Half a league, half a league, half a league of debts onwards

I reported that Roma have been put up for sale even though they came second in Italy – and that they have loads of debts.

Now I find (in an article on Italian-Calcio Blog) the Italian football federation has announced that Serie B side Ancona and 20 Lega Pro sides have been kicked out of football will not be readmitted to their championships.  All clubs in Italy must prove their financial stability to the Covisoc financial committee before they are allowed to register for the year.  It was announced that 42 Series B, Lega Pro Prima and Seconda Divisions failed to pass muster. 

The federation board meeting which decided on the new measures was not attended by representatives of Serie A or Serie B in protest at the recent decision to allow clubs to only buy one non-EU player this season rather than the previous two and there is talk of strike action.

Changing countries, Ajax in the Netherlands are 25 million euros in debt apparently.  IM Scouting says so and it was on Radio 5 too.

As for Spain, well we know really, but here’s Football Economy’s take on it this week: “La Liga is in a worse financial state than the Premiership according to Stefan Szymanski, football economics guru at the Cass Business School…   He said that apart from Real Madrid and Barcelona, all the teams in La Liga were in financial trouble (and even Barcelona have their problems).  Asked why Real Madrid were able to splash out so much cash year after year, he said that their finances were not very transparent but there were evidently political considerations involved.”

Moving on, I’ve talked about Scotland before – particularly Rangers who are seemingly run by their bank, like Liverpool.  Here’s what Herald Scotland said this week…

“This summer, football finances have hit an extreme low. It is hard to remember a more austere time for our game, with fewer jobs for players available. For many years I have been encouraging players of all levels to look at football abroad. Now, this may be a necessity for some.

“Of course not all players can play at that level but countries such as Cyprus, Iceland, Finland, Australia and even India now are looking for Scottish players to play in their domestic league. A decent living awaits those who are bold enough to try something new.”

Back to Football Economy, and try this one for size…

New research published by the International Journal of Sports Marketing & Sponsorship suggests that football clubs are using insolvency as a business tactic.

“The research, which analyses insolvency events in UK football in the past 20 years, shows that many clubs have gone into administration more than once and that there is little regard for creditors, particularly government agencies such as the Inland Revenue and Customs and Excise.

“Lead author of the report, John Beech, head of Sport and Tourism at Coventry University, concludes that the inference is undoubtedly a willingness to enter administration as a business decision.

“‘Among members of the Football League Division 1 and 2, more than half have suffered an insolvency event in recent years. Because the process of entering Administration is designed to help ailing businesses rather than hard-pressed creditors, it is seen as a relatively soft option by football’s governing bodies.’

“The findings suggest that there are five basic triggers that lead to financial difficulty:

1. Clubs fail to cope with the financial consequences of relegation;
2. Clubs fail to pay government authorities such as the Inland Revenue on time resulting in cashflow problems and in consequence suffering winding up orders;
3. Soft debts, such as those from wealthy benefactors, become hard debts, which clubs have not budgeted to repay;
4. A loss of stadium ownership and the consequential reduction in revenues;
5. Repeat offenders, which have difficulty recovering from the impact of earlier insolvencies, or which decide insolvency is an acceptable process to clear debt.”

The research shows that 62.5 per cent of clubs in League 2 had suffered an ‘insolvency event’, whereas only 20% of Premier League clubs had done so and only Portsmouth had while actually in the Premier League.

47% of repetitions happened with four years and 68% within seven years.

Looking at repeat offenders the web site says,

‘It might be argued that the clubs had not learned their lessons. In only four cases (Darlington 2009, Luton Town 2007, Swansea City (2003 and Swindon Town (2002) were debts at a lower level than in the preceding insolvency event.’

So what of Portsmouth? Sad to say they have another problem because the newly active Revenue and Customs (the UK taxman) has challenged their administration, alleging “material irregularities” in the creditor vote that led to the company voluntary arrangement being approved last month. The Company Voluntary Arrangement (the move out of administration), prepared by the administrator proposed 20p in the pound to all creditors over a four-year period, which would have allowed the club to exit administration.

However the jackbooted tax man (more powers than the police so don’t rub them up the wrong way) believes Andronikou overlooked its legitimate claims and is pressing for the CVA to be revoked. If the high court appeal is sustained, Portsmouth would then have to set up a new company through which to make an application under “exceptional circumstances” rules to be admitted to the Football League.  Even if that was approved, the outcome would be a huge points deduction for still being in admin at the start of a season.

The almighty Leeds United went through this in 2007 and got a 15‑point penalty for their pains.

But there is a bigger implication – if Revenue and Customs win then that’s the end of football debts getting priority over Revenue and Customs, and that changes the whole landscape.

So what of our old friends, Liverpool Insolvency. They have bought Mr Cole for zero but are paying him £90k a week until he is past his sell-by date (well over 33).   How come if they are bust.

