Untold Arsenal » Most of the Premier League are now insolvent or just one step from disaster

Equifax does reports on the financial health of EPL clubs – you may have seen they did a new one this month. What they do is take a look at the accounts, what the auditor says about dodgy dealings and dubious debts, contemplate their ability to repay debts, look at working capital, and also sees how many court orders they have outstanding.

The oddity is that the highest score was given to Manchester IOU – I can only take it that the authors think there is no chance of the club defaulting on any of its debts because it is too big to fail. This approach (if it is correct) is based on the old adage that if you owe your bank £100 you have a problem. If you owe your bank half a billion pounds your bank has a problem.

There are, I believe, many people of vastly superior in knowledge to myself on such matters, and I am hoping that someone can clarify the Manchester position and explain the rating.

Arsenal come in second place, marginally behind Manchester IOU but still in the very top bracket – the only two clubs that are.

After that there is a huge jump down to the next bunch which are classified as having “good” status. This group includes Birmingham, Wolverhampton, Blackburn Rovers and (again surprisingly) Liverpool.

However I believe Liverpool’s situation gives us an insight into what is going on here. Liverpool have to repay the banks £60 million a year under the new agreement, and this must need to find all the cash can only hinder their normal approach. But the report is not concerned with the “normal approach” to football within the club. Instead it asks, “is the money safe?” and it thinks that this is so. They believe Liverpool’s bankers and others will get their money back. The club might end up in League One, but the money will be paid.

Then we have another big drop in rankings, until we get to the “above average” score. Only one club gets this – and it scrapes in on the bottom mark of “above average” – Tottenham.

Below them the average group includes just two clubs, Sunderland, and (another surprise) West Ham – but again I suspect this just means the reporters think WHU will ultimately repay their debts.

“Lower than average” gives us Manchester City and Fulham, while at the bottom “Low status” includes Fulham, Everton, Aston Villa, Chelsea, Bolton, Portsmouth, Wigan Athletic, Stoke City, Burnley, Hull City.

This last large group – that is clubs whose finances stink (to use the technical term) includes the clubs that are totally dependent upon one rich kid stuffing money into the team – something that the accountancy people don’t like – because the rich man might die (we wish them no harm of course), or be thrown in prison (we make no allegations at all), or lose all th money when an oil field blows up (we have no plans in this direction) or a revolution happens in Kurkkanmanismanistan (we have no political involvement), or they simply get bored with the fact that they will never play as well as Arsenal.

But there is another measure to add in. The clubs that are insolvent – ie clubs that on the face of their books can’t pay their bills. Here we have Fulham, Villa, Portsmouth, Chelsea, Everton, Bolton, Hull, Wigan, Stoke and Burnley. Again many of the clubs that are dependant on the good intentions of one rich owner – the owner has to stuff in more money and more money and more money to keep the going.

As far as I know, no other industry is in such a mess at the top.

But even though the Manchester IOU score of 100/100 is odd, it is interesting that Arsenal’s score is 98/100. West Ham got 37, the Tiny Totts got 50, and our dear friends in Hull got 1 (presumably on the basis that they have overstretched themselves and so will be in a total mess when they go down at the end of this season.)

Tottenham’s score is interesting, because with that sort of score I would guess that they will be required to pay above the norm interest rates for their fantasy ground development – Arsenal got their deals on terrific rates because they were seen to be rock solid. Because Tottenham are owned AND FUNDED by a man in a tax haven, there are questions – not because he has done anything amiss, but because accounts in tax havens are never open to as close a scrutiny as they are if the owners were in the UK.

Arsenal, Liverpool and Manchester IOU are not funded by their owners – they are funded totally by the activities of the club. The problem for Liverpool and Manchester is that these funding streams are hard pressed to pay the debts each year, and indeed Manchester have given up paying interest on their debts.

So, Arsenal right up their at the top – one might even say we have a game in hand.

If anyone can help clarify this chart, please do write in.

(c) Tony Attwood 2009