‘Arsenal and Malcolm Glazer's Manchester United have two things in common: they share merchant banker N M Rothschild and will soon be battling it out for City finance. To finance Ashburton Grove, Arsenal have £260 million of debt on which they are paying 7.5 per cent interest. Depending on how much they get for their Highbury redevelopment, and excess land at Ashburton Grove, Arsenal will have debt over the next 25 years of £200 million-£250 million. They plan to finance this through a bond.
‘Stephen Schechter, chairman of Schechter and Co, who has advised a number of football clubs, told me: "The word in the City is that Arsenal are not going for a conventional bond but for a wrapped bond [a bond wrapped around an insurance policy]. This would be backed by a monoline insurance company giving it an AAA, AAA rating [the highest available]. Arsenal's income from all sources would be the security for the bond and the bond could be for 25 years. The advantage is it would be half the cost of a normal bond. Arsenal would have to pay a premium on the monoline insurance but it is still the best method of financing long-term debt."
‘Glazer's purchase of Manchester United means the club, who had no debt, now have debt of £283 million. Schechter says: "There is little doubt that Glazer would need to quickly refinance this debt. It is my belief that Mr Glazer is a very smart man and I would not be surprised if he went for this wrapped bond route. Manchester United are a bigger club than Arsenal, have a bigger stadium, and I see no problem in Glazer getting City support to refinance this debt."
‘But unlike Arsenal, Glazer's every move is hounded by a small bunch of committed fans led by Shareholders United, the group formed to thwart Rupert Murdoch's takeover. Their representative in America has complained to the NFL that United's reported plans for a casino at Old Trafford would conflict with NFL policy, but I understand this is the old board policy which Glazer is not said to be keen on.
‘Glazer is using four British-registered companies to own the club, but they could be rolled into Red Football Partnership based in Nevada and become very opaque. Perhaps, even more than Arsenal, who, more than a decade after they did their deal with the Bank of Scotland over the bond issue to redevelop the North Bank, have still not told shareholders the details. It is said the deal gives the bank an interest in the income generated from up to 8,000 seats in Highbury.’