Ordinary is Pointless
Which club has the most debt?
Editorial prelude [well we’ve never had one before, so why not?
On the History of Arsenal site, linked at the end of this article, you’ll find a page from the programme for the first ever league match at Highbury in 1913, reprinted. It is part of our build up to 100 years at Highbury.
Anyway, on that page there is an acknowledgement of the fact that Arsenal were indeed in debt as a result of building the Highbury stadium. To help overcome the debt they were selling shares in the club (£1 each), and season tickets (£1.05). There were discounts for being both a season ticket AND a shareholder.
So there was Arsenal (or more particularly, Messrs Hall and Norris who paid for the stadium) full of debt. 99 years on, its no longer our club that is searching for funds.
Which club has the most debt? and where are we in the debtor’s league?
By Cameron Wolfe
Shortly after becoming Chelsea’s Owner Mr Abramovich and the club released a statement saying that within five years Chelsea would be self sufficient.
That they (and others) have fallen well short of that statement, to say the least, is shown in the latest figures for various premier league clubs are below.
Here are two classic quotes from Chelsea.
Chief executive Ron Gourlay said: ‘Achieving a record level of turnover is satisfying given the economic background against which we are operating.’
Chairman Bruce Buck added: ‘The club is focused on complying with the requirements of Uefa’s financial fair play regulations while maintaining its ability to challenge for major trophies. We would expect this to be reflected in our results for the current financial year.”
Current results show a £63m loss and they just spent that again on new players this summer. And all this from a club that supports FFP.
So returning closer to home, where are Arsenal and Chelsea in the Debtors League?
No surprise, Chelsea are top which is to be expected considering just how much money Abramovich has pumped in to the club. Some people are of the belief that this money has been written off. But that’s not true. It’s on Chelsea’s parent company’s books and in theory could be asked to be repaid at just eighteen months notice. Some believe that in reality he’ll never see his money again. Others suspect he might one day ask for it back – and demand it. Forbes values the club at £402m so a buyer would have to pay @ 1.2billion
Sitting in an unhealthy second place is Man.U. No doubt once the Glazers convince which ever stock market they’re trying to create more shares on that their club is worth $3 billion everything will once again be rosy up at OT.
Clearly the Glaziers are in to make money – following the liquidity problems they had with their shopping malls and other ventures. The best solution for Man. U would be for the Glaziers to sell up and move on but currently the are looking for anywhere upwards of $2 billion for the club. (Depending on which figures are too be believed.)
Meanwhile, looking around elsewhere…
Stoke. Never been a fan. Mainly down to the fact I can’t stand Pulis and their style of play but Kudos to their powers that be. No debt. See you can be a premier league team and have no debt. Maybe other clubs should follow their financial plan. Maybe they are just keeping it simple. No outrageous signings/wages and a decent cup run or two. If they can sustain there EPL status indefinitely then they’ll be able to start sign better players.
A surprise was that Man. City carries a debt. Not a huge one but you would think that a club run by a family rumoured to be worth $55 billion would make sure that they weren’t needlessly paying interest charges no matter how small.
Biggest surprise was Fulham. Their owner isn’t as generous as some would think and fully intends to keep track of how much he is owed by the club. A good business man should always know how much he’s owed especially if it’s £190m.
So, Arsenal. How do we compare?
Nothing like Chelsea or Man. U when it comes to the amount of debt we have. Most importantly for the club the debt is coming down nicely on a yearly basis and the amount we pay in interest charges is more than manageable. In the next few years depending on how well we do in the CL, cups and in the league in general will help any along with extra income from TV, Naming rights or a new shirt sponsorship deal could easily go towards paying down the debt.
Stadium building costs don’t count when calculating FFP – and nor do academy costs, so all things considered we are doing ok on all front. The debt is just the normal mortgage debt and it goes down year by year.
Our income isn’t too far behind Man.U and if we keep on expanding in Asia, Africa and the Middle East then our income will keep on growing. As will our profit. And given that we are now coming to the end of the original sponsorship deals which were front loaded to pay for the Emirates in part, we can expect a huge uplift in sponsorship income within the next couple of years.
