[Archived] Credit Crunch To Hit Football?

[PAFELL]

Did I hear right this morning on Five Live?

West Spam owner has less than 48 hours to sell the club otherwise he is bankrupt?

Bloody Hell!

"We're forever bursting bubbles..."

So, if they do, instant points deduction and where does that leave Sheff U's compo claim?

On a positive note, we'd be 3rd bottom...

If Pompey are also skint and need administration then Rovers would be fourth bottom without playing a game!!!!!!!

You did hear right about whu I also heard it.

[stuwilky]

Just one thing on Pompey Earlydoors, Portsmouth HAVE put in planning permission for a new stadium on the outskirts of the City just aside of the motorway as you drive into the City. Obviously theres a delay with money, but also the road infrastructure has to be put into place before work can begin to be carried out.

I thought they were still "working towards it", they have changed their minds so many times I cant keep up with it!

[Tim Southampton Rover]

Portsmouth originally had a site in the harbour next to the old Dockyard however due to money etc they re-drew plans to have it, as JAL said, just as you drive into the city. The latest I heard was that the latest plans could hit the rocks because of the club's need to include shops in the development. The bankers who are financing the £100m project have told the club that there must be a significant retail element alongside the 36,000-seater ground and housing, or the necessary cash will not be available. So they've re-drawn plans for that but the local council fear it could spark uproar as the shops in the city centre and Gunwharf Quays (shopping outlet) don't want their customers going elsewhere. I think the council will back them if they have a stadium just with housing including rather than retail.

[thenodrog]

Portsmouth originally had a site in the harbour next to the old Dockyard however due to money etc they re-drew plans to have it, as JAL said, just as you drive into the city. The latest I heard was that the latest plans could hit the rocks because of the club's need to include shops in the development. The bankers who are financing the £100m project have told the club that there must be a significant retail element alongside the 36,000-seater ground and housing, or the necessary cash will not be available. So they've re-drawn plans for that but the local council fear it could spark uproar as the shops in the city centre and Gunwharf Quays (shopping outlet) don't want their customers going elsewhere. I think the council will back them if they have a stadium just with housing including rather than retail.

Can they not simply share St Mary's?

[roversmum]

Now there's a thought

[JAL]

I thought they were still "working towards it", they have changed their minds so many times I cant keep up with it!

Yes, generally what you and Tim from Southampton are saying is true, one reason coming out of Portsmouth is their local council are blaming national government on putting a block any new out of town retail development that could have an adverse effect on established shopping areas (Cascades, Gunwharf etc.,)something that has cropped up with the Everton development (local politics shifting the blame).

Everything does seem up in the air knowing the state Pompey are in you cant realistically see the new ground ever happening.

[Billy Castell]

No news of either club going nto administration, so those rumours were probably tripe.

[philipl]

No news of either club going nto administration, so those rumours were probably tripe.

Which clubs?

When?

[Billy Castell]

Pompey and West Ham. Read the last page or so and see why I got the impression that I got.

[American]

West Ham has a couple of months to find a buyer, which I would be shocked if it didn't happen.

[tony gale's mic]

West Ham has a couple of months to find a buyer, which I would be shocked if it didn't happen.

They have the 30 million payment hanging over their heads too - that would be a BIG consideration for a buyer.

[philipl]

The weathervane on West Ham is if they strike an out of Court settlement with Sheff U. If they don't, they are in deep trouble.

The guy who was asking why they haven't gone bust already, West Ham might go before the end of the month whilst Pompey are not in imminent danger of going under although they do have debts which cause real pressure- a bunch of football teams due to receive their next transfer payments from the good ole' days of Gaydamak splashing futute commitments around.

[mickbrown]

The weathervane on West Ham is if they strike an out of Court settlement with Sheff U. If they don't, they are in deep trouble.

The guy who was asking why they haven't gone bust already, West Ham might go before the end of the month whilst Pompey are not in imminent danger of going under although they do have debts which cause real pressure- a bunch of football teams due to receive their next transfer payments from the good ole' days of Gaydamak splashing futute commitments around.

Im afraid West Ham are not on the verge of going into administration, even if Hansa(the holding company) goes into administration West Ham will not as they are solvent.

The sheff utd court case is likely to be sorted out of court for around £5 million which will not pust them over the edge, if of course they get hit for over £30 Million that it would be a different story but that outcome is highly unlikely........

West Ham could raise £30 Million tomorrow with selling Parker, Bellamy, Upson and Noble.

West Ham just need to downsize and reduce the wage bill.

[thenodrog]

West Ham could raise £30 Million tomorrow with selling Parker, Bellamy, Upson and Noble.

