Uncertainty for Manchester United sponsor amid Wall St troubles
Monday 15 September 2008
The American insurance firm AIG, the principal sponsors of Manchester United, have fallen into a "liquidity crisis" and are seeking the help of the US Federal Reserve. It is, as yet, unclear how this will affect Manchester United, whose jersey carries the logo of AIG.
Shares of AIG fell nearly 40 percent in pre-market trading after reports that the insurer had turned to the Federal Reserve for $40 billion in bridge financing to ward off a liquidity crisis and ratings downgrades.
The up-front cost of insuring $10 million of AIG's debt for five years jumped to $3.05 million from $1.3 million on Friday, in addition to annual payments of $500,000, according to Markit Intraday.
Manchester United have a four-year sponsorship deal with the AIG, worth £56.5m. Signed in 2006, it is the biggest sponsorship deal in English football.
Just as West Ham United look set to lose £8m in their sponsorship deal with with XL following the collapse of the low-cost airline and tour operator last week, Manchester United could be facing similar difficulties.
However it has been reported that the Manchester United is confident the deal with AIG will remain in place and that AIG will be able to honour their commitment to the club.
The insurer, which has incurred $18 billion in losses over the past three quarters from guarantees it wrote on mortgage derivatives, was hit on Friday by Standard & Poor's putting the company's credit ratings on negative watch, indicating a possible downgrade.
Over the weekend, AIG executives and New York state insurance regulators scrambled to hatch a plan that would boost AIG's liquidity.
AIG shares have fallen about 80 percent since the start of the year.
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