In the long run it makes sense to have been prudent when other clubs just kept on borrowing against their income. Or re-financing their debt every other year. In the very near future we will be able to compete on an even playing field. And we’ll be doing it just at a time when the finances of clubs like Tottenham, Liverpool, and possibly even Chelsea will be restricted somewhat by the desire to build a new stadium.
| Turnover £m | Wage bill £m | Debt £m | Interest £m | |
| Arsenal | 256 | 124 | 98 | 15 |
| Chelsea | 222 | 190 | 110* | 0.8 |
| Fulham | 77 | 58 | 190 | 0.6 |
| Liverpool | 184 | 135 | 65 | 3 |
| Man City | 153 | 174 | 43 | 5 |
| Man U | 331 | 153 | 487 | 50 |
| Newcastle | 89 | 54 | 130 | 0.2 |
| Stoke | 67 | 47 | 0 | 0 |
| Sunderland | 79 | 61 | 77 | 2 |
| Tottenham | 163 | 91 | 57 | 6 |
* Doesn’t include the 760m owed to Abramovich.
So summarising the future:
- Arsenal – turnover to rise with income from new sponsorship deals.
- Chelsea – were trying to get towards FFP but then panicked over poor league form and started spending again.
- Fulham – now spending money on extending one of the stands – so debt will increase.
- Liverpool – still pondering what to do about a stadium and how to afford it
- Man City – not looking remotely as if they can qualify under FFP rules.
- Newcastle – now trying a new link up with Rangers – which is interesting to say the least.
- Stoke – nice club, shame about the football (and the fans)
- Sunderland – interesting how slow the manager has been in the transfer market this summer
- Tottenham – still got to find the cash to build the new ground. If they borrow, it will be hard to borrow money for players. Will the owner in the Virgin Islands cough up more cash?
A season ticket at Arsenal for £1.05
Sunderlands debt is also huge given their turnover. With regards to Chelsea, i did think that Abramovich had invested all the money he was prepared to but the CL victory seems to have reignited his interest.
The other interesting point is the gap between ours and Tottenhams figures, almost £100m more turnover and a wage bill only £33m higher. As you say if they do look to build a stadium that will have a dramatic impact on their finances. All the talk in the media last season that they had over taken us was another short sighted view of how things truly are.
Thanks for a great piece
A thought provoking article, but I’m afraid completely misses the point in respect of Stoke. They are not a nice club. They are simply a Chelski or Mansour City in disguise. If you read the Swiss Ramble site, you will see that even in 2010, they had spent massively to achieve and maintain their premier league status. The only difference with City and Chelski is that their funding originates from Peter Coates’s Bet365 fortune and not oil or oligarch money.
In the last 5 years Stoke are the third biggest net transfer spenders in the Premier league – incredible I know – with little more than lower level prem survival to show for it.
The reason that Coates’s investment doesn’t show on the books of Stoke as a debt is that they are registered as interest free loans in the books of the parent Company Stoke City Holdings.
Please don’t take the usual media line of “plucky little Stoke” facing up to the big boys of the premiership. They are just City/Chelski lite with a manager who watched more rugby than football in South Wales.
please excuse my rant, but I anyone who loves football and Arsenal (synonymous) needs to understand the truth about the unpleasant team and fans from the Potteries.
It has often been reported that to repay the stadium debt early would be uneconomical due to early repayment charges. How much are the club allowed to pay back each season? And when will the stadium debt be fully repaid and the club declared debt free?
Les Compton, Walter,
Cheers for that great analysis – it may well make a lot of sense of how favored Stoke seems to be in the ref reviews. Walter?
Great great article. looking at the numbers, i am particular impressed with Arsenal’s ratio of wage bill to turnover of 48%. Compare this with the rest of the top teams…Chelsea 86%, Liverpool 74%, Man City 113%…Any team spending more than 70% of their turnover on wages like undoubtedly not show a profitable balance sheet at the end of the day. If the FFP is really happening, we should see a lot of desperate sales from these teams in the near future…
Alan,
Indeed, this could be calculated by someone and made known to fans; but someone(s) wouldn’t want fans to be that much in the know now would we? 🙂 This kind of knowledge and people might pose realistic requests, instead of going away with the mantra that we still have the stadium to pay. You’re absolutely right to pose this question and I join you in asking someone to do the calculation and let us all know just when the stadium debt is paid off?
