Relegation woes are still causing headaches for UK-based soccer team Leicester City, which last week announced that pressure from creditors had forced it into administration.

The football club, which has a GBP28 million privately placed securitization of media and commercial income, suffered its second blow along with UK soccer in general when ITV Digital collapsed earlier this year. According to market sources, the Soccer League signed a three-year GBP315million contract in 2000 - revenue that will now be unavailable to teams in the league. In times when players' salaries are soaring, this unprecedented cut is sure to hurt teams going forward.

This, along with the reality of relegation, can prove disastrous for a club. "It was obvious that although relegation is a topic taken into account when doing a securitization, no one can really predict what sort of effect a team may feel in ticket receipts once it is relegated," said one market source.

According to figures reported by Deloitte & Touche, relegation has cost clubs bumped from the premiership in 1999-2000 up to GBP7 million. But typically, one source said, the profile of soccer teams that are considered for securitizations generally include a strong and loyal fan base - which can help to mitigate the affects of relegation. Bear Stearns recently arranged a deal for Manchester City Plc, and sources at the banks say that the team, even when it suffered relegation, actually saw ticket sales go up because of its loyal fan base.

The source added, however, that while there were many teams that have expressed interest in tapping into securitizations, it's only a select few that really have the proper profile to enter the market.

"One of the things these clubs could depend on if all else was lost was the ability to sell people on transfer," said one market source. "But the bottom has fallen out on that, as a lot of the clubs are offloading some big earners at bargains."

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