Newcastle United became the first British soccer team to securitize future ticket income in a deal worth GBP55 million ($85 million) at the end of September. The transaction, arranged by J. Henry Schroders, will be used to replace a GBP40 million-term loan taken out to finance the addition of 15,000 seats to Newcastle's stadium, St. James Park.

The remaining proceeds will cover interest payments on the loan, a contingency reserve of GBP3 million and provide funds for investment elsewhere in the business.

"We are very pleased to have achieved a highly cost effective method of refinancing our stadium expansion scheme. The expansion is on schedule and we expect to start the 2000/2001 season in a magnificent new 51,000 seater stadium," said Les Wheatley, the club's chief operating officer.

The transaction, Schroder's first European securitization, pays a weighted average fixed interest rate of 7.43% (or 210 basis points over the 10-year gilt) and is repayable in annual installments of GBP6 million between 2001 and 2016. It was privately placed with six insurance or pension companies, two in the U.S. and four in the U.K.

"The coverage ratios run up to four or five times," said Steve Schechter, managing director of debt capital markets at Schroders. "We've looked back to the year 1896 and the bottom line is that except for the war years 1914-18 and 1939-45 the revenues [adjusted for the different prices] would have made debt service."

Sports stadia receivables are an established asset class in the U.S., where ticket- and television rights-backed deals are popular because they allow for the relatively long-term funding considered ideal for stadium financing. In Europe, however, the asset class is in its infancy, with deals from Merrill Lynch for Italian clubs Lazio and Fiorentina and a Credit Suisse First Boston-arranged transaction that financed the Stade de France, the show piece stadium in Paris.

Merrill Lynch has also been working on a $50 million ticket receivables transaction for Spanish giants Real Madrid for some time, after arranging a privately placed loan secured on ticket revenue for the club in 1997. Turkish club Galatasary is also hoping to follow suit.

Until this deal the nearest equivalent transaction in the U.K. was a 10-year secured bond issued by Chelsea football club's holding company, Chelsea Village, which is currently trading around 350 basis points over Gilts.

"They've been working on this for some time but if you accept the premise that Newcastle aren't going to go bankrupt then this looks like a good deal with good pricing. Especially compared to the Chelsea Village bond," said a banker at a rival firm.

GNW arrangers pharmacy loan-backed deal

Other deals included a GBP200 million transaction arranged by Greenwich NatWest (GNW) for UniChem, the U.K. division of Alliance Unichem Plc. According to GNW, the private placement represents the first time that securitization has been used to finance pharmacy trade loans.

The deal refinances the current portfolio of loans made by U.K. banks to independent pharmacies, which are backed by a guarantee from Alliance UniChem. As part of the arrangement GNW's parent bank National Westminster Bank will become the loan administrator for the deal.

"The transaction requires a considerable amount of co-ordination and innovation given the requirement to establish a bespoke servicing operation as well as the dynamics involved in structuring a first time securitization," said Steve Skerrett, GNW's head of securitization.

Pub-backed issue from MSDW

Earlier in September, Morgan Stanley Dean Witter closed a GBP183 million pub-backed securitization, in a deal that confirms pub revenues as a thriving asset class in the U.K. market.

The transaction packaged revenues from pubs owned by venture capital house Alchemy Partners. It was the house's second attempt at using securitization to refinance its acquisition of Ushers of Trowbridge, after a GNW-led deal fell victim to last October's blow-out in spreads.

The deal is backed by the 571 pubs acquired from Usher's and those that Alchemy already owned.

An Alchemy official suggested that as most of the pubs are tenanted, with highly predictable cashflows generated by beer sales and rent, they are ideally suited to securitization.

The transaction, called Alehouse Finance Plc., was split into three chunks two senior pieces rated A2 by Moody's and a junior chunk rated Baa2. The A1 floater pays 135 basis points over three-month Libor and the A2 fixed rate note boasts a coupon of 7.685%. The B chunk pays 275 basis points over the benchmark.

The deal was placed with 15 investors, mostly U.K. pension funds.

Fourth Irish MBS from First Active

The other side of the Irish Sea saw the fourth mortgage-backed securitization in First Active's Celtic Residential Irish Mortgage Securitisation series. The E300 million transaction split into a E385 million triple-A tranche and a E15 million single-A piece was lead-managed by Paribas.

The deal priced at 29 basis points over three-month Euribor, six points above the pricing for the previous deal in the series. Paribas said that this simply reflected the widening in spreads since June, when the previous deal was launched.

The underlying portfolio featured a high proportion of seasoned loans to offset concerns about the recent boom in Irish house prices.

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