By Banco Danglais
One moment it is financial doom and gloom the next moment it is spend-spend-spend. But the reality is the Premier League clubs are being hit financially on all sides and there are multiple warnings in the air about how much money they are going to be losing.
TV money is the obvious big time loss, both with demands for refunds this season (at the very least for not playing the games on the agreed dates) through to demands for refunds for next season (starting late, number of games cut). Then there are the losses of cup games for those still in the various cups, and the rapid decline in transfer values because everyone will be losing money so transfer values will decline.
Then there is the problem with debts secured against this season’s or indeed next season’s TV deal. The clubs have now spent the loan, but have no way of paying the money back.
Plus other bits that keep on popping up like the fact that “Premier League clubs could lose around £70 million in commercial revenues if the police and Government enforce their plans to play the remaining matches at neutral grounds.” (The Guardian).
Telegraph Sport has chimed in with the issue of lost sponsorship revenues because of the lack of crowds and games played at odd times. And that loss gets even bigger if neutral venues are used as has been proposed.
Meanwhile the Mail tells us that “Barcelona ‘make MAJORITY of their players available for sale or swap this summer with only Lionel Messi and five others guaranteed a place at the Nou Camp next season’… as stars start expressing their concerns publicly.”
Manchester United are talking of losing £20m on their broadcasting income alone this season. They knocked up a pre-tax loss of £28.55m between 1 January and 31 March. That is £40m worse than the same period last year.
Also interesting is that Manchester United’s net debt is reported to have gone up from £127.4m last year at this time to £429.1m this year.
As an example of how this is working, Cliff Baty, Manchester United’s chief financial officer, said that he felt that the postponement of just three games (two home one away) and the closure of its store and other facilities, cost the club £23m.
These sorts of figures suggest that even if the games are played, but become ghost games, the loss to the league would be about £70m, assuming that it only lasted this season.
So who is going to be most affected? Obviously the clubs living in debt are really going to feel the pinch because few bankers will lend more money when the current loans can’t be repaid. This doesn’t mean the banks will demand their money back on time – but rather that they will refuse further borrowings until there are signs that things will stabilise. The clubs only reliable asset is then the players.
But let us spare a thought for Tottenham Hotpsur. While clubs like Arsenal and Manchester United have worked hard and paid for their grounds and ground improvement, and clubs like Manchester City and West Ham United have had their grounds partially paid for by the state, Tottenham have taken the honorable course and by and large done what Arsenal has done. Built the ground and paid for it by taking out loans.
Tottenham’s misfortune is that they did this a) when the cost of borrowing was much higher than it is today, and b) finished the ground under a year before the lockdown.
Mind you their recent run of results will not have helped the mindset…
|19 Feb||Tottenham Hotspur v Red Bull Leipzig||L||0-1||Champions League|
|22 Feb||Chelsea v Tottenham Hotspur||L||2-1||Premier League|
|01 Mar||Tottenham Hotspur v Wolverhampton W||L||2-3||Premier League|
|04 Mar||Tottenham Hotspur v Norwich City||L||1-1 (2-3)||FA Cup|
|07 Mar||Burnley v Tottenham Hotspur||D||1-1||Premier League|
|10 Mar||Red Bull Leipzig v Tottenham Hotspur||L||3-0||Champions League|
But the point is there is money to be repaid, and that money was going to come out of profits from playing games at the new stadium.
The cost increased due to the higher cost of import by at least 15% caused by the Brexit vote on the exchange rate, changes to the build, overtime working, extra hirings and higher construction costs as we reported during the event. (And for once Untold can’t be blamed as we all voted Remain).
Quite a few reports put the cost at over £1.2 billion, although Tottenham said it was less than £1bn and Mr Leavy did mention £1bn in an article on the club website.
It was widely reported that the costs did rise considerably due to some trouble in the building of the ground, and it is widely agreed in the serious financial press that Tottenham ended up with a debt of £637m to be repaid over a 23-year period at £30 million a season. As with Arsenal’s rebuild of Highbury some was converted to bonds to be repaid with interest in 15 to 30 years.
The aim is to pay for the ground through ticket sales, hosting American football and boxing matches, sponsorship, advertising, concessions etc etc. Of course none of this took account of a viral outbreak.
And here lies a problem. The last time all business was pretty much suspended (1939 to 1945) all business debts were put also on hold so no one could claim late payment fees etc. But there is no sign of that this time.
It is with this very brief analysis that we can see why Tottenham decided to furlough their staff – a move they then retracted. They are looking at the long term financial future, with a stadium to pay for. I wonder if they took out any epidemic insurance.
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