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British Soccer Clubs Sweat Out Credit Crisis

By Mark

While March Madness occupies most American, at least those not preoccupied with either the Presidential race or the latest twists and turns of the credit crisis, Wall Street's issues are drawing close attention across the pond among the executive suites in the clubhouse across the English Premier League. It's not just because of the recent influx of North American owners into the league either. No, the credit crisis is playing out in surprising ways among some of England's top clubs.

The sudden fall from grace of Bear Stearns allegedly will not impact Tottenham Hotspur despite the investment of principal owner Joe Lewis. Billionaire Lewis, who controls Tottenham's parent company ENIC, spent about $1.2 billion in building up a roughly 10% stake in Bear Stearns over the last year only to see that essentially wiped out when the bank was sold to JP Morgan over the weekend for about $225 million in a Federal Reserve orchestra take out. Lewis, who is opposing the sale, claims the blow was not too severe and that the club will not be put up for sale. He has assured Daniel Levy, Spurs chairman, that all is still well. I guess that can be the case when you are the 16th richest man in Britain.

As for other club's problems, well the most immediate is probably Newcastle who should be looking for a new jersey sponsor as current sponsor Northern Rock is unlikely to renew following its takeover by the British government due to the mortgage crunch. The big three of Manchester United, Arsenal and Liverpool are all heavily indebted to the tune of several hundred million pounds each. While all of the debt is fixed rate and in the case of Man U and Arsenal looks clearly covered by adequate cash flow and has many years left on their terms, the likelihood of refinancing at lower rates, or taking the debt out by securitizing it or floating a public offering of a stock is, at this point too remote to contemplate in the intermediate term or for the next 12 to 24 months certainly.

The problem for Liverpool is a bit more acute as it will need to refinance its debt within 18 months as it matures then. In addition, it needs to build a new stadium, the financing for which is not in place and is not likely to be able to be placed easily in this credit environment. Add to this mix the toxic stew that is the current relations between the partners, Dallas Stars owner Tom Hicks and Montreal Canadiens owner George Gillett, and you have a situation that could rapidly escalate into a full blown crisis.

Full post as published by Sports Biz on March 20, 2008 (boomark / email).