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For Sale Two used football clubs - Global reach, european pedigree, loyal fanbase, 18 titles each, a mountain of debt and an uncertain future (Sunday Tribune)

Their form on the pitch may be alarming but it's the ridiculous legacy of leveraged buyouts that should be scaring the life out of fans of Manchester United and Liverpool, writes Ciaran Cronin

Prize assets: Manchester United and Liverpool may find themselves in a situation where their spiralling debt necessitates they sell some of their strongest playing assets such as Wayne Rooney or Fernando Torres, both of whom would be worth in the region of £70million

Fernando Torres

Popular: Manchester City owner Sheikh Mansour Bin Zayed Al Nahyan (centre), here with City chairman Gary Cook, has become a hero to fans with his lofty aims for the club

Unpopular: Joel Glazer and his family have saddled Manchester United with huge debt and in doing so have earned the wrath of the fans

With hindsight everyone can be a smart arse," says Alex Fynn when asked if English football's current financial troubles could have been predicted a few years back, "but when I looked at the situation back when the Glazers took control of Manchester United, I saw that, all of a sudden, the biggest, richest and most profitable football club in the world had a huge debt around its neck."

Fynn – a man labelled "the spiritual Godfather of the Premier League" who now makes a living as a football consultant and recently co-authored the wonderfully insightful Arsenal: The Making of a Modern Super-Club – is an expert on such matters but his point should be understood by anybody with even so much as a rudimentary knowledge of a profit and loss account. Profitable companies with guaranteed revenue streams should not have hundreds of millions pounds of debts weighing them down. It goes against the cosmic balance of the business world, an anomaly that stands out like a sheep with two heads. It has happened, somehow, in some way, but it is fundamentally wrong.

MANCHESTER UNITED, LIVERPOOL AND THE AMERICANS

And yet it is the reality that Manchester United, and indeed Liverpool, are now faced with. Fans of both clubs anxiously scan the back pages of the newspapers each morning keeping their fingers crossed that more desperate financial figures don't jump out at them, that there isn't another story lurking in print about some cataclysmic scenario or other that could hit their club. In some ways, as Liverpool grind their way through the season on the pitch and United struggle to find the sort of rhythm they've usually found by now, the poverty of both clubs' on-field efforts has been eclipsed by the threat, however minor, that there might not be a Liverpool or Manchester United to watch in 10 years' time. It has focused minds on what's really important and taken the pressure off Alex Ferguson and Rafa Benitez. However bad it is watching Dimitar Berbatov do a poor impression of a United centre-forward, or Philipp Degen running aimlessly up the flank, it's better than not having a club to watch at all.

Yet there is a bit of head scratching to be done. Right here, in the midst of the financial mess that Liverpool and United find themselves in, it is difficult to see what Tom Hicks, George Gillett and the Glazers were trying to achieve with their leveraged buyouts of two of English football's most famous and decorated clubs. But change your mindset to that of the mid-noughties, a time of excess and intemperance, and you discover why. "They were speculating to accumulate," says Fynn. In other words, the Glazers thought that in paying £660million (€752m) for United, they'd be able to sell the club for £900m a few years later. That's £240m profit in just two years.

Likewise Tom Hicks and George Gillett. They figured that by buying the club for somewhere in the region of £200m and building a new stadium, they could make a quick killing and leave Anfield with a tidy profit for company. All of which would have been possible in the years before the financial world came crashing down. But not in the current climate. "Neither of them saw the recession," says Fynn. "I think they also believed that success was a given and it hasn't turned out that way. And I don't think they saw what was going to happen at Manchester City either."

With no logical exit strategy, the Americans are stuck, both with the money they borrowed to buy the two clubs in the first place and, by extension, the clubs themselves. It's a mess.

When United's financial figures were released this week, you figured that they must have got them mixed up with those of a financial institution. Or a small country. An accumulated debt of £716m, one that has gone up rather than down, and an interest payment of £68m – surely these couldn't be the figures of a football club? But they are and they indicate things that things might well get worse. "This year's figures were based on the sale of Ronaldo, winning the Premier League, getting into the Champions League final, winning the League Cup and the World Club Championship," says Alex Fynn. "The problem comes if they don't repeat that."

The problems? "They will have trouble servicing the interest payments and the problems will start from there," says Fynn. "United's financial position is sustainable if they stay top of the tree. But if they have a poor season, for example if they didn't win the league or miss out on qualifying for the Champions League, they would have to have a stringent look at their finances." Fynn believes there is only one way the Glazers, and by extension United, would then be able to keep the wolves from their door. "United would still have huge match day income but in the short term, they may not be able to buy anybody and after that there's a real chance that may have to sell somebody like Nemanja Vidic and perhaps even Wayne Rooney if they want to trade at a profit."