The answer is that the bankers who run the club want their £300m back, and another £90,000 a week going out is neither here nor there given that they are releasing and selling players, and they need to keep the operation afloat while they continue to look for a bidder.   The worst thing for the bankers would be for Liverpool to sink into the relegation mire, so they are propping up the edifice, in the hope that an angel appears sometime soon.  they have managed, through this free transfer to get Radio 5 talking about Liverpool returning to the top four, which is obviously good for the banking business, although more than likely a load of footballing tosh.

And to end…

Manchester United remain the most valuable sporting club in the world, according to Forbes.com despite their insane level of debt.

The publisher released its fantasy league of the world’s most valuable teams yesterday, with the Premier League club having a positive rather than a negative value!

The Dallas Cowboys were second followed by the New York Yankees, Washington Redskins, New England Patriots, Real Madrid, New York Giants, Arsenal, New York Jets and Houston Texans.

Ah fantasy economics.  Doesn’t it just remind you of the criminals and crooks in the banks.  I am told that there is a campaign to bring back hanging for being a banker.  Seems fair enough.

Untold Arsenal – everything you never wanted to know and more

Untold Woolwich Arsenal – everything you never even imagined happened to our club in the past.

Untold Making the Arsenal. Historical fiction on acid.

10 Replies to “Half a league, half a league, half a league of debts onwards”

  1. Mallorca from Spain have been thrown out from the Europa League due to bad finances. Guess UEFA means it for real

  2. Ajax have really suffered in the last few seasons because they haven’t qualified for the Champions League Group stages, so its no surprise that they are currently losing money. Its a shame though, because if ever there was one team you could expect to hold up and shine a light on – as a club that does things the right way by investing in top quality youth coaching as a way to produce quality players – then it would be Ajax. No doubt they will have to sell Van der Wiel, and Suarez etc, but give it another couple of years and they will have some more quality young players in their place, so I wouldn’t worry about them too much. Liverpool on the other hand….

  3. Interesting piece Tony, good to see a round-up of the news that some may have missed. I’m currently reading into the Financial Fair Play proposals to see if they’ll solve much but first impressions are that they are a bit weak…

  4. I think Ajax made a loss of 31 million euro’s last season.

    The good thing they have is that they always seem to have the ability to bring up new talent throught their own ranks and add a few young and still unknown players to their squad which they can sell later on, eg Suarez.
    But it could be interesting to keep an eye on their young CB pairing.

  5. Great piece, its good to know Arsenal are prepared for any stipulations that come into play over the next few years, our level has been from 332.8 million pounds a year ago to 203.6 million pounds, and with us being 3rd in most valuable football teams the future is bright. And due to our wage structure if a capping comes into play(which it should) then we’ll be smooth sailing.

    but yo can be sure if a capping is talked about then the KGB and Arabs will start throwing money at the men in the offices, bit like the japanese when it comes to the whaling commission!!

  6. Shhhhhh
    If you listen carefully just as the sun sets, you will hear the unmistakeable sound of chickens…… coming home to roost.

    8th most valuable and getting better all the time? Yup I’ll take that everyday of the week.

    The yoof coming through nicely and individuals starting to shine.
    All may not be exactly perfect in Arsenalville, but things can only get better.

  7. Mallorca are not the first to be thrown out of one of the big competitions in Europe – according to the Uefa web site I think five have gone before them. But don’t forget Portsmouth also have been told they can’t play, and normally they would because as cup runners up with the winning team in the Champs already, they would normally qualify for Europa League.

  8. Tony

    There was a piece on Newsnight this week about the economic crisis in Spain mostly being due to the Cajas (sort of like regional building societies/banks) mostly being bust due to poor lending practices to construction firms. Apparently about 450 billion Euros south, the lot of them………puts Portsmouth’s little problem into context doesn’t it?

    The issue in Spain is apparently this: banks are now spooked so won’t lend to good businesses, who need the money for working capital. This means those businesses need to lay off staff, not that they want to but the banks are forcing their hands, but EU law makes that cost more than borrowing money to keep them on.

    All in all it sounds like a PE man’s dream. Squeeze businesses until they are on their knees and then come in as the financier with strength.

    Dunno if that’s what’ll happen.

    In football, all you need is 3 laws:
    1. No preferential creditors in the industry.
    2. Each season a license is issued only when HMRC dues are paid and when local supplier terms are less than 120 days and preferably less than 90 days. (If I were a supplier I’d say cash up front with a lot of clubs and 30 days with most).
    3. An annual financial audit by financially qualified fans. Easy to get a dodgy accountant, blue chip or no, to sign something off. A fan who can read the numbers will make it pretty clear if a club’s heading South.

    If you did that, the industry would be sorted out within 5 years.

    Perhaps they don’t want that as it would clip too many wings????

  9. What chance Mohammed Fayed selling Fulham and buying Liverpool?

    He has a wallet full of Arab cash from his sale of Harrods, and his honcho Hodgson is already in place at the helm of Liverpool.

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