Losing My Inheritance
Apr 24th, 2007 by 'holic
“Hello Dad, how are you?”
” Alright boy, and you? What’s all this business at the Arsenal about then?”
I love being called ‘boy’ after half a century! Dad is obviously the reason I bleed red. He will be 85 on Saturday and now lives in retirement in Devon. He’s probably forgotten more about business, and Arsenal, than I will ever know.
His question is genuine enough. My explanation doesn’t satisfy him. After all he has been retired for twenty years. “That can’t be right son, if he has to borrow the money to buy a business that already has a large debt, he will have to borrow enough to repay that and pay the existing shareholders. If he got into a position to launch a bid and everybody accepted he would be in for the thick end of nine hundred million.”
His business acumen is savvy enough after a lifetime with blue chip companies, but after twenty years the sheer size of the sums in relation to the collateral is what is beyond him. I don’t need to explain leveraged buy-outs to him, but I do need to assure him that there are lenders out there now who will happily provide that level of funding to buy a football club.
Forty years ago, he points out, Arsenal stretched themselves to find £80,000 to put 5200 seats underneath the West Stand at Highbury. Then fifteen years ago we went cap in hand to the supporters to fund the £16.5 million North Bank Stand, and only succeeded in selling bonds to the value of about a third of that. A couple of years ago we had to almost beg to get a consortium of banks to put up the initial £260 million to build the Grove, a loan that was converted to bonds only last year.
“Ok, assuming he gets the money, who repays it, and how?” Well there’s the clever bit Dad. The debt will fall on the club. Hopefully the television deals will continue to increase in value, then Mr Kroenke will make enough to pay the interest, take his cut and with a bit of luck repay some of the capital. When he no longer gets his cut he sells up, or, if he cannot find a buyer, well let’s not even go there.
“I thought the current board had sorted out a bond issue so the stadium debt is sorted by 2020 anyway, and with the property developments close to yielding additional returns why would they walk away now?” By all accounts they don’t want to Dad, but it’s a fragile grip they have now. Their best hope is the twelve percent of shares that are held in ones or twos by supporters. If half of those stay loyal then we are fine, for now!
“For now is right son. I’m on my third generation of Hill-Wood’s and Bracewell-Smith’s now. There can’t be many left!” Actually there’s not, he has a point. It won’t be long before Arsenal has to be sold, but please not to this man, using our money.
Unless you can convince us otherwise Mr Kroenke?
One Response to “Losing My Inheritance”
The current board are not running Arsenal as a business but saddlling the club with 3/4 billion pounds of debt is worse.
The current board has not clearly articulated the dangers that would confront the club if a levereged buyout occurs. A lot of supporters see the dangers but it seems a lot more think that sugar daddy is coming.