So while a firesale isn't on the agenda this season, it may be the season after that which will leave the future of the club depending on two things; firstly, the manager's ability to juggle a set of playing resources much smaller than he's been used to and, then, the success of the much talked about bond issue, which will take £500m of debt away from the banks and park them with a group of investors seeking more interest but over a longer period of time, thus allowing the club to chance to pay off their other £216m of debt.. The consensus among the football business experts out there seems to be that United are not in the kind of peril that, say, Leeds United found themselves in the early parts of the last decade but there are serious worries about Liverpool, even though their debt is roughly half that of United's.

"Liverpool's position is far worse," says Fynn. "They play in an antiquated stadium and don't have the revenue streams that United do. If they don't qualify for the Champions League, they can wave goodbye to a substantial sum of broadcast income. If that comes to pass this season, they may be tempted to sell somebody like Torres." So while the Anfield club may be saddled with a debt of just £300m – and using the word "just" says a lot about the state of English football's finances – they don't have the same kind of money coming through the gate on a weekly basis to service that debt without recourse to flogging their major assets. One season without Champions League football may force the sale of one top player, but two seasons on the outside might multiply that number. And after that?

Nobody can be sure but it ain't likely to be pretty.

ARSENAL, TOTTENHAM AND THE POSITIVE SIDE OF DEBT

"There are two types of debt," says Fynn. "The debt caused by a change of owner or to buy players is unhealthy because there is no payback from it – you're just saddled with it. But the debt Arsenal have is different because they have a stadium that makes them money each and every week." And how. Towards the end of their time at Highbury, Arsenal were making £1m every time they played a home game; at the Emirates, that figure is somewhere closer to £3m.

The club's books may show that Arsenal owe more than £300m – something akin to what Liverpool owe at this moment in time – to various financial institutions but it's a different category of debt altogether. Like a personal mortgage, it is a long term debt with a reasonable rate of interest and as long as the agreed amount is paid back each year, it doesn't matter what Arsenal, as is the case with a house owner, do with the rest of their money. And they do have money, as a £225m turnover and £39m profit will attest to, even if Arsene Wenger can't be persuaded to spend it.

"Of all the major clubs, Manchester City are best placed because of their infinite resources, Chelsea are second because of their almost infinite resources and Arsenal are third," says Fynn. "They have done the best of job of remodelling themselves." And while Arsenal's future looks immeasurably bright, particularly as their interest payments go down year on year, their north London neighbours and great rivals have a bright future too.

Tottenham are one of the few clubs at the top end of the Premier League without any debt to speak of, and although they will saddle themselves with a few hundred million quid worth of liabilities when they build their new stadium at White Hart Lane in the next 18 months, they will reap similar rewards to Arsenal in terms of match-day revenue. "Tottenham should have built their new stadium years ago," says Flynn, "but I suppose it's better late than never." The key for Tottenham, however, will be to replicate Arsenal's ability to maximise resources on the pitch during the traditionally tough initial period of paying back the money men.

THE OTHERS IN FINANCIAL BOTHER

Manchester United and Liverpool aren't the only clubs in trouble, merely the most eye-catching. Everton currently survive on a hand-to-mouth basis, Hull City may never rise again if they go down to the Championship this season – a Deloitte report estimated that they needed to make a surplus of £23m this season if they were to survive as a club after relegation – while Portsmouth may well become the first Premier League club to go out of business and, as a result, finish the season on a minus points total. West Ham look to be on a little surer footing this week after the takeover by the Davids, Gold and Sullivan, but they won't be spending significantly in the near future.

There are others in peril. Wigan, on the outside at least, may seem like a conservative, well-organised club but when you examine the books they too are leaking money. In staying up last season to earn a fifth consecutive season in the Premier League, they posted a loss of £11.2m, leaving the Latics with an accumulated debt of £48.2m. It is not, by any means, a fortune compared to what United or Liverpool owe but for Wigan, it's still a significant figure.

Why these clubs don't simply cut their cloth according to what they receive in revenue is a mystery. It's not as though they aren't handed over enough. Each club receives a figure of at least £25m in TV money every season. That figure can reach as high as £50m depending on how many occasions a team is chosen for a live game. Then each club is awarded money depending on where they finish in the league (from £700,000 for finishing 17th to £15m for winning the league). And all that is before taking into account money generated from merchandising, ticketing and other areas, including profit on transfers. Yet after receiving all of this – a sum that reaches £55m for a club finishing between 10th and 15th in the table – some clubs feel the need to spend more so that they can repeat the process all over again. "Given the amount of central income that is generated by the Premier League, it would be down to absolutely rank bad management if a club itself was actually to go into administration," says Richard Scudamore, the league's chief executive.

