The Football Association will save at least £12m a year after refinancing its Wembley debt, the Guardian can reveal, as the national stadium moves from onerous millstone to money maker for the first time.
According to the FA, which is trying to save at least £30m per year to reinvest in grassroots football amid a controversial round of job cuts, the new facility with a consortium of banks will reduce its interest payments and give it more flexibility.
Under the new deal, the FA expects to save at least £12m of that £30m through the refinancing agreement. The rest will come from cost cutting and previously announced job cuts of about 100 people.
The chief financial officer, Andrew Crean, said it represented a tipping point for the FA after years battling the debilitating financial drain of servicing the loans taken out to build the £757m national stadium. “It is quite a landmark moment for Wembley and the FA because it represents the moment when it becomes an asset of the group,” said Crean, who joined the FA in 2013 from the Jockey Club. “It’s a core part of the group, it’s cash generative and it’s got a financial track record. Going forward, Wembley will be returning cash surpluses to the FA for reinvestment into football.”
He said that the new financing arrangements, which allow for a facility of £300m of which £225m will be drawn down, would also give the FA more financial room for manoeuvre.
The Wembley debt was last refinanced in 2008, at a time when there was grave concern over its debilitating effect on the FA’s finances in the midst of a global economic slump and there were fears over its then broadcasting partner Setanta, which collapsed in 2009.
Finally opened in 2007 after the construction of the stadium overran and went over budget amid legal wrangles between contractors, the new Wembley quickly became a huge drain on resources and management focus. Under that agreement, about £40m to £50m had to be retained within the Wembley National Stadium Limited division as a safety net and could not be used for other purposes.
The recently appointed chief executive, Martin Glenn, has embarked on a controversial cost-cutting scheme, announcing plans to axe 100 jobs – largely in office-based and administrative functions – to help fund increased investment in facilities and coaches.
Glenn said the refinancing was an “important step in our move towards a more focused, sustainable FA that maximises investment into football, especially at the lower levels of the game where our support is critical”.
As part of the reorganisation, Wembley has been taken into the main FA Group for the first time and the separate management layer has been swept away. The FA also believes refinancing at more beneficial rates represents a vote of confidence in Wembley’s business model from lenders.
The renewal of the 10-year Club Wembley debentures, which represent 12% of the FA’s turnover, in 2017 has always been identified as a crunch point for the FA. However, there is believed to be confidence that by restructuring the offer to give more flexibility over the length of the contracts there will be a high rate of renewal.
With Chelsea and Tottenham Hotspur jostling for position to move into Wembley on a temporary basis while they rebuild their stadiums and the prospect of an NFL franchise in London, there is confidence that its business model will prosper.
Concern over the impact of increased competition from the Olympic Stadium, Arsenal’s Emirates Stadium and Twickenham has also lessened amid confidence that the number of music acts and other sporting events capable of keeping the tills ringing has expanded.
The NFL has signed a deal with Spurs to use the new White Hart Lane but could yet decide to share matches around two or three stadiums in the capital if it establishes a full franchise in London.
For so long a wasteland beneath the distinctive Wembley arch, the area around the stadium has in recent years belatedly started to be developed, with shops, hotels and other leisure facilities. The acquisition of Quintain, the property firm that owns the land, by the US private equity firm Lone Star last July is expected to accelerate that progress.
With increased confidence in the underlying business model, the idea of potentially taking a handful of England matches on the road is likely to be raised again. The Club Wembley licences are likely to be altered for the next period to at least give the FA the option of playing some England games away from the national stadium.
While Wembley was being built, England successfully played at other club stadiums in a move that was regarded as helping to connect the side with the rest of the country.
The question of whether the FA should ever have got into the stadium construction and management business in the first place remains moot, given the huge sums spent on servicing the loans down the years. There is now at least confidence among the new management team, however, that the era of Wembley being a huge drag on its ability to invest in its core activities is finally over. The new £300m loan facility is being provided by Barclays, HSBC and Santander.
