Arsene Wenger is perhaps the shrewdest operator in the transfer market. So when news came out about him sending potential waves of panic through Arsenal fans, I figured that some sanity should be restored.
The very first point that I would like to make is that the source of those comments, News of the World, is the most sensationalist tabloid in the UK. They thrive on releasing stories such as these to ensure that more of their "papers" are sold.
So, it was only natural that when they published such extravagant quotes from the Boss, all the blogs and websites picked up on the story and re-published it.
Secondly, Arsene Wenger is not stupid. I don't understand why he would actually come out and say things such as, "The strategy of the club is to sell every year and to buy less expensive players."
I've read a lot of what Arsene Wenger has said and that sounds nothing like him.
Isn't it odd that last week it was reported that Barcelona bid £24m for Emmanuel Adebayor, and the same figure is being floated about as a potential "surplus" which Arsenal have to create annually out of transfers to ensure that payments are made towards the fixed-interest bonds taken out over a 25-year period?
Thirdly, there is no explicit mention of the surplus coming from transfer activities. Let me quote Wenger:
"We manage at Arsenal to maintain all our football ambitions—national and European—while having to free up—for 17 more years—an annual surplus of £24m to pay for our stadium."
Now, if I multiply £24m to 17 years, I get a total of £408m to be paid over the 17 years. The interesting thing is that this figure is much more than what Arsenal actually has to pay (net) toward the fixed-interest bonds that were floated for the payment of the stadium.
Let me quote the annual financial results of Arsenal Private Limited Company (PLC) as on 31 May 2007, in relation to the debt financing:
"£260 million of bonds with long-dated maturities and a weighted average fixed interest rate of 5.3 percent were issued in the year to refinance all of the Group’s stadium-related debt, providing a significant reduction in annual debt service costs for the long term."
Arsenal were expected to make around £300m from the redevelopment of Highbury, but due to a recessionary state in the economy, that figure will be somewhat reduced, but not by much. But, it will go significantly toward the debt repayment.
If anything, our cash balances are said to have been around £74m. Although, the amount has been reduced due to the above-mentioned Highbury redevelopment project due to the state of the economy, so I'll keep it at a ballpark of £40-50m.
The amount received or paid from transfer activity will impact only the cash balances.
We've spent £5m on Aaron Ramsey and potentially £13m on Samir Nasri (which is not a straight-cash deal). So, we should have a good £10-20m to spend from our cash reserves on transfers.
So, there is absolutely no reason for Arsenal fans to pay so much attention to some hotchpotch tabloid report which mentions some vague amounts having to be retained as surpluses.
Isn't it strange how the press just throws around some numbers and make us all panic with just a single article?
But this just didn't look right to me, and I hope that with this article, I've set the record straight.
Arsenal are not a selling club and don't need to be one for the foreseeable future.
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3 months ago
I agree totaly with you Shyam! Those stories just don't add up. Arsene is not a stupid idiot to do something like that. Its just the press making mountains out of mole hills!
from 3 months ago
Exactly.
3 months ago
The News of the World has fallen in my eyes...I won't be reading them ever again..if this is false..Not that I read them now but anyways..lol..
from 3 months ago
NOTW publishes nonsense every Sunday, Salaar. This story has been blown out of proportion - thats what the NOTW does.
3 months ago
I agree with the basic premise that these "reported" statements are nothing to worry about, but just want to point out the 5.3% interest on the £260 million of bonds would be payable every year for the 20-odd years of their length, meaning total repayments would equal £260 million from the original loan plus a further £234 million in interest if the length of the bonds is another 17 years.. which comes to £509 million (an extra year of interest cos they were issued a year ago).. and this all just approximate, but this still works out as about £28 million a year so if anything, the NOTW reporter has underestimated the cost of the debt... BUT i totally don't see anything new in this report from the News of the World, I'm sure I've heard figures of about £27 million reported as the cost annually of Arsenal's debt, compared to an extra £40 million extra that the club gets in gate receipts due to the move.. which to me seems like a pretty sound investment and means that there is effectively more money to spend now (even with the debt repayments) than there was when we were still at Highbury
from 3 months ago
Yup, totally correct there Mark. The redevelopment of Highbury should also generate a good amount of income for the club so I don't foresee any financial problems - certainly nothing impacting the transfers of the club.
3 months ago
arsenal has no need to panic is right. arsenal are a club which has always been bullyed and tormanted by the media they probley pray on us because we have a young sde with minds that can be influenced. However my cry to arsenal fans is keep calm and have faith in wenger he will steer us the right way we have a new signing in ramsey and the possible signings of nasri,bisshoff and maybe with chelsea ending their campain to get arshavin we migt even get him. come on u arsenal fans!!!
3 months ago
arsenal has no need to panic is right. arsenal are a club which has always been bullyed and tormanted by the media they probley pray on us because we have a young sde with minds that can be influenced. However my cry to arsenal fans is keep calm and have faith in wenger he will steer us the right way we have a new signing in ramsey and the possible signings of nasri,bisshoff and maybe with chelsea ending their campain to get arshavin we migt even get him. come on u arsenal fans!!!
3 months ago
arsenal has no need to panic is right. arsenal are a club which has always been bullyed and tormanted by the media they probley pray on us because we have a young sde with minds that can be influenced. However my cry to arsenal fans is keep calm and have faith in wenger he will steer us the right way we have a new signing in ramsey and the possible signings of nasri,bisshoff and maybe with chelsea ending their campain to get arshavin we migt even get him. come on u arsenal fans!!!
3 months ago
Now the simple mathematics: If I multiply £24m to 17 years, I get a total of £408m to be paid over the 17 years. The interesting thing is that this figure is much more than what Arsenal actually has toward the fixed-interest bonds that were floated for the payment of the stadium.
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The reason that this multiplies out to 408 million and not the 260 million you read about is becasue we have to pay interest as well as the 260 we owe on the stadium debt. As anyone with a mortage knows, banks
(unlike parents, say) dont ruffle your hair, tell you to pay them back when you can and lend you money for free. When you take into account the interest we have to pay you get close to the 400 odd million number you see here.
In fact, if you do those calculations with the 5.20% weighted averaed fixed interest rate mentioned in the report, you fall short of 408 million. If we really are paying 24million a year in combined interest and capital repayment, then the true interest rate looks more like 5.75%. Either that or the board have been scammed into buying a collosal mortgage payment protection policy that they arent telling us about.
As the writer said, the mathematics is indeed simple. Obviosuly its not his strong point though
from 3 months ago
You're right, but when the income stream seems to be coming from the redevelopment of upto 300 million pounds.. you add up the numbers which is around 508 milllion pounds which is greater than the 400 odd million pounds.. so it is simple mathematics, and the newspaper reports still seem to quote vague numbers about.
from 3 months ago
I'm sorry, little hazy from waking up :)
You're right when you say that around 400+ million has to actually be paid off. But, to compensate that, Arsenal plc. has redeveloped the Highbury Square property giving us an income stream of almost 300 mil. pounds - which should go toward the repayment of the loan.
In any case, saving 24 million from transfer activity is never the policy of any club, including Arsenal and that was the point of this article in any case. Thanks for your inputs.
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