As we said, it's a mystery but perhaps the example of Burnley explains all. "This club doesn't go into debt," said the club's operations manager, Paul Fletcher, a few weeks back. "We don't have a bank overdraft and to get into the Premiership without a bank overdraft is quite a miracle in itself. We've made our minds up not to be sucked into a £20m, £30m or £40m overdraft. We're a family club and we do business our way." And Burnley's reward for coming out and telling the world they're only going to spend the money they actually earn? Owen Coyle decided to leave them for Bolton, a club that recently had to take a £4.5m loan at an interest rate of 10 per cent just to continue standing still.

MANCHESTER CITY, CHELSEA AND DESTABILISATION OF FOOTBALL

Manchester City and Chelsea are the exceptions to this financial mess and arguably the ones who caused it in the first place. If City and Chelsea weren't spending money they had been given rather than earned, no other clubs would have to break the bank, or indeed borrow from it, to keep up with them. But are clubs with billionaire owners in danger of financial peril in the near future? "We can only hope so," says Fynn. "They have destabilised all of football. On one level, you don't want to see any club fall flat on its face but..."

You can understand the sentiment. Because of the billions Sheikh Mansour and Roman Abramovich have in their respective back accounts, City and Chelsea operate in a completely different financial environment to the rest of England's football clubs. What comes into the coffers in terms of revenue is practically irrelevant because the both owners subsidise their respective clubs from their own pockets. Arsene Wenger has called it "financial doping" and his phase sums up the phenomenon rather neatly.

Of course, both clubs could implode if either owner were to lose interest in owning a football club in the coming years but that is not a scenario that can be planned for. Fans of City and Chelsea can only hope that if that day does come, their respective owners pass the flame to somebody else without looking for every penny they spent on the club back in return.

Already, there are signs that they won't behave in such a way. Both Sheikh Mansour and Abramovich have converted the money they've loaned their clubs into equity in recent months, which means that any future owner won't be saddled with massive debts.

Enormous wages and inflated expectations might, however, be a different matter.

SALVATION?

One possible solution in all of this is Michel Platini's proposed regulations for European competition which state that clubs would only be able to spend on players and wages what they earn through gate revenues, merchandise, and money from television and sponsorship deals from the 2012/13 season onwards. That means that the pockets of the philanthropic owners would be no good to Manchester City and Chelsea, although you can already see ways around it. What's to stop, say, Sheikh Mansour paying £100m for a special executive season ticket? Or Roman Abramovich £150m for a signed Chelsea shirt at an auction? The only other solution is to let the laws of the financial world take their course.

And let others learn from the example of the fallen.

It just might happen - the big four in 2012

Manchester United

Despite the over subscription of the bond issue, Alex Ferguson wasn't allowed to add to his squad in the summer of 2010 so that the club could meet the interest payments on their loans. United, with an ageing squad, failed to qualify for the Champions League after finishing fifth at the end of the 2010/11 season, forcing the manager to sell Wayne Rooney to Barcelona so that the club could continue to meet their financial obligations. As things stand, they sit mid-table and are unlikely to finish anywhere near the top four.

Liverpool

With no money for a new stadium, Liverpool remain at Anfield where there are a couple of thousand spares seats every week. With Fernando Torres having left in the summer of 2010 following the club's failure to qualify for the Champions League, and Rafa Benitez departing a few weeks later, Liverpool failed to qualify for the Champions League again at the end of the 2010/11 season having failed to persuade any big name manager that they have the financial power to compete at the top of the table. As a result, the Carling Cup is their only chance of silverware in 2012.

Chelsea

After the west London club won the Champions League in May 2010, Roman Abramovich decided to sell the club to a group of Swiss banks for the not unreasonable sum of £300m. The trouble is that the club's wage bill was inhibiting and as the new owners attempted to cut costs, old players decided to leave and new players couldn't be convinced to join. Chelsea's new generation of fans also begin to desert a side who are struggling to stay in the top six.

Arsenal

The Gunners are going from strength to strength. Having beaten Chelsea to the Premier League title in 2010, Arsene Wenger spent £40m on players that summer to guarantee the 2011 title and a further investment of £60m has ensured Arsenal are top of the table in January 2012. Meanwhile the mortgage on the stadium shrinks every year, giving Wenger even more money to play with.

