Arsenal News » 2010 » January » 05

As a starting point, take Manchester IOU who are thinking about a £600m bond issue to try and sort out their debts.   First thing to note here is that you don’t do this sort of thing if everything is fit and dandy.

So we might ask, why issue bonds?   The scheme is designed to move the debt from banks and hedge funds where it sits at the moment and put it in a bond, which is a bit like a mortgage.    The point is however the debt still remains.  It is just in a different place.

The Man U situation is that with the debt surrounding them and the fact that they have repeatedly said that they are growing through increased marketing (which they are not), the club is shown in a decidedly poor light.

The club says that the interest on the loans is less than the operating profit, which might be true (they quote figures showing that the profit was £3m bigger than the interest in 2008).   But that doesn’t answer why the interest isn’t being paid.  Put another way, as was said on Radio 5 last night, the Ronaldo £80m pays for the interest for two years.

It’s an interesting point to note.  Arsenal’s debt goes down each year because they pay off the mortgage step by step.  Manchester’s debt goes up each year.

At KGB Fulham Roman Abramovich converted £340m in interest-free loans into equity.  That was probably a clever move, since it was unlikely that the owner would call in the loan, since to do so would virtually wreck the club and then he’d fail to get his money back.   Now he can sell the shares bit by bit if he wants.   In short he has given himself an exit route.

This is bad news for Chelsea, since it suggests instability, which is probably why the news was dressed up in the preposterous “we are now debt free” press release.

The club in fact has two problems.  First, how do they fund future expenditure, when the club is nowhere near the much heralded break-even and the youth structure has broken down (see previous articles which go into this in some detail).  Issuing more shares all the time will look odd, unless the new shares are issued to someone else.

Second, the internal problems of the club.   The fundamental notion was that if you spent enough money you could be sure to win the EPL and Champs League, but history shows this is not true, and this undermines the whole premise of the club and the Abramovich money.

Worse, the vast infusion of money, the failure of the “break even” policy and the failure of the youth policy, plus the accusations against the club over the illegal transfer issues combined with the actions of people like J Terry and A Cole, makes it all seem a bit, well, out of control and ungovernable.

John Terry’s situation seems particularly odd.  Obviously I have no insight into what happened at the training ground recently when it was alleged that he took money from a ticket tout in return for allowing people to be shown around.  If he is innocent, then we would expect a libel case very soon.

But even if that happens there is the issue of his mother and mother in law admitting they were shop lifting and his father being found guilty of trading in cocaine.   You have to wonder why a club with all the wealth of Chelsea can’t help this young man sort himself and his family out.

The same is true over Ashley Cole.  What were Chelsea doing tapping up Ashley Cole when they could have bought anyone they wanted in the world?  Or one might ask, what has Ashley Cole been doing with his private life, or indeed why was he driving at over 100mph in a 50mph limit at noon a few weeks back?

It is as if there is a vision within the KGB in Fulham that the law in any shape or form, doesn’t apply to Chelsea – and that is an interesting frame of mind to consider.

What is also interesting is that Terry’s mother’s solicitor has denied that the lady understood that by accepting the caution she was admitting the charge, and that she would fight to have her name cleared.  Nothing more was heard.   If the same is true in the Terry-at-the-training-ground saga (and again I stress I have no inside knowledge of any of these cases) we might draw some conclusions.

Manchester Arab are of course the other club with near unlimited resources and they have quickly indicated that they are Chelsea in disguise with the way they bought any old player and sacked Hughes while making him take the club out for one last game.   The normal rules don’t apply to us… you can just hear them saying it.

At the other end of the scale there is Portsmouth where so many people are being questioned or charged either by the Revenue or the police one begins to lose count.  Arry, Storrie, ex-owner…  Owners who say they have money and don’t… what are they playing at?   And of course we don’t know if anyone is guilty or everyone is innocent on the legal front, but to get into this state seems to suggest that someone is not looking after the club properly.

You see the pattern I am trying to project here.  Clubs out of control at all sorts of level, clubs believing that somehow the normal rules of personal behaviour or financial accounting don’t apply.

It is a bit like Notts County. The fans owned the club, a bunch of unknown wealthy investors came along and said they would make the club an EPL outfit within a few years, as long as the fans GIVE the rich men the shares.  For nothing.   Oh and they didn’t want to say who they were either.

And what a surprise.  The mega investment never turned up, the shares that people were promised have never been delivered, and nothing is happening, except there is a dreadful sinking feeling all around the ground.  A winding up order was just avoided a couple of weeks back with the payment of some debts.  Now there is another one in place, and the FA have banned all transfer movements.

The only person who comes out of Notts C with any credibility is Sol, who looked, understood exactly what was going on, and walked out.

So what links all these disparate clubs together is a total sense of make-believe and fantasy.   “We’ve got an Arab,” … oh that’s ok then.  Better not ask him anything personal, like, do you have any money?

There’s another club on my horizon in this arena: Cardiff City. When Sam Hamman sold the club to Ridsdale ( the ex-bossman at Leeds during the collapse) an issue quickly arose about a debt that was owed by the Cardiff to some mystery consortium.  I have no idea how that was resolved, but suddenly there is an alleged theft of papers from the club and an alleged debt of millions of pounds.   Maybe it is just a coincidence.  I have no knowledge either way.

This list could go on and on taking in Liverpool (or should we call them Little Manchester), Crystal Palace (now seemingly bust) and Everton.  Everton’s problems are different but just as real.  They make a loss every year, and are only bailed out by the occasional sale of Wayne Rooney.  Now attempts to create Wooney II have failed so they’ve tried to sell off their training ground, but had a big row with the council over that, and they’ve tried to build a new stadium, and what a surprise, they had a row with the council.  Again.

Everton’s position is interesting, because unlike the other clubs mentioned, they are just sinking into the mire day by day, rather than because of a take-over.  They simply don’t earn enough money.

So what about Arsenal? We are the club that was set up in Woolwich, and owned by Norris, his friends, and the locals of Woolwich, plus all the people who have bought shares since.   We had our crisis 100 years ago (as you’ll know if you have read my book MAKING THE ARSENAL).

The attraction that Liverpool and Manchester had when they were bought was that they were debt free and making money, so the new owners could buy them out easily.  Chelsea were not debt free, but were available for a smallish sum (in comparison), and so could be bought out by one man who could readily pay off the debt.

Arsenal is different in that we have the debt of the development of the Ems.  Also our shares are expensive.  So anyone wanting to come in and take over the club either in order to load it with debt or to sit on it and take dividends would have to pay twice – once for the debt and once for the shares.  It is a lot less attractive that way around, and would make Arsenal more expensive than Manchester IOU.

This is probably why attention was turned to Manchester City – they could be bought much more easily, and like Chelsea, who cares if they haven’t won too much in the recent past?  Why buy Arsenal when you could buy Newcastle, or Everton, throw a load of money at the club, and buy your way to success?

My view, for what it is worth, is that football in England is in a total and absolute mess, and that we are now just seeing the early stages of what will become a catastrophe.   As one or two clubs fall, so they will drag others down.

Which is why I think Arsene Wenger was so right when he said that football is about winning things and balancing the books.  I was also deeply saddened to see a few Arsenal sites argue with this point.  Do we really want to be like all the rest of the clubs?   That’s never been the Arsenal way, not since the Norris takeover 100 years ago.   Vive la difference.

Tony Attwood

MAKING THE ARSENAL – the story of Arsenal 10o years ago – is available from Amazon.co.uk and from the publishers.

Today on the Making the Arsenal web site, “If we could go back to the Arsenal 100 years ago“