Football in Economic Crisis: Birmingham City « Untold Arsenal: Arsenal News, supporting the club, the players and the manager
Mr Wenger doesn’t make predictions of gloom, doom and disaster lightly, so when he speaks of football being about to collapse through financial mismanagement, we need to take notice.
And in fact everywhere we look clubs are teetering on the edge. For the moment I am not writing about poor Plymouth, who could be the first to go, but instead focus on two larger clubs: Birmingham and Rangers – and in this article Birmingham
Ever since the current part owner of Birmingham came to power there have been questions – and legal battles with the previous owners who now control West Ham.
Carson Yeung owns 26% shareholder, was thought at first to own the lot, and spoke in the early days of a massive amount of money to be spent on the club. I am not sure where the fellow is at the moment, but he certainly has of late been staying at the pleasure of Chinese state prosecutors in Hong Kong charged with money laundering.
Birmingham City is owned by Birmingham International Holdings in the Cayman Islands – there being of course a long and historic link between the Caymans and Birmingham which make this quite natural, above board and proper. The club is on the Hong Kong Stock Exchange as one would expect for a historic English football club.
Last season Birmingham won the league cup as we all know with a lot of pain (at least for those of us who were there) but they also lost £14m which was careless, and now need £10m to stay afloat. Mr Yeung has loaned £15m it is said, but without the extra they exceed what they have agreed with the banks that they can borrow.
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This is the issue: the banks won’t lend money, and get a bit uppity if a club borrows it elsewhere, because that suggests that the bank won’t get its existing loan back. Mr Y has said that he can raise another £12m in Hong Kong, but the bank in the UK is edgy about that, since it raises the question of what happens if Mr Y falls. How does the bank get paid then, short of selling the ground for property development.
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Liverpool were themselves in this crisis, but they managed to escape – but Liverpool are a special case – a club with a tradition and history that most clubs can only dream about.
One thing that all these clubs like Birmingham, Plymouth and Rangers have in common (despite the huge difference in their sizes) is that they all deny there is a problem. Birmingham do this all the time through Peter Pannu their vice chairman. And of course that is to be expected. You would hardly come out and say, “we are in the shit”. Even if it is true.
The problem for Birmingham however is that they are not too big to fall, and no one seems to believe them any more. So when they do get money on the tax haven markets they start paying eye watering rates of interest, and that is what Birmingham is now doing – borrowing money in the Virgin Islands (which of course has a direct connection with the club) at 12% interest or more. It is getting to be so that it would be cheaper to borrow money on a credit card.
Another thing that happens is that companies and people suddenly pop up and seem to be owning part of the club or raising money, or lending money to the club. In Birmingham’s case it is Inkatha owned by Yang Yuezhou, who is, well, who knows.
And here’s another thing that clubs in debt have in common – when they speak it is to say all is fine, but most of the time they don’t speak – at least to their supporters.
Meanwhile the value of the club sinks as it is clear that if it wants to borrow anything, then it is having to pay more and more interest and go to more and more exotic places to get the money. Sometimes there are share issues, but they are rarely successful, and in Birmingham’s case, not very successful at all. Money comes from one source and is used to pay off another debt – and always the interest rates go up.
Birmingham of course have the great problem of relegation, and to pay for the loss of income they are selling players like Jerome, Gardner, Johnson, Dann, Philips, Ferguson, Bowyer.. . Sometimes they get money, sometimes they are just trying to get rid of a salary.
We have seen it before with Portsmouth and Leeds, and so we might expect Birmingham to go through the same situation. But there’s two clouds on the horizon. In the old days banks loved to loan to football clubs because they thought their money was safe – now the reverse is true. And there’s the endless cases brought by HMRC to overturn the football creditor’s rule which protects clubs on going into administration. If that goes, then Plymouth, Birmingham, Rangers and others all go.
And you will hear the echoes of the bang for years to come.
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