A Crisis In Numbers

£3.1bn - the estimated accumulated debt of the 20 Premier League clubs

3 - the number of times Portsmouth's players haven't been paid on time this season

£149m - Chelsea's annual wage bill, the highest in the Premier League

£40m - Hull City's wage bill for the 2009/10 season

£23,000 - the average wage, per week, of a Premier League footballer (£1.2m per year)

£92.5m - loss posted by Manchester City for the 2008/09 season

£252.2m - Manchester United's annual turnover, the highest in the Premier League

£59.3m - the annual turnover of Bolton Wanderers

£340m - the figure converted from loans to equity by Roman Abramovich last month

£3m - the monthly sum Liverpool paid in interest on their loans last season

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Manchester City and Chelsea are the exceptions to this financial mess and arguably the ones who caused it in the first place.

I'm sick of seeing journos write about Chelsea and huge finances, do they bother to look at our buy-in's over the last few years. Spurs spent 80mill in a window on players a few years back to our near enough zilch (think it was the season we got Alex) We don't throw money around now and haven't since buying Sheva, the last major signing that we didn't need.

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Chelsea re the ones that caused the financial mess that sees Manchester Utd and Liverpool in potentially financial turmoil.

Every time I read things like that words can't express how I feel...

Actually they can.

2-0 to the Chelsea, 2-0 to the Chelsea...

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Chelsea re the ones that caused the financial mess that sees Manchester Utd and Liverpool in potentially financial turmoil.

Every time I read things like that words can't express how I feel...

Actually they can.

2-0 to the Chelsea, 2-0 to the Chelsea...

Lovely!!

and of course Sky have played no part and are completely neutral in changing football finances

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Wow, that went from a fairly informative aricle to a the equivalent of a youtube comment in no time at all.

"Of course, both clubs could implode if either owner were to lose interest in owning a football club in the coming years but that is not a scenario that can be planned for."

They forgot the phrase 'sugar daddy' when they made this jibe. The writer or the expert is a gooner and just one of those that didnt like Roman's wealth breaking up the cabal that owned this league since the 90s.

And how in god's name is this 'financial expert' able to blame the crisis at the northern clubs on us? The implication is that it must be us, because we became rich before city. Man Utd were doing just fine before the Glazers. How were they made vulnerable to a takeover? Not because they wanted to spend more on transfers, which they had no problem doing before, but because their pigheaded manager pissed off two huge shareholders and they sold up to the worst buyer they could find. Now, its their fault their debt cripples them from ONCE AGAIN setting the transfer records they smahsed for so many years, when absolutely nobody could catch up to them.

What about Liverpool: Been in the shadow of the Mancs for 20 years without a title and want bigger and better things, namely getting that new stadium. Win the Champions League final in 2005, and the FA Cup the following year so they were clearly fine on the field, despite both those things being down to outrageous luck. What did Hicks and Gillet bring? A 22m pound player and a mountain of debt. Clearly, this whiter than white "peoples club" took a gamble on corporate ownership for a shot at being the big boys once again and failed.

The extent of Chelsea's blame in all this was to convince gullible (read: stupid) fans and executives that an ownership takeover could be a great thing, like in our case, except they didnt have the intelligence to realize having no money and having billions are worlds apart. f**king does my head in that simplistic horse sh*t like this can be explained away in a few mintues, but gets published anyway

As for this, well....

Chelsea

After the west London club won the Champions League in May 2010, Roman Abramovich decided to sell the club to a group of Swiss banks for the not unreasonable sum of £300m. The trouble is that the club's wage bill was inhibiting and as the new owners attempted to cut costs, old players decided to leave and new players couldn't be convinced to join. Chelsea's new generation of fans also begin to desert a side who are struggling to stay in the top six.

Arsenal

The Gunners are going from strength to strength. Having beaten Chelsea to the Premier League title in 2010, Arsene Wenger spent £40m on players that summer to guarantee the 2011 title and a further investment of £60m has ensured Arsenal are top of the table in January 2012. Meanwhile the mortgage on the stadium shrinks every year, giving Wenger even more money to play with.

:) :rolleyes: :rolleyes:

You can almost hear the writier willing it to happen

Its equally likely that our wage bill is lower in a few years becuse of youth players being promoted (this is very likely, in fact) and despite Roman seeing us win more silverware, he decideds to convert his hobby-club into a revenue generator.

