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Slowly the football financial truths emerge

Companies, like individuals, that are in trouble tend to be a bit circumspect with the truth when debating their situation.

And so we have seen with the situation concerning Liverpool FC – and it looks like there is more to come.

I reported that Liverpool’s finances are so awful that the banks that have loaned them money have given them an extension until the summer, and suggested that at that time they expect Liverpool’s financial mess to be sorted by the club – or else no more loans.

However it has now become clear that there is another clause, that the club have been hiding away.  It emerged after my silly open letter to the banks, protesting at the way they have loaned the money.  I doubt that my post achieved that – it must be a coincidence.

Anyway, we now know that the £350 million loan must not UNDER ANY CIRCUMSTANCES be used for the buying of players.

What really screws Liverpool at this point is that they, like most clubs, buy players on the never-never – so when you hear someone buys Johnny Foreigner (to use the ex-chairman of the Tiny Totts name for Bergkamp) for 20 million what you are actually getting is 20 million over five years.

What this means is that Liverpool need that £350 million loan not just to pay Benetiz his newly inflated salary, and players wages, and all the other players Benitez wants to buy, but to pay for people bought in the past.  And the strict interpretation of the loan is that it can’t be used for that.  (Even if it can, they still can’t use it to buy players, or else the bank closes the loan down).

Of course Liverpool are not the worst placed club today.  That honour goes to West Iceland United.

In simplistic terms, their owner has gone bust (because he owned an Icelandic bank), the club is for sale and no one is buying, Sheffield United want their 50 million having won the Argentine case, and now the EPL and FA are investigating them again, and will probably end up deducting points.
West Iceland’s problems stem from their fanatical secrecy – they chose not to show the FA and EPL the contracts relating to Tevez – and that is the cause of all that happened after.  After that it got worse and worse, as the club starting telling the EPL and FA one thing, but then were telling the player’s lawyer something else.

In the midst of all this – with every aspect of the affair going against them West Iceland are doing nothing other than denying everything.  For each issue they have an excuse.

A bit like the EPL itself.  EPL top dogs are currently stating that they expect the next Sky deal to be as big as the current one.   Yes well, not in the world I live in.

Last point – just a detail.  I tried taking off the checking process (the maths question) for those who wish to post, and have just spent an hour getting rid of 250 spam emails sent to the group.  Sorry – it has to go back on.  If you want to post you will be asked a simple maths question (like 3 + 5 =).  Annoying I know, but it makes the smooth running of this group (which is after all just a hobby for me) much easier.

(c) Tony Attwood 2009.

8 comments to Slowly the football financial truths emerge

  • Jonny Neale

    Tony just a thought – the first time I posted and was asked to “add 2 and 3”. As ‘add’ has more than one meaning it wasn’t clear to me if I was meant to enter 23 (add 2 and 3) or 5 (ADD 2 and 3). Thereafter it became obvious but if you changed the terminology to –

    “Please add together x and x and enter the answer in the box to the left”

    This might help make it a little more clear?

  • Marc

    Tony – It’s amazing how some clubs are manging to get away with there business models. After the news this morning re: Man City and Kaka the FA / Premier League need to step in and stop this madness. My feeling is that there is no problem with someone buying a club and investing in infrastructure i.e. new or expanded stadiums but we have got to stop what has already happened at Chelsea (And now looks like it is unraveling) and is now happening at Man City.

  • manwithnoname

    Hey I love your blog but would love it if at the end of the article or at the end of a paragraph in which your supplying information, such as the clause on the Liverpool loan, if you could put links to where you got the information.

  • don't believe the hype

    It’s annoying when you submit a comment having forgotten to do the maths first, but I don’t blame you for leaving it on if you have to deal with all that spam.

    I don’t know what it’s going to take for the FA to act. It is a complete waste of space as a governing body. It’s like the emperor Nero fiddling while Rome burns.

  • Waleed

    Is it a hobby or an experiment? I hope you just reply to one of my comments and shut me up.

  • Consolsbob

    Tony. That was a wonderful letter. How did the other clause info emerge? I take it that you did not actually write to the bank?

  • pacificworld

    This Arshavin story is getting wackyer and wackyer. Now its reported that the bloke is going to pay “£3m towards his own transfer fee to insure he move to the Emirates”.
    http://www.arsenalshorts.co.uk/2009/jan09/20090115.html

  • Jimmy

    Great letter, and good article again tony. can i echo consolsbob and manwithnoname’s request for links and stuff about the liverpool stuff?
    thanks as ever for the un-failing optimism for the arsenal. my only fear is that even if liverpool and man utd do get themselves into really bhot water financially, theres no way the FA (or the government come to that!) will let them face the consequences – can you imagine any government allowing liverpool to go bust?!