I would only question Chelsea’s alleged indebtedness.
It seems to me Abramovich uses the Club as a plaything, pumping in funds ad lib with no thought of making money.
How, therefore, can you say that Chelsea are in the red.
Alan, Bob, I am not sure the stadium pay off question is of much importance. It is just like paying off your house mortgage. If interest rates are very high you might well be moved to pay it quickly, but then take into account the penalty clause and see if it really helps.
If interest rates are low then you probably don’t bother, since you have money in the bank anyway, and there is still that early payment penalty clause.
No company gives out information like this for fun. Certainly if in my company I found one of my staff or my directors handing out information about our properties and the amount we pay on them, I’d have him out the door. It is, for a business, confidential information.
I think you may be comparing Arsenals nett debt with gross debt at other clubs. Not the end of the world but needs explaining more.
It’s also important to understand what clubs have got for their debt. We have a new stadium the sponsorship of which pays the interest – or will do soon. Spurs (for instance) have no new stadium to show for theirs and Man Utd. will probably never get sponsorship for Old Trafford because it will always be known as exactly that.
This link is mainly about PSG but some of the tables and graphs show where Arsenal are in relation to Europe.
http://swissramble.blogspot.ro/
Continued from above.
http://swissramble.blogspot.ro/
The fourth paragraph.
‘QSI, an investment arm of Qatar’s sovereign wealth fund owned by the ruling Al Thani family, bought 70% of PSG from American investment company Colony Capital in May last year, before acquiring the remaining 30% in March in a transaction that placed a €100 million value on the entire club.’
Go further down and we have this:
‘There are also strong trading links between France and Qatar, so it was not exactly out of the ordinary for former president Nicolas Sarkozy to host a dinner with a member of the ruling Al Thani family, nor to invite Michel Platini, given the Qatari’s interest in sport, but the aftermath was positive for all involved, as Platini surprisingly voted for Qatar to host the 2022 World Cup, while PSG secured their much needed investment. Sarkozy, a well-known PSG fan, was described by French newspaper Libération as “the Qatari team’s 12th man”. Incidentally, Platini’s son now works for QSI.’
Will the new finace regulations limit clubs likes chelski etc., not if this article is to be believed.
Tony, Alan
It seems important to know what’s legally knowable for fans who otherwise are chronically told that their requests/dreams are in excess (i.e., to F-off) because there’s the stadium debt to liquidate. Is there some point, as Alan asks, that it is right for fans to hear (as well as celebratory for the club to announce) it is debt free? Is that date so far off that its secrecy is so treasured right now?
Of course some class of a private entity’s shareholder/investors are entitled to know when a team’s specific debts are slated to be paid off. So, for example, Manure, as condition of being publicly listed on NYSE, does have to file this type of information by the investment rules of the Exchange and the SEC.
In our unlisted case, are you saying that the actual amount and payment terms of the stadium loan are completely private under UK law. Don’t venues like Swiss Ramble try to guesstimate/ analyze that type of information on some basis?
I can understand, in principle, why AFC wouldn’t like Manure, Chelski and Citeh to know its internal data. But I have to believe that most clubs work at making educated analyses of each other’s internal condition so as to put immoral, if legalized pressures on a team on behalf of pressure-campaigns to strip away (by tapping, etc.) its prize assets. Surely we are targeted this way by these sides and agents/advisors like Dein the Lesser. In the economic warfare, known as professional football, I can well understand the need to seal lips and data from such forces. But there is also a hard tradeoff for fans – a price that fans pay in not knowing even basic parameters. We are told to go away and leave your desires and dreams to your betters. Fact.
@ Les Compton
Sorry if I the article irritated you. Not my intention. Whilst sifting through the figures available I only highlighted Stoke due to the “debt Free” tag being in several reprts that I used as reference. I understand the Coates family paid off debts related to the club but whether or not like Chelsea and Fulham they could be repaid to the Family. I couldn’t find any information.
