 Liverpool has been in the news again on footballeconomy.com and once again it’s for reasons not connected with their title bid. Representatives of the club held discussions in Kuwait with the Al Kharafi family who were reportedly interested in investing in the club. At the time of writing, the prospective deal does not seem to have gone anywhere. In any case, Tom Hicks does not seem to have talked to his business partner George Gillett about what was proposed, although they are supposed to consult each other about any disposal of their stake. Then it appeared that Hicks was only prepared to dispose half of his stake anyway, only giving the Kuwaitis a 25 per cent interest, and that at a highly unrealistic price. No wonder they were not interested.
Something will have to be sorted out sooner or later. The American owners have had the £350m bank loan they used to buy the club extended for six months, but it is unlikely to be renewed again when it runs out in July. Then they will have to sell the club. Any new owner will have to find the money to finance the new stadium project which is needed to guarantee the club’s long-term competitiveness. Everton have, of course, run into planning problems with their stadium project, leading to the revival of the idea that the two clubs should share a stadium. However, that idea goes down badly in both the red and blue parts of Merseyside.
All top four clubs have been in the news this month. Manchester United has been told that the troubled financial group AIG will not be renewing their sponsorship. This was no surprise and the club are hopeful of finding a similarly lucrative deal, possibly from Malaysia, although Indian group Sahara is also in the frame. The current deal is worth £19m, although that includes £5m for Manchester United Finance, and the future of that aspect of the deal is uncertain. United have also been planning to build their global brand in the key Asian market, including Indonesia in their summer tour for the first time.
Chelsea has had to emphatically deny that they have been in negotiations with Middle Eastern interests to sell the club. Roman Abramovich may have lost a few billions in the world economic crisis with commodity prices slumping, but he is still rich beyond the dreams of anyone reading this article. I am not a Chelsea fan, but there does seem a willingness to believe the slightest rumour that the club might be in some sort of trouble.
Across London, Arsenal’s grip on a Champions League place is slipping. However, the club’s chairman has reassured fans that this will not place in jeopardy repayments on the £350m Emirates Stadium. The club will not get anything like the money they get from the Champions League from even a good UEFA cup run, but the club’s financial planning never assumed that they will be in the Champions League every season.
Newcastle posted a big loss of £34.1m in their last financial year. Wages accounted for a worrying 72 per cent of turnover when 60 per cent is regarded as the maximum safe level. Apparently, Mike Ashley nearly managed to sell the club at a price acceptable to him, but the American investor pulled out at the last minute after he sustained big losses in the Bernard Madoff scandal.
A lot of our stories this month have been about football north of the border. The credit crunch has hit hard there first because clubs there do not have anything like the revenue from television deals that is received south of the border. Even Rangers have had to be careful, while rumours perennially swirl round Hearts. A number of clubs such as Kilmarnock and Aberdeen have high levels of debt. However, one bright spot was that Dundee United reported good profits. They had a surplus of £834k which is encouraging given that they were making losses of £2.87m as recently as 2003.
One solution has been put forward is the formation of a SPL Division Two. Clubs in the current first division below the Premiership try to remain full-time to maintain a promotion challenge, but this can lead to deficits of £300-£500k a year. Even if such a scheme did go ahead it would not help what are effectively community clubs in the lower divisions. Some of the greatest financial problems have been encountered even when clubs are run on a part-time basis. There are fears that geographically isolated Stranraer may go the way of Gretna with the club’s chairman giving them only a 50/50 chance of completing the season. They owe creditors £250k and their gates have slumped from around 1,000 to 250. However, another geographically isolated club, Berwick Rangers (actually in England) have had some good news with the successful completion of a long drawn out takeover by a group of fans.
South of the border, the bidding process for the next television deal has started. One consequence of the economic crisis is that people are staying in more and relying to a greater extent on home entertainment. The television deal should be as good as the last one and it is that that ultimately underwrites spending in the Premiership.
Wyn Grant is a regular contributor to Albion Road and also the publisher of footballeconomy.com, a website covering the business and economy of the game of football.
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