Kroenke Sports Entertainment (KSE) have bought out a majority of Arsenal’s debt related to the Emirates Stadium to provide the club with more financial stability in the challenging global economic climate caused due to the coronavirus.
The North London club announced yesterday through a notice issued on the London Stock Exchange that they would redeem their bonds related to the construction of the Emirates Stadium, financed by a loan from KSE.
Arsenal took out loans from various financial institutions to raise funds for the construction of their stadium and have been paying it back over the years. The club have had to keep just under £37 million in reserve annually as a guarantee of their financial robustness to repay their debt with interest.
The club’s cash flow has been severely impacted due to the consequences of the pandemic which include but are not limited to loss of matchday revenue. Arsenal posted an operating loss of £27.1 million for the year upto May 31, 2019. This is the first time the Gunners have reported an operating loss since 2002. The Arsenal Supporters Trust has forecasted the club’s losses reaching £144 million if the entirety of the 2020/21 season is played behind closed doors.
KSE’s purchase of a lion’s share of the club’s stadium debt means Arsenal will have to repay Stan Kroenke’s company rather than a host of financial institutions. One would expect the interest rate on this debt to be lower than before or at the very least, the same.
The Gunners have paid £20 million in interest and debt repayments in each of the last two years. If KSE provides them with a more favourable plan, these costs will be reduced. This move by KSE also ensures that Arsenal will not have to keep £37 million in reserve and so the club will have more money to utilise in order to keep the club financially robust.
It is not expected to directly translate to a much bigger budget in the transfer window but will definitely have some impact on Arsenal’s ability to be ambitious in the summer. The primary reason for this move is to ensure that the Gunners are able to operate in this strained economic climate with increased ease and stability.