I’m certainly not blowing Stokes trumpet. Far from it. Their style of play. The use of rotational fouling and Pulis himself. I’m not a fan at all.
Again looking at a debt table they came bottom.
Promise never to mention Stoke again when writing about Arsenal.
Unless we hammer them 6-0 this season.
Hi Cameron, nice article, but how is our interest £15M on a £98M debt? It looks like we’re borrowing money @ Glazier rates, or am I reading it wrong?
@robl
The 15m is a cash amount not a %.
So currenly the debt wiil decrease by a miniumum 15m every year.
@Alan
When the loan was first taken out it will have probably have contained a clause where by Arsenal can make extra payments. They will however be limited by how much per year or by how many extra payments can be made over the term. It’s in the banks favour to keep the loan/mortgage going as long as possible.
The writer has forgotten the
Bonds – fixed rate …..£ 183,428 millions
Bonds – floating rate ..£ 50,000 millions
Debenture loans………£ 12,642 millions
and of course the Covenants that must be obeyed.
RVP signed the EPL Contract Forms 13 and 13A, wherein one should not cause distress to The Arsenal.
Tony, is quite right – sensitive information about a company is only revealed to those who need to know. That is why there can be 2 payrolls, one for those who do not need to know, and the other for Directors and executives.
@robl
do not believe Cameron at 8.53 pm.
@Robl
As far as I can tell Arsenal signed a 14 year fixed term loan in 2004 for the stadium. So they should be clear of that by 2018.
I suppose logically if you’re paying off the 98m left by 15m every year there’s @ 6 years left to go unless they do clear it early.
Just think how much more attractive Arsenal will look then?
Maybe it’s what Silent Stan and the Russian are waiting for?
@Les Compton,
I saw your namesake play, along with brother Denis in Arsenal’s Championship year 1947/8.
You chose the proud name of one of Arsenal’s unsung heroes of yesteryear.
Notoverthehill – as I understand it directors salaries have to be revealed – not by the name of the person but in total and individually over a certain level. Two pay rolls would be illegal.
@Notoverthehill
Before you start telling other people not to believe my response.
Straight of the Arsenal official website and quoted from Arsene: Friday, February 10, 2012
Arsène Wenger has clarified his comments about needing to make money each summer by reiterating the Club’s obligation to pay off the debt of the construction of Emirates Stadium.
The Arsenal manager was quoted in a Belgian newspaper earlier this week, speaking of an “imperative” to generate a profit of at least £15 million to £20 million each season.
“We want to pay the debt we owe from the stadium we built, that’s around £15 million [per year]. So it’s normal that at the start, we have to make at least £15 million or we lose money.”
He seems to be under the impression that Arsenal need to pay off the outstanding debt by 15m a year.
The stadium is Arsenals only outstanding debt.
I’d like to think that even in the case of Arsenals debt:
ARSENE KNOWS BEST.
With MU’s debt,the rd needs to win and win 90% of the time.I hope when RVP goes there he will get to the cl final and lose .The rf thinks that with dm he can win the lot just like Canton a was the catalyst.Of course history can or may not repaet itself.
I just hope the gunners can challenge for the epl until the last match of the season and not fizzle out like previous season. A repeat of this scenario will be intolerable to fans.
Interesting comparison! It would have been good to have net income as well for each club (unsure if this is available).
Some clubs have debt but are not able to make money, and were not profitable last 5 years (chelsea, barca, ManU). Some other clubs like arsenal are in net profit nearly each year(i know, not the very last year). Just as an interesting figure, barca made less than 5mn of net income (=real profit) the year they won everything. ManU did not do any profit except this year and a very small one (a few millions). This compares to the need of 20mn for transfert each year (average transfert fee at ManU from 1995 to 2011).
That shows in perspective how crazy it is to spend 45mn on a player: in the real world even in a top club you will need 6 or seven years of cash to afford it.
