Untold Arsenal: Arsenal News. Supporting the Lord Wenger in all he does » Chelsea FC are not debt free at all – it was all a huge con (or a mistake)

By Tony Attwood

The BBC and a lot of other commentators and news sources said,  “Chelsea Football Club has said it is now “virtually debt-free”.”

You’ll remember it well.   30 December last year

Now it turns out not to be true.  Not at all.  Not one jot.  Of course I can’t say what was in Mr Abramovich’s mind when the story came out.  Maybe he never authorised it, and it was just an over-excited pressman at Chelsea who released it.  But whatever the cause, it was just a load of old cobblers.

But had the ruse not been rumbled, it might just have looked to Uefa (who as we know don’t always see things clearly) that Chelsea FC were indeed debt free and so eligible for the Champs league the year after next.

In fact the disappearance and finding again of Chelsea’s debt is one of the most extraordinary stories of either a deliberate attempt to slip one over Uefa, or a simple error that big boys in the world of finance should never make.

Here’s the whole story.

Chelsea (who we renamed The KGB in Fulham, after their proven ability to re-write the minutes of their own fans’ forum, to edit out the awkward questions) were given an interest-free loan from a company controlled by Mr Abramovich, in order for them to win the league and stuff.

Then Bruce Buck the “chairman” of Chelsea said: “The club’s debt load has been reduced almost to nil in order to provide more long-term stability for the club. It will also enable the club to comply with any regulations on debt levels which are being discussed by the football community.”

That is a really interesting quote – note that he is specifically thinking about the new regs which require clubs to break even on football related business after 2012.

Chelsea wrote that they were engaged in “disciplined management” of capital expenditure, a reduction in capital expenditure etc.  So Mr Abramovich wrote off £726m in loans.

Well, no.

It now turns out that Mr Abramovich loaned the money not to Chelsea FC at all, but to Chelsea Limited.   Who loaned it on to Chelsea FC plc, which is what we mere mortals know as the KGB in Fulham.

So it was the loans from Chelsea FC plc that were converted to shares.  But that awfully nice Mr Abramovich’s loan to the holding company which owns Chelsea FC plc, was not converted to anything.

Not only is the loan still there – it is getting bigger.  Because Mr A just loaned another £25m.

And now here is a funny old thing.  The name of Chelsea Limited (which you might think is a good old name, since it reflects the name of the club-type thing that plays football) has now been changed to Fordstam Limited.  Fordstam owes £726m, owed to Mr Abramovich.  So I guess the fans could sing…

“And its Fordstam Limited, Fordstam Limi-ted

You’re by far the greatest team whose name begins with F

Except Fulham.”

Now, in case you are fluent in Gobbledegook, this is what a spokesperson for the KGB in Fulham said to the papers that bothered to take an interest.

“Recapitalisation of loans happened at the level of Chelsea FC plc, not the holding company, therefore making the football club debt free.”

Well not quite sunshine.  Whichever way you stand on your head, Fordstam owns what we all know as Chelsea FC.

Now maybe Chelsea has done a deal with Uefa so that they can get away with this.  Maybe they thought no one would notice.  Maybe they will willingly give up their place in the Champions League in recovery.

But here’s an idea.  Maybe it was all a little slip and they never meant to change the name of the company at all.  You know how it is.  You are walking down the street in Cardiff, and happen to see as you head north out of the city this big building on your left, and you just happen to drop in, in case its a pub or something (forgetting that the pubs are on the other side of the road – they all have the word “Brains” written outside).  Then when the lack of a bar, pool; table and TV give you the club that this huge building is actually a government office and not a pub at all the man behind the till slips a piece of paper under your nose, and next thing you know you have changed the name of your company from Chelsea to Fordstam.  Must happen every day of the week in Cardiff.  Regular thing.  My how they laugh in the Topplledll Bollardll Publlic Hollusell.

I must stress of course that they have done nothing illegal, and they have no obligation to tell the press or anyone else what is going on.  So no allegation at all from me.  I’m just, well, I suppose, amused.

Yes, amused.

That’s it.

Amused.

Anyway, here’s the big thing.  When we all looked at what appeared to be the original Chelsea plan (that is when we believed that Abromovich had indeed made the club debt free by converting the loan of £700m to shares, a question was raised.

What happens at each transfer window when Chelsea want to buy another player or four?   The club is losing money, which is why Abramovich has to keep pouring money into it.   Does he keep creating new shares?  If so, that would look daft, and surely even Uefa wouldn’t actually go with something as blatant as that.

Now it seems he doesn’t have to do it – he can just put money into Fordstam and feed it through that way.

Fordstam owes Abramovich £726m.  Unlike many loans in football, tThe loan is interest free, but it is repayable if Abramovich gives 18 months’ notice.  So that is the lifeline Chelsea are on.  18 months.  Not that long really.

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Chelsea: the dark origins

The Index of Indexes to Everything Positive and Nice (except Fifa and its bent world cup)

Woolwich Arsenal – now there is a club on the brink of disaster

The Book – not as useful as the Hitch hikers guide to the galaxy, but still, quite good for a read during the summer break.