Success and fear fuel problems
qWhy is the richest football league in the world creaking with debt problems? aThe quick answer is success and the fear of being relegated to a lower division. Clubs such as Manchester United, Liverpool and Chelsea have spent small fortunes on players' wages in the chase for domestic and European honours. Liverpool's debt is more than £200 million (Dh1.12 billion), while you can more than double that for United. Chelsea have limited debt, but are owned by a billionaire. The rest are just trying to keep up ... and stay in the top flight.
So, if the top clubs are saddled with debt, what about the others? Some are in real trouble, such as Portsmouth and West Ham with multimillion pounds of debt. But then, there is hardly an English Premier League (EPL) team that does not have red ink on their books. Sunderland, for example, who are hovering around the middle of the table, had debts of about £69m, according to accounts for the year to July 31 2008 that appeared in The Guardian.
Is it possible to find an EPL club that is not in debt? Tricky question. Stoke City are a small club that have punched above their weight. Accounts for the year to May 31 2008 show Stoke had debts of about £2.3m, which could have grown since. There must one debt-free club. Again tricky. Chelsea at one point had debts of about £700m, but they have been greatly reduced. The rest is believed to be converted into shares, which are owned by the Russian tycoon Roman Abramovich who controls the club. Simply put, he owns all the debt. "It's zero, since the shareholder loans were converted to equity," said Keith Harris, the chairman of the investment bank Seymour Pierce. "Losses last year were reduced to about £47m." Manchester City are also free of debt since the takeover by Sheikh Mansour bin Zayed Al Nahyan.
That, at least, is two pieces of good news. Or is it? Not really when you take into account the other clubs and the drain on finances through bloated salaries. Wages in proportion to turnover at Chelsea, for example, were running at 68 per cent, accounts for the year ending June 30 2008 show. At Stoke, they blew out to 106 per cent in the same period. This must become unsustainable.
For the small clubs, yes, but the big teams will carry on spending as long as they have billionaires to pay. Manchester United still head Forbes magazine's rich list of clubs at £1.1bn because of their turnover potential and TV deals. "Despite the large amount of debt most clubs accrue, investors are continuing to pick up teams around the globe, due in large part to [football's] growth prospects in emerging markets," Forbes said.
* Gordon Watts
Published: April 25, 2010 04:00 AM