary. It had been suggested that 3i would not consolidate its accounts because it was a private equity firm. A spokesman confirmed that the group was applying the standard to its accounts for wholly owned group companies. But 3i will not be consolidating the accounts of companies in its investment portfolio, as it does not own more than 49% of these businesses.

FTSE250
Reporting a drop in pre-tax profits from €23.8m (£16.2m) to €7.9m, car rental group Avis Europe revealed that it had been adversely affected by its capital restructuring exercise. Avis Europe booked a €5.8m restructuring charge into its accounts because of the costs incurred in addressing a distributable reserves deficit.

AIM
The owner of the Elle fashion line, Actif Group is planning to slice its overheads by 20% and cut its head office workforce because of tough retail trading conditions. The fashion company said retail sales for the six months to 30 July were 14% down on 2004 figures. As a result, Actif is expecting to record a pre-tax loss of £450,000. Mark Evans, the group’s CEO, said: ‘We will seek further opportunities to reduce our cost base without compromising our core strengths.’

Sierra Leone Diamond Company has revealed its interim accounts have not been audited, and that the company’s management was responsible for the financial statements. The group, which raised $34.4m (£18.8m) when listing on AIM, reported a net loss of $1.8m for the six months to the end of June 2005.

FTSE ALL-SHARE
Aerospace and defence company Chemring has increased its short-term gearing to approximately 85% in order to fund its £22m acquisition of Troon Investments. The group funded the acquisition utilising new loan facilities with the Bank of Scotland. Chemring finance director Paul Rayner said that, although debt would increase in the short term, the cash generated by the enlarged group would reduce gearing levels by 2006.