Arsenal Holdings PLC - Official announcement

Last updated : 23 February 2004 By Chris Parry

Arsenal Holdings plc

ARSENAL CONFIRMS FUNDING FOR STADIUM PROJECT

Arsenal Holdings plc announces that the Arsenal Group has concluded arrangements for the financing of its new stadium project (the "Stadium"). The finalisation of the Stadium financing package, together with the resolution of other previously outstanding issues associated with the project, means Arsenal can now confirm that, subject only to its satisfaction of conditions precedent prior to drawdown of the financing, the Stadium will go ahead with a planned opening for the start of the 2006/2007 football season.

The Stadium, which has been designed by HOK Sport, will have a capacity of 60,000 including extensive executive box and hospitality facilities and is expected to generate significantly increased match day revenues for the Group compared to its current home at Highbury.

The banking facilities which have now been agreed will be used initially to re-finance the amount by which the Group's expenditure to date on the project exceeds the GBP102 million that the Group will leave invested in the project, and subsequently to finance the balance of the cost of the development. The overall, final project cost is expected to be in the region of GBP357 million which includes the stadium build, the relocation of businesses and statutory services including construction of a new waste and recycling centre and depot ("WRC") for Islington, the upgrading of transport infrastructure and significant regeneration of the surrounding area. Arsenal Football Club plc ("Arsenal Football Club") (a member of the Arsenal Group) is committed to making a further investment of GBP45 million in the project, which is to be funded from future monies receivable under the Nike sponsorship contract announced last August.

The Stadium facilities comprise GBP260 million of senior debt to be provided to Ashburton Properties Limited ("Ashburton Properties") (the member of the Arsenal Group which owns the Stadium site) by a Stadium facility banking group consisting of the Royal Bank of Scotland PLC, Espirito Santo Investment, The Bank of Ireland, Allied Irish Banks PLC, CIT Group Structured Finance (UK) Limited and HSH Nordbank AG with the Royal Bank of Scotland acting as facility agent for the group. Interest on the senior debt will be at a commercial and fully hedged fixed rate over the 14 year term.

The Royal Bank of Scotland and Espirito Santo Investment will also provide a standby facility comprising up to GBP15.4 million of senior subordinated debt which will be available under certain agreed circumstances to meet unforeseen contingencies.

Interest on the senior debt will roll up until the Stadium opens and thereafter interest and debt repayment will be serviced from the operational cashflows of Ashburton Properties which will be generated under a formal agreement with Arsenal Football Club in relation to the staging of first team matches at the Stadium. Security for the senior debt is provided by way of a charge over these cashflows and all other assets of Ashburton Properties as well as over its share capital.

First drawdown on the senior debt facilities is subject to a number of conditions precedent which Ashburton Properties expects to fulfil within the next 4 weeks.

Ashburton Properties has signed a GBP220 million fixed price, turn-key contract for the construction of the Stadium with Sir Robert McAlpine Limited ("McAlpine"). The contract price is inclusive of the preliminary enabling works carried out by McAlpine at Ashburton Grove in 2003 and the construction of the WRC at Hornsey Street so that the existing waste transfer services at Ashburton Grove can be relocated. Work on the WRC is well advanced and construction work at the Stadium site has already recommenced.

The Royal Bank of Scotland will also provide loan facilities to Ashburton Trading Limited ("Ashburton Trading") (the member of the Arsenal Group which is carrying out the Group's property trading activities). The arrangements with the Royal Bank of Scotland provide a GBP42.6 million committed facility which will be secured on the contracted amounts receivable from Wilson Connolly plc in respect of certain completed property development transactions. The initial drawings on this facility are expected to be in the region of GBP30 million which will be used to refinance Ashburton Trading's existing loan from Barclays Bank plc ("Barclays").

The facilities to be provided to Ashburton Trading, which are also at a commercial and fully hedged fixed rate, are available until 31 December 2006, by which time the Group expects them to be fully repaid.

Barclays will continue as bankers to the other members of the Arsenal Group. In addition to providing a continuation of the existing GBP25 million working capital facility available to Arsenal Football Club, Barclays will provide a GBP37 million loan facility to Highbury Holdings Limited (the member of the Arsenal Group which owns the existing stadium at Highbury and certain other development sites). This loan is expected to be fully repaid by August 2007.

The Group has planning consent for the development of residential accommodation at Highbury once its move to the Stadium is complete.

Rothschild was the Group's financial adviser on the transaction and Slaughter and May acted as legal adviser. Allen & Overy acted as legal adviser to the Stadium facility banking group and Linklaters as legal adviser to Barclays.

Commenting on the news, Danny Fiszman, Director of Arsenal, said: "We believe we have now effectively concluded the pre construction phase of the project and secured the Stadium for Arsenal with all its benefits. This is a very considerable achievement given the complexity of the project across an enormous range of issues and that, in addition to the Stadium, we will also be delivering one of the largest regeneration schemes in the country. A lot of people have worked very hard to bring us this far but I would particularly like to thank Islington Council, who have worked alongside us from the outset, the
London Development Agency and the Mayor for all their support. We now look forward to working with our banking group and chosen constructor, McAlpine, as we move into the construction phase of the project."

Arsenal Chairman, Peter Hill-Wood, concluded: "This is excellent news for Arsenal. Over recent years we have established ourselves as one of the leading clubs in Europe and the Stadium, which we can now positively look forward to, will provide us with the opportunity to sustain and build on this position. The financing of the Group is now very complex, but throughout the financing structure we have retained the twin objectives of continued investment in our outstanding playing squad and separate funding for the building of the Stadium."

The directors of Arsenal Holdings plc take full responsibility for the contents of this announcement.