The events surrounding the 10 point deduction from Southampton should have all Gooners worried. Southampton FC were confident that they would be immune from any 10 point deductions because the Football Club is okay, but its parent company is in trouble. Arsenal Football Club and Arsenal Holdings PLC have a similar relationship.

As things stand Arsenal are in no financial trouble, and the Club (or should that be Arsenal Holdings PLC) are regularly reassuring fans that they have a sustainable business model, capable of paying off the considerable loans acquired to build the new stadium. However, a large amount of this capability is based on the sale of the flats at Highbury. As the property market continues to slump, so Arsenal continue to be unsuccessful in their attempts to close deals on the new build. A couple of months ago the Club were forced to admit that they were now unable to pay off the loans as quickly as they were hoping and there may be a need to further re-finance them.

Now let’s just say that, this time next season, Arsenal are 6th in the League and have no hope of qualifying for the European Cup. The property market has continued to fail and Arsenal Holdings PLC are unable to re-finance the loans. Within a further year or two, Arsenal could quite easily begin to default on their payments, with no European TV money or prize-money, and less income for live Sky matches due to not being shown as often. After this, the top players have gone, and Arsenal continue a downward spiral.

I am sure that the idea of setting up Arsenal Holdings PLC as a parent company for Arsenal Football Club was to ensure that, should the loans become unserviceable, the Football Club would, in essence, be unaffected. What has been shown with the situation at Southampton is that the Football Club will be directly affected by the debts of the parent company.

Looking forward to starting season 2012-2013 on minus 10 points?

(Ed’s note – as I understand it, the way the Highbury Square development has been set up legally, Arsenal could just declare that arm of the company bankrupt without any liability falling on the football club. So if they are unable to extend the loan taken out to build the flats, they could just walk away and leave it to the banks to clear up the mess. I may of course, be wrong, but that’s my take on it)