Gunner Thoughts

Understanding KSE’s action

Yesterday, KSE restructured Arsenal’s debt, but what does that mean?

Yesterday, it was reported that KSE had looked to redeem two of Arsenal’s fixed rate bonds and pay off some of the debts Arsenal had with banks. It was known that this was not all of Arsenal’s debts but it was good portion of them. This news caused a flurry of speculations from people and a good amount misunderstanding in the situation.

While I am no expert on these situations, neither were many of them and this led to some interesting, but false, conclusions about the whole situation. Later today I will write some articles on Arteta’s press conference pre-NLD, but wanted to take a second to discuss a few points so that readers could understand to some extent what happened yesterday.

Before I begin, if this is a topic of interest you have, I highly suggest that you go follow and read the writings of Swiss Ramble who is great with this stuff, as well as the Arsenal Supporters Trust (AST) who follow this kind of information very carefully and do a great job explaining what it means for fans who don’t understand many of the terms being used — like me!

Here is a breakdown of what happened as I understand it:

  • KSE did take on and pay off the outstanding debt on Arsenal’s stadium, but it was done in the form of a loan to the club, not a gift of cash from our owners.
  • That loan amount is believed to be around £184 million, which according to AST is £144 million for The Emirates and £40 million in penalties. It can be assumed this penalty was factored into Arsenal’s decision-making process
  • Benefit: By doing this, Arsenal free up the £36m that was retained in the cash reserves but unusable due to it being tied up in debt services. This could now be used more flexibly by the club.
  • Benefit: By paying off this debt now, it saves Arsenal £20m in interest, however it should be noted that Arsenal will likely need to pay some form of interest yearly on the KSE loan. AST suggests this amount could likely be between £5-10M based on current market rates but no terms of the loan have been seen.
  • There are a few aspects of this decision that likely tie into the £505m loan that KSE used to purchase remaining Arsenal shares and increase the amount owed to roughly £700m

AST ended their thread of points by saying “AST would like Arsenal and KSE to provide more information about the new arrangements as they are of material significance to supporters. Good governance is based upon accountability and engagement with supporters about how the club is run.”

They added, that what is yet to be understood is if the club will only be undertaking the £184m amount that was loaned to them or if they will be playing a roll in the complete amount now. To be seen…

Let’s make a slight pivot though to what many of you will want to know about – transfers. There is good news and bad news. Many people, that I consider trustworthy, are stressing that this move is NOT the same as a cash injection that we see when we talk about Chelsea or Manchester City. This is a restructuring of debt that will ease the difficulties facing the club post-pandemic when revenue streams have dried up and there is uncertainty of when that may change.

However, it should be noted that some of the new flexibility could be used to help stretch how far Arsenal can get with their funds as well as create a sense of comfortability in spending while the market favors those that have cash flexibility. At the very least, this move will allow Arsenal the comfortable ability to spend funds that were intended to be used on transfers on transfers rather than running costs.

A lot more to be seen and without seeing the terms of this agreement, it is a little tough to tell what it will or won’t do, but on the surface it feels like a positive thing.

I will leave this money talk there and let you get back to thinking about this weekends game! Big one against THEM.

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