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Kroenke could lose his fortune AND Arsenal as takeover details emerge
Stan Kroenke’s takeover of Arsenal could put his personal fortune at risk if he fails to keep up repayments.
Billionaire Kroenke today confirmed that he will buy out Alisher Usmanov’s 30% stake in the club for £550m to become the sole owner of the club.
To do that he has a loan agreement with Deutsche Bank to lend him £557m, allowing him to fund the takeover.
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Kroenke has used his stock ownership of Kroenke Sports & Entertainment, his holding company through which he owns his Arsenal shares and a selection of other assets, such as the Denver Nuggets, Colorado Rapids, sporting stadiums, property and other business interests.
The agreement between Kroenke and Deutsche Bank pledges his entire company, stating, ‘all of the issued and outstanding shares of capital stock of KSE at any time owned by the Pledgor,’ has been provided as collateral to secure the loan.
Further down the document, it is stated that until the loan is settled, all dividends that Kroenke would ordinarily be able to claim, are due to Deutsche Bank as part of the agreement.
Should Kroenke be unable to match the repayment schedule of the loan, then the agreement details that Kroenke would have ‘to transfer all or any part of the Collateral into the Pledgee’s name,’ meaning he would lose his whole stake in his holding company.
While it is unlikely, a general economic crisis could reduce the value o holdings and damage the earnings of his other businesses, which would hamper his ability to repay the loan.
The deal between Kroenke and Deutsche Bank is an unusual one because KSE is not listed on any stock market, meaning the two groups must have come to a rough understanding about how much the company is worth. With Kroenke valued at $8bn as recently as 2016, it can be assumed that his wealth dwarfs the total he has borrowed from the bank.
Additionally, the loan is described as a, ‘bridging loan,’ meaning that Kroenke might anticipate repaying the sum relatively swiftly until he is able to come into more funds. When Kroenke assumes full control of Arsenal, he would be able to remove as much of the roughly £300m cash from the club as he might wish. He may also be able to raise funds by selling other business interests at a slower pace in order to ensure the best deal, or secure another loan for better terms once the deal is completed.
Nevertheless, the club’s ownership, and Kroenke’s wealth, is theoretically at risk until the debt is settled.
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