Saturday 7 November 2009

Rangers a sign of things to come; Football Finance

The situation with Rangers Football Club and Lloyds Banking Group has been widely reported. Looking in from the outside there seems to be a good situation if you are a banker. Rangers owe money, they have plenty of saleable assets and a valuable brand. Step in and make some noise, a new buyer will appear and the loans are paid back.

Banks in the boom lent an awful lot of money to football clubs. Lloyds (not the new group with HBOS) stayed out, but Barclays and RBS went mad for footie finance as did HBUST.

Key examples are the Arsenal stadium finance (sold on through a securitisation by RBS) and RBS's backing a Liverpool takeover to the tune of a cool £250 million (UPDATED - ta Scrobs).

West Ham were bought by an Icelandic consortium and now is in the hands of the Icelandic Government. They chairman Andrew Bernhardt is an ex-Leveraged finance banker - how appropriate!

Football is big business and it is really showing in the credit crunch. In fact Rangers and West Ham are the first of the many. Unless you have a billionaire owner the future is not so bright for a premier league club.

Hull are next on the hit list and their CEO has already resigned. Hull have huge debts and are going to be forced to sell players. If they are relegated they may well follow Forest, Leeds and Southampton down the divisions.

My view is it is that the billionaires have priced non-billionaire clubs out of the market. In the Premier League Everton, Hull, Portsmouth, Bolton, Stoke, Burnley, (Wigan) and Wolves all have no chance of competing with the other clubs who have mega-wealthy backers. Without a level field to play on financially, they should really just shrink the league and make participation based on how much money owners are up for putting into the clubs - more like Formula One. Radical, but the league would be more exciting to watch with a higher level of competitive teams.

Football clubs are not listed on the stock exchange so much anymore, but all of the above are in danger of over reach on their budgets and any could pop this year. Hull will go first, but how many will follow?

As for the banks I wonder how many football loans have made it into the RBS APS scheme - to think some players wages are likely being guaranteed by the taxpayer!


sobers said...

I'm a Liverpool fan but even I don't think they are worth £250 billion. £250 million perhaps?

Bill Quango MP said...

What's the damage to liverpool if they miss out on this champions league AND miss the next completely.

They won't of course. Man city still have small club mentality and Villa/Everton have a squad with the depth of paddling pool.

James Higham said...

The Australian league use a stringent salary cap provision within the range of the total receipts from the game. It seems to be working fine down there.

Anonymous said...

In a business model where all the money went to the players it has to fail. ergo JH above, it will happen.

Demetrius said...

If only FIFA/UEFA would insist that players should be formally domiciled in the tax jurisdictions in which their club is located. That would cause some fun, and more interesting than many of the games.

Elby the Beserk said...

Bill Q,

As a City fan for some 50 years, I can tell you that when you have been shite or thereabouts for most of the past thirty years, then two, three or four years to put it all together is not a hard price to pay. Rome wasn't built in a day, and most City fans know that as well. It's all going to plan.

By the way, regarding the article, it was of course the establishment of the Premiership, to ensure that that top clubs got as big a slice of the football cherry as possible, which has brought us to where we are today.

I would highly recommend reading David Conn's "The Football Business" which details football's hijack by the formation of the Prem, and also the less than savoury details of coups at various clubs. Especially interesting to this City fan is the recounting of how Louis Edwards slithered his way into controlling United, and how he made his money peddling tainted meat, via the council, to schools in Manchester.

The Bent Butcher, as he is still known.

Bill Quango MP said...

Elby: I'm not convinced by your manager. It may well take 5-6 years to get established if you play as if relegation is your main worry.

An excellent set of versatile players that give Burnley their 1st away point of the season.

Go shopping on the continent next season.

Marchamont Needham said...

Rugby League introduced a salary cap a few years ago, and it's worked brilliantly.

Superleague is now so much more open than it was a few years ago.

Maybe one day footie will catch up. You never know, they might even introduce video refs too.

Elby the Beserk said...


Times may have changed, but may I remind you - United fans were VERY unconvinced by Ferguson for four or five seasons.

What exactly would the point be of getting rid of Hughes now. Start all over again? It does seem to me he has the respect of the owners, so we must let them get on with it.

10 years ago I saw us snatch victory from the jaws of defeat at Wembley. Ten years ago we were in the (real) Third Division.

I'll take where we are today. It is only the media demanding a top four finish. Top six, and maybe a pot would be a great season.

Bill Quango MP said...

Elby - you may be correct. Changing the boss doesn't often bring victory. But Chelsea are a better squad this season with virtually the same players as last season.

Man City deserve to be a top 6 side on supporters, stadium, football presence in the home city etc. But Newcastle said the same for a decade. Its about appointing the right person.

Hughes - well, we don't know. Ideal for a Blackburn or a Wigan - Top six might escape you this year unless you can get some wins in.
There's always some cheeky club hanging around seventh place.
Aston villa/sunderland/everton/ or even a tiddler team like fulham or Stoke.

Best of luck anyway.

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