Arsenal to Extend Loan Repayment Date
Arsenal has had a giant axe hanging them in the form of a loan in the region of £130million. This loan needs to be repaid by April 2010. The loan relates to the development of Highbury Square.
Unless anyone has been living in a cave for the last 18 months, the property market has collapsed, leaving the club with over 600 flats to sell. The idea was that the flats will be sold by summer 2009, the loan would be repaid this summer and either Wenger would be given the surplus, £100million, to spend on the team or it would be used to reduce the debt generated by the building of the Emirates.
That was the plan, and all was going well with over 90% of the flats “pre-sold” with people leaving a deposit of £1,000 to secure their dream home.
Reality set in and last October the club had completed the sale of 90 flats, generating £39million (this money was used to pay of part of the loan and monies owed to the contractors). Since October the cub have been silent on the number of flats sold, though The Guardian claims that we have managed to sell a further two flats since then.
The club insists that the development is ring-fenced from the footballing side of the business, so in theory if the building part of the company went into liquidation it would not affect Arsenal FC, in reality that parent company would have had to give assurances to the banks in obtaining the initial loan which would have an ultimate impact on the football club.
The club has been desperate to re-negotiate the loan repayment, probably pushing the repayment date from April 2010 to April 2012. The extra two years should see the housing market improve and the club would then realise the income it had anticipated.
It has been reported over the week-end that the banks are prepared to extend the loan repayment period. This would be great news for the club. It would show confidence in the club having the ability to sell the flats albeit over a longer period and it would ease the financial constraints that Wenger has been working within over the last couple of seasons.
The club was right in developing Highbury and keeping the project in-house, the development will show a big profit. Unfortunately the directors were caught out like everyone else when the “credit crunch” hit. Obtaining an extension on the loan is another indication that Ivan Gazidis is a man who gets things done; it shows he is the ideal CEO for Arsenal.