Assuming that they own them. I don't know the situation but I assume that they will no doubt still be paying off various finance companies.

[philipl]

Hansa are in administration already and have been for two months.

The threat to West Ham I believe is that the owner made his advances to West Ham at least in part as loans through Hansa. Therefore West Ham have over £30m in commercial debt now left stranded by guarrantees supported by a company in administration plus the Hansa administrators looking to recover intra-group loans and they are solely responsible for getting the best deal for the Hansa creditors with West Ham's well-being at best a third level consideration.

Personally, I don't think at the moment there is a serious bidder amongst the nine who are supposedly interested in buying West Ham but there are a bunch of chancers who will try to buy at a penny more than the administrator thinks is the club's break up value so West Ham's future currently looks precarious.

The Sheff U situation seems to be far more serious than the WHammers are willing to recognise. The original £5m fine is totally irrelevant- the arbitrators (one of whom was a West Ham appointee) unanimously found West Ham breaking all the rules again AFTER the date of the fine and that is the prime reason they found for Sheff U. So far as the arbitration process is now concerned, the only question is how much have Sheffield United lost through relegation and have they sensibly managed/mitigated their losses. Whatever that figure is will be the bill for West Ham to pay but for sure it will be more than £5m. This is one of the reasons why West Ham have delayed publishing their results until March as the arbitrators will rule by then- the other is the Hansa administrators' decision to seek a sale on or before 7 March ahead of their next appointment in Court in Iceland when they might be ordered to start liquidating Hansa if they have made little progress in realising cash for the creditors.

Sheff U's problem is that West Ham are teetering and their claim will become more delayed in its execution if West Ham go under- that is just about the only pressure Sheff U face to settle out of Court for less than they believe they are realistically due. Sheff U must wonder whether West Ham could even pay an out-of-Court settlement even if one were agreed, especially if it happens after the window closes so West Ham cannot flog off another few players to pay for it. On the other hand, Sheff U's claim presumably must be categorised as a football claim as it has been arbitrated according to the rules of the FA. If West Ham go into administration, whoever comes in will have to pay Sheff U 100% or else West Ham will face additional punitive points deductions like Leeds, Bournemouth, Rotherham and Luton have done in the very recent past.

My marginal best guess is that West Ham will go into administration shortly before the end of the January window.

City, Villa and Spurs might all be looking at Bellamy, Parker and Upson but all three clubs have shown no inclination to start an auction and everything points to them looking to come up with ingenious ways to screw West Ham in the Hammers' time of weakness.

City have low-balled a bid, Spurs have put a decent number in for two players as a package and Villa are biding their time on Bellamy whilst not getting into high numbers for Upson. West Ham of course are hamstrung by Pompey needing to sell without being as desperate as WHam are so Spurs, City and Villa are playing a game of who needs our cash the most between Pompey and West Ham given that Bellamy and Defoe could be argued to be relative equivalents (apart from age and nationality).

[American]

My marginal best guess is that West Ham will go into administration shortly before the end of the January window.

I'd guess that they drop their asking price from 250 million and one of the 9 supposedly interested parties becomes a very interested party and does a Man City like last minute purchase on the cheap to bail them out (maybe around 100 million to 150 million including debt).

I'll give you 2-1 odds they don't go into administration anytime in the next 2 months (and I would happily pay it with the 9 point deduction they would get being a good consolation!).

[philipl]

I said marginal because I suspect none of the 9 are willing to russle up £100m.

A serious and skilled bidder should be able to get the purchase price down to projected administration yield plus a penny but the Sheff U situation complicates the whole thing. But, the sensible purchaser would also knock £30m+ for Sheff U and the 17 other cases that follow from Sheff U off the administration yield figure but the Hansa Administrator would probably gamble against Sheff U getting their money. There is also the transfer window that shuts on 2 February as a cut-off for realising cash from player sales and that unfortunate (for West Ham) wrong order of the timing is why I think administration is narrowly the favourite. Sheff U are not going to do WHam any favours whatsoever, let's face it.

Although West Ham are asset rich, their debts are all too pressing and current if the Hansa administrators need their cash which it seems they do. In which case, debts are around the £100m mark even before the Sheff U settlement and the arbitration is at a stage at which Sheff U could ordinarily expect cash with documents.

[mickbrown]

The vice chairman of West Ham in November'08 said they are debt free, what makes you so sure west ham have inter-company debts ?

[philipl]

I believe there is £30m of football and other operating debt to third parties excluding the Sheff U and 18 other law suits outstanding.