Meanwhile, Wenger, who will be 61 at the end of this year, might wind up having an argument with Kroenke or Usmanov, or just get tired of the failings of his youth policy, and up and leave for Barcelona

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Such a promising start to an article and then it suddenly turned-tail and headed off into the writer’s own little dream world, where everything he ever wished for the Gunners (and himself) came true in the happiest of endings. Just how an early factual piece suddenly drifted into the realms of fantasy in this way is hard to fathom, but I’ll have a go and will start with the simple truths that could have been condensed into the following paragraphs…

‘Right here, in the midst of the financial mess that Liverpool and United find themselves in, it is difficult to see what Tom Hicks, George Gillett and the Glazers were trying to achieve with their leveraged buyouts of two of English football's most famous and decorated clubs. But change your mindset to that of the mid-noughties, a time of excess and intemperance, and you discover why. "They were speculating to accumulate," says Fynn. In other words, the Glazers thought that in paying £660million (€752m) for United, they'd be able to sell the club for £900m a few years later. That's £240m profit in just two years.

Likewise Tom Hicks and George Gillett. They figured that by buying the club for somewhere in the region of £200m and building a new stadium, they could make a quick killing and leave Anfield with a tidy profit for company. All of which would have been possible in the years before the financial world came crashing down. But not in the current climate. "Neither of them saw the recession," says Fynn. "I think they also believed that success was a given and it hasn't turned out that way. And I don't think they saw what was going to happen at Manchester City either."

With no logical exit strategy, the Americans are stuck, both with the money they borrowed to buy the two clubs in the first place and, by extension, the clubs themselves. It's a mess.

Can’t argue with any of that, although in isolation these bald facts do not satisfy the basic needs of a writer who wishes to slay all of the Premiership dragons, bar one, and to achieve that aim there has to be a comparison with the current debt-laden haven’t-a-bean potential has-beens and their billionaire backed rivals. Hence the wealthy villains of the piece are exposed as follows:-

'Manchester City and Chelsea are the exceptions to this financial mess and arguably the ones who caused it in the first place. If City and Chelsea weren't spending money they had been given rather than earned, no other clubs would have to break the bank, or indeed borrow from it, to keep up with them. But are clubs with billionaire owners in danger of financial peril in the near future? "We can only hope so," says Fynn. "They have destabilised all of football. On one level, you don't want to see any club fall flat on its face but..."

You can understand the sentiment. Because of the billions Sheikh Mansour and Roman Abramovich have in their respective back accounts, City and Chelsea operate in a completely different financial environment to the rest of England's football clubs. What comes into the coffers in terms of revenue is practically irrelevant because the both owners subsidise their respective clubs from their own pockets. Arsene Wenger has called it "financial doping" and his phase sums up the phenomenon rather neatly.'

The spending and means theme, or “financial doping†as the great guru Wenger calls it, is a rather desperate attempt to sully the character of anyone wishing to put their own money into English football, without necessarily requiring a financial return, by making it sound as though the whole process involves an injection of something other than cash in an unsavoury way. For example, only the other day I heard Tony Adams refer to a £50million ‘injection’ of cash provided by Daniel Fizman that kick-started Arsene Wenger’s reign at Highbury - that’s the sort of thing we’re talking about here, except on a larger scale which, naturally enough, makes it something that we, as football fans, require salvation from and protection against. This leads to the writer’s somewhat tentative salvation solution…

SALVATION?

One possible solution in all of this is Michel Platini's proposed regulations for European competition which state that clubs would only be able to spend on players and wages what they earn through gate revenues, merchandise, and money from television and sponsorship deals from the 2012/13 season onwards. That means that the pockets of the philanthropic owners would be no good to Manchester City and Chelsea, although you can already see ways around it. What's to stop, say, Sheikh Mansour paying £100m for a special executive season ticket? Or Roman Abramovich £150m for a signed Chelsea shirt at an auction? The only other solution is to let the laws of the financial world take their course.

Notice how the word ‘philanthropic’ has been slipped in here, as unobtrusively as possible, when an alternative might have been ‘benevolent‘, ‘good-hearted‘, ‘generous’ or ‘charitable‘. Then again, any of those substitutes would have blown the attempted blackening of the characters of Mansour and Abramovich right out of the water, exposing Wenger’s weasel wordplay as a slur on them, or indeed anyone else wishing to spend their money how they damn well pleased.

And what of Michel Platini’s so-called solution - only spending what you earn? Of course, we all do that, don’t we? No mortgage on the house, bought the car outright, turned down Dad’s kind offer to help out on that foreign holiday. Funny, isn’t it, how some people go out and buy something expensive and can enjoy the experience, whereas others can’t bring themselves to do it, prefering instead to treat the whole process as a destabilisation of the marketplace and then justifying their position by going on to seek salvation from the mortal sin of it all by reemploying Sol Campbell.

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