I was reading an article in the Guardian and came across some really interesting news. This is a direct extract from the Guardian website. http://www.guardian.co.uk/football/2008/may/20/premierleague.chelsea
Chelsea and Manchester United, the Premier League's two representatives in tomorrow's Champions League final, owe creditors £1.5bn between them. According to the latest accounts of Chelsea Limited, the company which owns the football club, Chelsea owed £736m to all its creditors. United's accounts, also recently filed at Companies House, showed total creditors at £764m. Those unprecedented figures will fuel concern that at this time of English football's greatest club triumph its clubs are carrying too much debt.
Covering the year to June 30 2007, Chelsea's accounts show that the club's largest creditor was the owner himself, Roman Abramovich, who had poured £578m into the club, not as a donation but as an interest-free loan. As stated by the chief executive, Peter Kenyon, in February, Chelsea did not owe "external debt" to any bank.
However, with Abramovich's £578m loan, introduced to sign players and pay wages since he bought the club in 2003, plus general amounts owed, taxes and some categories listed among creditors for formal accounting purposes, Chelsea's creditors stood at £736m in total.
Chelsea's director of communications, Simon Greenberg, confirmed that the £578m, described in the accounts as "Other loan", is indeed the loan from Abramovich. Greenberg reiterated that Chelsea has no "external debt" and pointed out that the creditors included season-ticket holders for 2007-08, whose money has technically to be treated as owed until the season is over, "and other normal operating creditors". The figure also included £36.3m still owed on a Eurobond taken out by Chelsea's previous owner, Ken Bates, in 1997. That, the last of Chelsea's "external debt", was then repaid last December.
Kenyon released headline figures from these accounts in February, highlighting that the club made a record turnover, £190.5m, and that its losses were down from £80.2m in 2005-06 to £75.8m last year. Kenyon said then that the club was in a healthy financial position, still aiming to break even by 2009-10, partly because it did not owe money to outside creditors and retained Abramovich's support. "With the company being external debt free and our ownership clearly demonstrating continuing commitment to the long term," Kenyon said, "I am very confident about the future."
United's accounts showed the club's total creditors at £764m. United does have "external debt"—£666m owed to financial institutions, including £152m to hedge funds - taken on by the Glazer family when they bought the club in 2005, then loaded on to United itself. While United's loans incurred interest of £81m last year, the loan to Chelsea by Abramovich is interest-free. Abramovich has funded Chelsea's extraordinary acquisition of stars and, although transfers showed a profit last year, he continued to allow Chelsea to be run at a substantial loss.
Kenyon's role is to transform Chelsea into a club which can survive on its own earnings. In February he acknowledged it was an "ambitious" target to aim to be self-financing by 2009-10 but the accounts bear out commercial progress in all areas. Having finished runners-up in the Premier League, won the FA Cup and League Cup and reached the Champions League semi-final, the club's sponsorship, match-day and media income all increased to push total turnover 25% up.
However, there is no doubt that the club remains wholly reliant on Abramovich's continued funding. Chelsea's chairman, Bruce Buck, has stressed that Abramovich "loves football" and will not "walk away" from Chelsea.
If the owner's enthusiasm were ever to wane, and Abramovich decided he did want his loan back, the accounts show that Chelsea would have 18 months to find the money.
12 comments Last one added 10 months ago — Leave a Comment
Andrew McNair 10 months ago
Interesting stuff mate. Put this next to Shyam's article and we see the different perspectives on money in football.
I say he'll get bored eventually and then who knows...
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Salomon Gonzales 10 months ago
Thanks. I hope he doesn't. All this ' we're breaking even' talk doesn't carry much water with me
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Chris Kirk 10 months ago
I am no financial expert and have little knowledge of the finance side of the game.
If the Glazers or Abramovich did pull out of the clubs, would this mean they would be plunged into administration thus incurring a 20 point deduction?
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Salomon Gonzales 10 months ago
Im not really sure about the Glazers Chris. If Abramovic did pull out then I assume Chelsea would be in serious trouble.....
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Patrick Ciechonski 10 months ago
I think if abramovich goes out chelsea would have to pay him 800M£ loool
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S B 10 months ago
Seems all in order. Lucky to have interest free loans from an internal source. Better than most clubs in the world.
Go Chelsea.
So is Kaka coming or not?? and what about Robinho??
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Salomon Gonzales 10 months ago
Its all well and good as long as Abramovic is still there and interested. Its if and when he decides to leave where the problem lies. Although if he does stay long enough I presume Chelsea wont be in as much trouble as they would be if he left now...
About Kaka i dont think he's joining us. To be honest im quite happy about that fact. I dont think anybody is worth 70M and if thats what Milan want for him then they can keep him....As for Robinho I am still not sure. One minute it looks like he'll join us and the next minute he is staying. Nobody knows except the people involved....
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S B 10 months ago
Oh and to answer your headline question:
I`d say his money is an investment in the form of a loan. Without any returns on the loan.
But with indirect returns based on Club performance and eventual earnings from a broad portfolio made up of endorsements, products, ticket sales, player sales and titles.
I also think this is a bit of a hobby for the rich bastard. He wants to win more than he wants to earn money.
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Zahi Sahli 10 months ago
interesting stuff... i dont think 18 months will do chelsea any good in covering the debt.
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Salomon Gonzales 10 months ago
Yes i know but thats the way things are at the moment. Unless things change, Abramovic leaving would leave us in serious problems...
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David Wilson 10 months ago
The big difference between the two clubs is that United has to service the debt that the Glazers borrowed to buy the club. Since Abramovich's funded Chelsea's purchase out of petty cash, I don't believe that his loan is accruing interest.
The problem for Chelsea would be if Abramovich ever decides to sell the team as the new owner will probably have to borrow money for the purchase. With a small stadium, I don't know if Chelsea can generate enough cash to pay off the debt. If they can't then they would be forced to sell players every year to make the debt payments.
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Willie Nandi 10 months ago
Treating it as a loan rather than an investment could have tax benefits for Abramovich. If he does walk out, he will probably write off the loan and that can be deducted as losses when he files his taxes....This is merely an educated guess though, I am not conversant with tax law, let alone British tax law.
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