I think you will find that when Hansa was in friendly hands there wasn't effectively any debt that could be called. However, once administrators are appointed, if there is book debt owed by West Ham the administrators are required to recover irrespective if there was no intention to call on it by your Icelandic owner.

At the moment Man U argue they are technically relatively debt free. However, if an administrator was appointed to run Red Football (Man U's parent), he'd want and be entitled to get the £600m+ out of Man U.

The thing which told me the West Ham game was nearly up was when Eggert Magnusson filed his legal claim for unpaid severance of £1.2m in the High Court. If anybody knows the reality, its Eggert as former executive-Chairman and 5% shareholder and he was staking his position in the queue of creditors unambiguously when he did that.

If a company cannot pay an amicably agreed deal with its former Chairman because of lack of cash (and Eggert had allowed some months to pass due date), it is in truly deep trouble.

[mickbrown]

So ignoring the law suits, if West Ham raise £30 Million this transfer window they are safe ?

They have just raised around £12 Million with sparky buying Parker...........

[philipl]

So ignoring the law suits, if West Ham raise £30 Million this transfer window they are safe ?

They have just raised around £12 Million with sparky buying Parker...........

You cannot ignore the law suits.

And if Gudmundson followed normal procedure by putting the £85m purchase price as a debt owed by West Ham to its parent, Hansa having gone to unfriendly hands (the administrators) now has that claim against West Ham.

If as seems likely on 9 March, the Rejkavik Court orders the liquidation of Hansa, it will be cough up that £85m time.

So from the West Ham board perspective, they are faced with the possibility of having to find £145m in March if everything goes wrong. If they know they will not be able to pay debts as they fall due, they have to call in the administrators. As the shareholder is himself an administrator, he might force that decision whilst the transfer window is still open if he does not believe he will get his money back through a trade sale.

As there has been so much speculation about West Ham going into administration, there has to be a debt from West Ham to the Hansa parent in there because otherwise you should be able to trade your way out of difficulty.

You would raise some £45m in all probability (primarily player sales) between now and March- I think you have got to be prepared for £20m+ to Sheff U, £10m+ to the other 17 law suits (excluding Bolton whom I don't think have a leg to stand on), £1m to Eggert but not all of the £30m trade debts will be falling due at the same time and you should be able to roll over most of it.

The other thing to remember is that administrators are above all interested in cash- player transfers are typically spread over the life of the contract of the buying club so you might need a higher headline sales value because payments are phased. However, having seen Rovers are reported to be getting cash all up front for Roque, no doubt West Ham have done the same for Parker.

[tony gale's mic]

Excellent article by the always excellent John Nicholson:

Could A Recession Save Football?

A new year always invites writers to speculate. But as the year just gone has amply proved, predicting the future can be like trying to catch a greased pig on ice, which coincidentally is what passes for romance in some towns of Norfolk.

The BBC news, in one of its hourly, 'hey-children-everything-is-awful-we-feel-your-pain' news bulletins has just announced that for 2009, 'the misery is just beginning'. Well, sod them. I'm going to be happy just to spite the BBC.

The bulletin went on to talk to a member of the public about how the 'recession' was affecting her. Clearly, she was having it very tough,

"Well, we'll probably only buy the expensive cheese we like once or twice a month instead of weekly," she said, in all seriousness, adding the now-inevitable Pavlovian coda, "...what with the credit crunch and everything." Presumably she needed access to substantial credit in order to buy cheese on a weekly basis.

Somehow, every vox-popped member of the public has learned that you must conclude every statement, however irrelevant with the hideous CC phrase.

"So you're really feeling the pinch," said the interviewer without a hint of irony.

"Oh yes, definitely," she confirmed. She meant it.

This is frequently what passes for insight in modern news media along with endless interviews with 'experts' who gloomily tell us how 2009 will be an apocalyptic year of grinding poverty.

These are the same people who spectacularly failed to predict how 2008 would turn out, so quite why they're being trusted to tell us the future again is a mystery, especially considering, as author Philip Tetlock documents in his book Expert Political Judgement, those who are employed to give economic and political predictions and advice are less likely to be right than a control group of chimps just selecting outcomes at random. Given a chimp or a BBC expert, I'd go for the chimp every time.

It might seem obvious to say, but no one really knows what the future holds. Not even those who write a 2,000-word screed about the imminent collapse of society/capitalism/life on earth on The Guardian's blogs. And they seem to find solving the problems of the world so easy and obvious, at least from inside their Halls Of Residence.

However, apart from the drastic cheese discipline the current economic conditions exert, what will it all mean for football?

