The Arsenal Supporters Trust isn’t happy « Untold Arsenal: Arsenal News, supporting the club, the players and the manager
By Phil Gregory
The Arsenal Supporters Trust isn’t happy.
A few weeks back they had a Q&A session with Ivan Gazidis that was feisty to say the least. Despite some of the usual football fan penis measuring “I’ve been a season ticket holder for TWENTY FIVE YEARS …” (therefore my view is more valid than yours, more so for the fact it is said very loudly, of course) there were some valid concerns raised amidst the noise. My favourite complaint was the usual harping on about how we need a defensive coach as Wenger can’t do it (Dear Sirs, please see: Invincibles, See: set piece stats overinflated by penalties etc. Do some research next time).
Anyway, I don’t particularly want to digress onto all that. Don’t get me wrong: I’m not intending to slate the AST here: I’ve had some excellent email exchanges with Tim Payton, their communications guy. I don’t necessarily agree with all they say or indeed most of what was said at the neck end of last season (guys, the clue is in the S of AST: get behind the lads until the season end) but I do believe they play a good role in representing the views of some football fans. Much credit to Arsenal for being so open with them. Meetings with the Chief Executive and various examples of access to the club show that Arsenal FC does a better job of connecting with its supporters than most.
Anyway, the main reason I’m writing today is that on Wednesday Tim Payton wrote an article for the Independent which you can find here if you haven’t seen it. It was a good read and I’d like to look at a few points in there, some of which I agree with, others that I don’t.
The first, well made point is about the lack of commercial revenue generated by the club. The long and short of it is that we got ourselves tied into front-loaded commercial deals (i.e. lump sums up front, so lower overall value deals) in order to minimise the debt and the resulting costs from it for the Emirates stadium. The commercial gap in regards to Manchester United (a good proxy club seeing as they are self-sustaining and are the target to overhaul in the Premier League) is large and needs to be addressed. Whether we can buy ourselves out of those deals as they wind down is open to debate, however. There may be penalty charges, or it may just be a question of securing enough additional money from a new sponsor to ensure there is profit after the early termination of the current deals. Additionally, an Asian tour is a good idea from a commercial point of view, but I was surprised at football fans effectively asking the club to commercialise even when at one point the manager believed it was at the detriment of team preparation. One to think about, there.
The second major point in the article was that of a share issue as part of a sustainable attempt to seek extra financing. The key phrase there is sustainable financing. Manchester City and Chelsea may be flying high at the moment, but what happens when their owners lose interest? I’m sure Portsmouth fans would swap their FA Cup win for Premier League football and a secure future right now.
So what is a share issue? While there are various complexities involved, the idea is that Arsenal FC issue more shares in the club, and current shareholders can buy them. Each shareholder may now for example own double the number of shares, but as everyone has doubled their shareholding, the proportion of each person’s ownership is unchanged. The club ends up with additional funding provided by the shareholders and the ownership structure changes.
While there is an argument our shareholders don’t finance the club and should dig deep, indirectly they do that by not taking their rightful dividends out of the club each season, something which gets forgotten when they are wrongly accused of money grabbing. Moreover, could small shareholders and the Arsenal Fanshare afford to get involved or would they see their influence further diluted?
The other question out of all this is would it be sustainable? There’s no point doing a share issue and getting £100m into the club, blowing it on transfers and then seeing the club in the red in no time. In the Independent, Tim makes the point that if the cash was used to pay down the debts it would be sustainable, as we could spend the money saved on interest.
According to the most recent figures I have, we’ve got £135m of bond debt costing us 5.3% and about £25m of debentures (basically bonds) that cost us negligible interest. Normally, a bond is repaid in full once it becomes due (unless you lent it to Greece) however there may be caveats that if we wish to pay it off earlier, we’ll have to pay extra money in addition to the face value of the bonds. I’m not sure of the situation in regards to our bonds specifically (if you do know please leave a comment) but the above situation applies to Manchester United’s bonds.
Would investors want their money back? Most are Arsenal fans, so if the move was dressed as helping the club, they might be happy to. Moreover, from a purely financial viewpoint, with the inflation rate so high at the moment (and unlikely to drop down in the medium term in my view) investors may be keen to get their cash back and seek a higher return (they’re making roughly 0.8% return once you take inflation into account). Whether they’ll be able to do that with interest rates as low as they are is another matter entirely.
So we may or may not be able to repay the bonds early, investors may or may not want the cash but it would save us around £20m, give or take. Sounds like a few too many ifs and maybes to be plausible just yet in my book, so don’t hold your breath.
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