GroovT,
If you sign that £45m player to a five year contract, any accountant will tell you that he amortises at £9m per year. With staggered payments it’s possible said player could cost only £9m per season.
Very few clubs pay upfront for players, how do you think Arsenal were able to sign Cazorla at such a bargain rate? Malaga couldn’t make the payments to Villareal (IIRC) and had to get their debt to them off the books before they could sign any players. I would imagine that we’re paying a hefty chunk upfront (we have the cash balance to do so, thanks ManCity) and smaller payments over the next couple of seasons.
@GroovT
Interesting that you mention signing a 45m player.
I know it’s still all up in the air on whether RVP stays or goes.
Seemingly SAF is going to offer more this week?
If we give RVP what he’s allegedly asking for @190,000 per week plus 10m resigning on fee????
That would cost Arsenal:
29m on a two year deal. Or 280,000 per week
46m On a four year deal. Or 238,000 per week
Now I hope that he does stay or if he goes then not to Man. U
but that’s a hell of a lot of money for a player that has only given Arsenal One great season in eight.
I am surprised that Man Utd is below Chelsea but considering how much money is pumped into the club, I am surprised there is that much debt! Lets hope they sort it out so there is less boring talk about debt.
Sophie
The more i want to learn on this subject of Arsenal debit the more i get confused
Could there fore somebody summarise Arsenal Debits for Idiots like me in a short sweet sense ?
Confusion A)
By taking Wenger`s quote that a kind on minimum 15M is required to pay just for the stadium yearly is it not sufficient the money that the club was/is making from the income of:
1-Gates
2-Merchandise
3-TV
I could have said easily money earned from player sell/transfer but that it depends i believe on their wages as well.So I don`t include.
Confusion B)
If success on the pitch will make vast difference on the profit what is the point then to sell the best players every season ?
I have a question about the FFP Rules and how it will effect clubs like Chelsea, United with major debt. I was in recent talks to City fans and they were going on about how their debt is paid off simply from personal investment outside the club (oil money of course). So what is stopping Abromovich and all the big spenders from just doing the same year after year?
Is there a clause in the FFP rules I missed, or is this a loophole they have been using will be using in time to come? I find the lavish spendings of Chelsea, City very irresponsible in light of FFP, unless as I say they are manipulating the system in the aforementioned way.
Can anyone please shed some light on this?
Jay – the Man C fans just tell us where the money is coming from, nothing else. The issue is the loss that the club makes, and where that gets to a certain size, that is when FFP kicks in.
Clubs can get around the losses in some ways. Building a new youth training centre and a new ground, for example, are exempt from the calculations.
To overcome their losses Man C have to cut their wage bill, sell off unwanted players at a profit and also increase their revenue from marketing, TV, and the like. None of these are easy to do.
Chelsea looked last year like they were going down this route, but they have reversed that. It looks like these clubs are simply sticking two fingers up at FFP, and it is a question of who will buckle first. Uefa’s worry is that if they kick Man C and Chelsea out of the Champs League in 2 years time, those clubs will go and form a new league themselves, or so devalue the Champs League that the TV finance for it will decline.
@CameronWolfe
The debt doesn’t decrease at a minimum of £15million a year. Wenger listed that as a minimum amount that Arsenal needed to clear as profit to service the debt – both the interest and the principal amount.
In 2006 we restructured our stadium debt from standard bank loans to bonds (becoming the first european club to do so) and paid a penalty to the banks for switching to this format – this was balanced out by the fact that the savings on maintaining the bonds was greater than the penalty.
To replace the £260million construction loans we issued two types of bond – £210 million linked to the rates for UK Government bonds, £50 set about 3% above the LIBOR rate. The £210m was due to mature after 14 years – meaning that this should be cleared by 2020, with the £50m maturing after 25 years – though this one could be activated to mature early, and is expected after 7.5 years – 2014.
The interest we accrue on these debts its variable due to the nature of the bond markets and interest rates and so the amount that the debt decreases by each year will be almost impossible to work out without having arsenal’s accounts to hand.
after an argument with a liverpool fan over the weekend i was just wondering do arsenal football club still have an existing mortgage or is the stadium paid for in full