July 7 (Bloomberg) -- Arsenal Holdings Plc, beaten in European soccer's Champions League final this year, is preparing for a bond market victory.

The owner of the Arsenal soccer club in Highbury, London, plans to raise 260 million pounds ($478 million) this month in the first public sale of asset-backed debt by a European team. By insuring the 25-year securities and pledging ticket revenue to investors, the company obtained a AAA credit rating.

Arsenal will use the money to repay a loan that financed its new stadium and save about 1.2 million pounds in annual interest. The securities yield less than bonds sold by rival teams Chelsea and Manchester United and show how the asset-backed market is picking up in Europe.

``This deal will dramatically lower debt service charges,'' said Stephen Schechter, founder of Schechter & Co., a London- based investment bank that has helped seven U.K. clubs raise money. It isn't involved in Arsenal's offering. ``By selling top- rated bonds, you open up to a whole new class of investor.''

Financing arm Arsenal Securities Plc will sell 210 million pounds of notes that pay fixed interest and 50 million pounds with rates that reset every three months based on the benchmark London interbank offered rate, the company said last week.

The fixed-rate part may yield about 5.28 percent, or 73 basis points more than benchmark U.K. government debt, based on Merrill Lynch & Co. data showing yields on similarly rated bonds. That's 46 basis points less than Arsenal would have paid without buying insurance from New York-based Ambac Assurance Corp. Its bonds would have been rated BBB-, according to Standard & Poor's.

The Gunners

The Gunners, as Arsenal is known, will use the proceeds to repay the 14-year loan, which has an interest rate that floats 200 basis points over Libor, or 6.74 percent at today's rate. A basis point is 0.01 percentage point.

Barclays Capital and Royal Bank of Scotland Group Plc are underwriting the deal. Shaun Gamble, spokesman for RBS, and Kerry Kennedy, spokeswoman for Barclays Capital, wouldn't comment. Arsenal spokesman Dan Tolhurst declined to elaborate.

Arsenal, whose top goal scorer Thierry Henry will play for France's national team in the July 9 World Cup final, is taking advantage of growing demand for asset-backed bonds. Companies that sell the securities pool credit card bills, student loans, car payments or, in Arsenal's case, tickets sold at the new stadium, and sell debt backed by the cash flows they generate.

Borrowers in Europe sold a record 173 billion euros ($221 billion) of asset-backed securities in the first half, up 20 percent from the same period last year, according to Deutsche Bank AG.

Highbury Home

Arsenal is replacing its stadium at Highbury, home turf for 93 years, to increase seats to 60,000 from 36,000. The Emirates Stadium, sponsored by Dubai's state-owned airline, will boost annual sales by as much as 50 million pounds, Managing Director Keith Edelman said in May. Arsenal last season made 33.8 million pounds from home games.

``What you have at Arsenal is fantastic demand for tickets, the sizzle of the new stadium, new boxes, new corporate demand,'' Schechter said.

Manchester United, acquired by U.S. billionaire Malcolm Glazer last year for $1.4 billion, may follow Arsenal's lead. The world's second-largest club by revenue after Real Madrid pays interest as high as 20 percent on 275 million pounds of so-called pay-in-kind notes.

Glazer, Abramovich

``It's perfectly natural that one would seek to refinance and restructure after a buyout,'' said Philip Townsend, a spokesman, declining to comment on specific plans.

Hedge funds including Citadel Investment Group LLC in Chicago and New York-based Perry Capital LLC that own the notes have the right to seize the Glazer family's stake should the company fail to repay the debt in the next four years.

`We're all waiting to see what the Glazers' big idea is to make the buyout work,'' John Williams, director of the Centre for the Sociology of Sport at the University of Leicester, said in a telephone interview. ``A bond securitization would seem to make sense.''

London's Chelsea team, owned by Russian billionaire Roman Abramovich, pays 8.875 percent a year in interest on a 75 million-pound issue due December 2007, data compiled by Bloomberg show.

Liverpool Football Club is looking for investor help to move from its 45,000-seat stadium by 2009.

Teams that want to sell bonds ``need to have a track record of stability'' and ``support a big fan base,'' said Robert Robinson, an analyst at S&P in London. ``There's only a small bunch of top clubs around Europe that can say that.''

English soccer teams have previously arranged private sales of asset-backed bonds to raise smaller amounts than Arsenal is seeking. Everton and Manchester City in 2002 each raised about 30 million pounds.

To contact the reporter on this story: John Glover in Milan on johnglover@bloomberg.net

Last Updated: July 7, 2006 12:49 EDT