Monolines, Disney, and the Trouble with Arsenal Football

Fascinating watching some of the side consequences of the current troubles in mortgage markets, especially as it migrates over toward corporate debt and the so-called "monoline insurers". Today’s case in point: Arsenal Football. Yes, that Arsenal.

(A quick explanation first: No, monoline insurers are not the people from whom you buy insurance if you’re planning on riding the monorail at Disney’s Magic Kingdom. Instead, they are, at least as currently fretted over, people who sell only one kind of insurance, especially the kind used to secure corporate bonds, i.e., companies like Ambac, MBIA, etc. And they are in deep trouble, with their own ratings being slashed, making it impossible for them to stand by their insurance of other debt, which makes that debt’s rating meaningless, and so you go sliding down the greasy financial pipe to bad places.)

Anyway, building on Friday’s Fitch downgrade of bond monoline insurer Ambac, ratings service Fitch (which itself really needs a good downgrade upside the head) today downgraded some of the bonds insured by Ambac. In particular, it downgraded debt that Arsenal Football Club had issued to build its Emirates stadium in London.

What implications might that have? Among other things, if any more debt were to be required it could cause Arsenal ticket/pass prices to go up, as that debt has to be serviced at a higher cost, which has to come from somewhere, most obvious among which is Arsenal fans. More money from Arsenal fans means less money for said consumers to spend on other things, of course, which is yet another fine example of the many merry ways that credit problems bounce Brownian-style back-and-forth from market to market.


  1. Was watching FSC a couple weekends ago, and I believe they noted that Man U had record revenues for the quarter (year?). Then they had to admit that the t/e/a/m/ company is so highly leveraged that even record revenues weren’t going to make it solvent.
    Palace may be solvent, but the Eagles are also unlikely to make it back into the Premier League (if, indeed, they can stay in First Division). I suspect I know which way the fans will prefer.

  2. Just because the secondary market value of the bonds collapses and the yield therefore soars folloing the Ambac downgrade, doesn’t mean that the coupon on the bond changes at all. Arsenal season ticket holders should be safe, at least as far as price increases are concerned