Fun with finance

[PsychedelicCeltic]

http://football.guardian.co.uk/News_Story/0,1563,1690703,00.html

he stadium itself should cost an extremely affordable £125m. The £250m-plus balance has been expended on moving a waste-transfer station, building affordable homes, improving transport infrastructure and associated construction projects. The completion date of the 60,000-seat, near-£400m project had to be deferred from last August to this summer, costing an estimated minimum of £40m in lost match-day income. And how Arsenal needed that money.

According to their most recent published accounts, Arsenal paid £45.515m in debt service and capital repayment in the year ending May 2004 and £32.644m to May last year. Over the two-year period the club took on £233.456m in new debt.

Worse, the club's travails in persuading Thierry Henry to stay were hindered by the House of Lords' verdict on the so-called Dextra case last July . The ruling increased the tax burden on employee benefit trusts, a mechanism Arsenal had been using to boost their players' salaries without ceding high percentages of income tax to the Inland Revenue.

Patrick Vieira's £13.75m move to Juventus last summer was accompanied by whispers that Arsenal were shunting their captain's wages off the payroll and scrabbling for lump-sum income to cover the Dextra-related increase in player costs. Wenger's investments during this transfer window, at a cumulative cost of £18m, have been in two teenagers and a young striker from the French league; all will be satisfied with salaries far below the levels Henry can command. Wenger is not competing for Ronaldinho; indeed, it is still not definite that Henry will not join the striker in Barcelona this summer.

[Cannon]

You missed the best part of that article:

Arsenal group companies turnover

2005 £138.4m 2004 £156.9m

Operating profit

2005 £32.6m 2004 £36.2m

Net Debt

2005 £153.331m 2004 £141.268m

Capital repayment

2005 £18.572m 2004 £40.181m

Debt service

2005 £14.072m 2004 £5.334m

Match-day income

2005 £37.397m 2007 £70m plus

All figures taken from accounts to May 31 2005
That is why we had to move. They also don't go into the sponsor money and explain its role in servicing the debt. I'll try to see if I can find the info that was posted last season. Basically it said that once we meet the attendence levels, which are far below the % level seen for any top Prem club, we can refinance and between that and the sponsor money the debt will be covered with would allow much of the profit to go straight back into the club for wages and/or transfers.

[michaec]

If you look at those figures and how the capital repayment on the debt has gone down from 2004 (£40.181m) to 2005 (£18.572m) in spite of the actual net debt level increasing by just over £12m, then I'd say they must have refinanced all or a significant part of the debt already.

EDIT: Of course the debt service has gone up, but only by about half that the capital repayments have gone down, so it's a better short-term cash flow position. When the new revenue comes in from the increased attendance and premium priced tickets at the new stadium, the cash flow looks very good. There are assumptions here, like continued participation in the Champions League, but any business that takes out loans for a project klike this is taking a risk. I think it's necessary and worth it if we are to challenge in the top bracket of European and domestic football.

[Cannon]

Yeah I saw that but its too hard to figure out what the current status of the debt is. The info I saw said that we shouldn't expect the refinance until we've been in the new stadium for a bit. However, I guess if sales are high enough already then they might have brought that to the bankers. Either way I agree with you, we're in better shape than the tone of that article would suggest.