The Premier League has never existed in a recession. It's lived its life in the rich upland pastures of milk and honey. Can it cope?

Clubs have lived beyond their means for years, paid obscene wages to average talent, built grounds they can barely afford in order to pack in more people paying prices that people who do the minimum wage jobs that keep our lives ticking over could never afford.

To fill all the seats and garner income to pay players, they have courted the fickle support of people who see football as just another place to be entertained; who will tell you to sit down, who don't understand why you are shouting if there's not a goal, and will report you to a steward for swearing. The people who are absent from their seats when the second half kicks off. They're also the people who won't go when times get tough.

In a desperate search for more income to fund the overspend on wages, clubs have flooded the market with oceans of tatty merchandise and replica shirts that cost pennies to make in the Far East but will cost you forty quid.

If you're not badged and logo-ed up you're no-one, son. Everyone believes that now. All so the likes of Mark Viduka can earn 70,000 big ones or more a week. Great, isn't it?

But with the uncertain global financial situation, this must all be coming to an end. A prolonged worldwide recession will affect TV revenue from advertising and subscriptions and that's where the major growth in income has come for the top flight.

The billionaires who already own clubs are losing money hand over fist on the stock market, dodgy investments and in collapsing financial institutions, thus constraining their desire or ability to spend big money on a football club.

With low inflation or even deflation, ticket prices can't be raised to increase income to clubs. And with sterling weak against the Euro, that cheap midfielder from Lyon is now 30% more expensive than a year ago.

Consequently, the 'it's cheaper to buy foreign' era may also be coming to an end. Transfer fees will also have to drop substantially because no-one can pay big anymore.

If the Premier League isn't awash with easy money anymore, it will stop being such a pull for talented kids from all across the world, thus giving more opportunity to homegrown players to flourish.

Lower-league sides could benefit from recession by unearthing talent and selling it on at a profit to bigger clubs, just as they used to. That lifeline of cash has all but been turned off in the last 15 years to the detriment of all lower-league clubs' coffers.

But clubs still need talent, preferably cheap talent. They'll get it the old-fashioned way, by trawling the schools locally, nationally and abroad for good kids, training them properly and bringing them through the youth and reserve teams.

You develop your own assets and in doing so you automatically foster greater allegiance to the club both from the player and from the fans who love to see local kids get a chance in the first team. It's wholesome. It's the football equivalent of slow, home cooking rather than buying in a frozen TV dinner. One is a whole culture in itself, the other is a disposable, quick hit.

There may well be pain along the way as the new realities hit home. Clubs like West Ham, with its profligate owners so enslaved to their unmanageable debt, may have to go into administration. The whole club may need to be rebuilt by new people on an entirely different cost structure but that will be a good thing in the long run. It'll mean more Mark Nobles and less Lucas Neills. That's a very good thing.

There may still be the odd financial freak like Chelsea or Manchester City, but if the City project fails to create a title -winning side within 18 months, it may discredit the whole concept of rich-dude-buys-club-to-make-him-and-his-business-look-cool and that mega-wealth may go elsewhere.

Recessions - and I've happily rocked through three big ones - can be very destructive but they are also excellent opportunities for change. It's hard to see this not being the case in the football world.

In the early 80s you didn't have to be a swivel-eyed devotee of Keith Joseph or Maggie Thatcher to realise that many of the industries that went to the wall or contracted dramatically in that period were unwieldy, unprofitable, badly managed and over-staffed. The unions held the whip hand. There was a lot of fat and very little meat, all propped up by state aid. In 2009 replace state aid with TV money and that sounds very like the Premier League.

A recession will change things. Contraction, fiscal discipline, smaller squads and a re-establishment of a sensible relationship between income and wages would help create a leaner, fitter and healthier football economy, free from the worst kinds of speculators and closer to the fans.

Many feel that the huge money influx has in some deep, core, almost moral way, ruined football, at least in the top flight. Maybe a recession is exactly what we need to begin to restore some belief and heart in the game and put it back in the bosom of the people who have always loved it best but who have increasingly been marginalised in the last ten years.

That is at least one reason to be cheerful...what with the credit crunch and everything.

[philipl]

Good article.

And very good news unless you are a West Ham or Pompey supporter.

Potentially even better news for Liverpool and Man U supporters depending on how much damage their current American owners do before their hands are prised off the shares they "own".

[philipl]

Guardian- 37% of Rovers season ticket holders and 36% of Man U season ticket holders doubtful about renewing.

[92er]

Guardian- 37% of Rovers season ticket holders and 36% of Man U season ticket holders doubtful about renewing.

The link didn't work for me!!