FA under fire over £130m U-turn

US INVESTMENT bank Bear Stearns is ready to take legal action to recover fees after the Football Association suddenly cancelled a £130m bond it had arranged.

The bond, which is effectively a loan to raise capital, was to have been supported by television and sponsorship income from England matches and the FA Cup.

But the deal was pulled by the FA on the eve of its launch a month ago.

Bear Stearns has claimed for money it says it is owed. Although neither side would comment, the bank is understood to be livid. One insider at Bear Stearns said: 'There were expenses we incurred. Are we going to write them off? No, we are not. We do not do this gratis, though the FA seems to think we do. We were ready to go with this, with a full order book and then suddenly it was pulled.'

Bonds are usually cancelled only if they are likely to be affected by a major market event. The FA said when it cancelled the bond that an improvement in the availability of short-term financing meant that raising money through a bond was no longer the best course of action.

But analysts suggest the decline in the value of its broadcasting rights made the FA fear it could not fund the deal over the 15 years of the bond.

The FA has since signed a deal with the BBC and BSkyB for £300m over four years from next year. This represents a cut of £40m per season, compared with the present £345m three-year deal. Clubs including Leicester, Newcastle, Ipswich and Leeds have used this method to raise money, but based their deals on gate receipts.

The FA deal was based on television and sponsorship revenues and Bear Stearns had to convince investors the credit risk was low.