[Archived] Credit Crunch To Hit Football?

[Hughesy]

They are due a big sponsorship deal soon are they not? No doubt a world record one. - what is that likely to add to them a year?

[philipl]

Hughesy, the numbers are very simple-

£1.5bn to be found over six years is £250m per year on average (in reality the numbers are heavily back-ended).

That is about the same as their total turnover, never mind any profits they make (about £60m to £80m before transfer trading and interest charges).

Clearly the game plan is to be bailed out by a buyer who could see a return on say £2bn investment. Ordinarily you are going to be looking for £300m a year return on a figure that big invested in something as risky as a football club.

So United have to carry on winning everything every year or their own bubble will burst. I cannot see their numbers as being sustainable and certainly not if they return to the levels of mortality all clubs have in the long run. Man U going back to what they were in the '70s and '80s is a spectacularly bust Man U.

[Hughesy]

But do they need to re-pay the whole £1.5bn by 2015? Surely they will re-structure it over time?

[philipl]

I would imagine this disclosure has been ma de now rather than in any of the other years since the Glazers arrived because it is well known that they have tried and failed to restructure when the times were good.

Right now the market for restructuring that sort of debt is completely non-existant.

Both the Glazers and the auditors presumably wanted to give some sort of reassurance to the debt holders so now they know

1) what is the total exposure to structured debt (£660m) and compound interest (c£900m- average rate is about 11%)

2) when the cash is needed to pay this; mostly 2011-2015 but there is a bubble next year.

Based on Man U's accounts last year, there is a further £150m+ of ordinary business debt in Man U as well (unpaid transfer fees etc) and that is before counting the £32m needed to sign Tevez.

[philipl]

From time to time folks wonder how Flybe is performing and how it is impacting Rovers' owners. There is a short piece here which probably answers most questions about the airline.

They have very strong management, an excellent cost base but like everyone else will be experiencing big challenges at the moment. They are not in any danger but equally are not going to be flooding the Trust with free cash.

[CrazyIvan]

From time to time folks wonder how Flybe is performing and how it is impacting Rovers' owners. There is a short piece here which probably answers most questions about the airline.

They have very strong management, an excellent cost base but like everyone else will be experiencing big challenges at the moment. They are not in any danger but equally are not going to be flooding the Trust with free cash.

I have often wondered why FlyBE aren't sponsors of Rovers given the links.

[dave birch]

Philip, I wonder, that given all the problems that a lot of prem clubs seem to have, that not one yet has turned turtle. They always seem to manage to avoid that terrible fate you predict will befall them.

Any reason?

[LeChuck]

I have often wondered why FlyBE aren't sponsors of Rovers given the links.

I think there's every chance they'd expect 'mates rates' if they were to sponsor us.

[Hughesy]

Exactly the reason they are not our sponsor!!

[stuwilky]

I have often wondered why FlyBE aren't sponsors of Rovers given the links.

FlyBe sponsor[ed] clubs based in towns and cities where they were based; Exeter, Southampton, Norwich, Birmingham etc

[philipl]

Philip, I wonder, that given all the problems that a lot of prem clubs seem to have, that not one yet has turned turtle. They always seem to manage to avoid that terrible fate you predict will befall them.

Any reason?

The Premier League has been doing a job behind the scenes with Pompey, West Ham and last summer Man City as I understand it.

With Platini on the war path, the PL is not exactly keen on any of its members turning turtle nor welching on payments due to other football clubs, either Premier League or non-English. Thaksin's City were close to getting the PL into a lot of trouble with the unpaid bills for players from Eastern European clubs.

[Hughesy]

West Ham United will be taken over by a consortium of international banks in the coming weeks. Icelandic government-appointed officials running the stricken investment bank Straumur are set to to take control from Bjorgolfur Gudmundsson at Upton Park. (The Guardian)

What does this mean Phil? They will simply own the club and then look to sell it off asap??

[thenodrog]

West Ham United will be taken over by a consortium of international banks in the coming weeks. Icelandic government-appointed officials running the stricken investment bank Straumur are set to to take control from Bjorgolfur Gudmundsson at Upton Park. (The Guardian)

What does this mean Phil? They will simply own the club and then look to sell it off asap??

imo It means that the money in WHU is dead and buried, buyers cannot be found cos of the legal situation so it's prob their only option to avoid a total wipe out.

Or am I just living in hope.

[dave birch]

The Premier League has been doing a job behind the scenes with Pompey, West Ham and last summer Man City as I understand it.

With Platini on the war path, the PL is not exactly keen on any of its members turning turtle nor welching on payments due to other football clubs, either Premier League or non-English. Thaksin's City were close to getting the PL into a lot of trouble with the unpaid bills for players from Eastern European clubs.

So nothing will happen.

I must admit, I'd like Platini to get his way, to shaft some of these so called "super clubs".

[philipl]

So nothing will happen.

I must admit, I'd like Platini to get his way, to shaft some of these so called "super clubs".

The PL can wheel and deal and matchmake when west Ham or Pompey have an immediate embarassment of £20m or so and sweet talk UEFA and FIFA to hold off on Man City's default on transfer fees for three players owing in Croatia and Ukraine whilst they knew the Thaksin sale was a runner.

Not a lot they can do if Liverpool go down for £350m! However, the issue there appears to be whether Gillett gets his sale of the Montreal franchise through and wether Hicks will sell to him vs Gillett and Hicks fighting each other to a standstill for the Kuwaitis to step in. Even less if Man U becomes a Hedge Fund property but at least the terms of their riskiest loan apparently has a clause which transfers ownership rights rather than have the Bank's administrators step in.

Hughesy, Mick Brown the Hammer who posts on here from time to time kindly PM'd this to me two weeks ago. It pretty well answers your questions:

here is the article from "International Financing Review"

Creditors are working on a restructuring plan for collapsed Icelandic bank Straumur. Banks are forming a committee to manage the firm and are likely to take full control soon. They will also seize UK football club West Ham United, for which Straumur is the major creditor. But a firesale of assets, including the club, is not on the agenda, as Mark Baker reports.

The future of English football club West Ham United is about to be put into the hands of the creditor banks of collapsed Icelandic bank Straumur. Within the next few weeks, officials working on the orderly management of Straumur’s assets are expected to arrive in London to take possession of the club. But, according to a person closely involved in that process, widespread predictions that there will then be a fairly quick sale of West Ham are wide of the mark.

The source said that a sale was unlikely within the next 18–24 months and that Straumur creditors were happy to continue to operate the club. The expressions of interest that have already been made about the club are thought to be nowhere near what creditors would consider a reasonable price.

The source added that recent reports that West Ham was safe from being seized because its parent company, Hansa, had recently secured an extension of its own debt moratorium until June 8 were also inaccurate. Covenants in the debt allow for possession to take place. “It can be seized whenever creditors want to,” said the source.

Straumur is thought to hold about 75% of West Ham’s debt, raised in order to finance the highly-leveraged acquisition of the club in 2006 by Bjorgolfur Gudmundsson, who owns 95% of West Ham through Hansa and who is also the club’s chairman. He is very likely to be removed from his West Ham role, along with vice-chairman Asgeir Fridgeirsson, when the banks take control of the club. This will be yet another serious blow for Gudmundsson and his son, Bjorgolfur Thor Bjorgolfsson, who jointly own Samson Global Holdings, a 34% shareholder in Straumur. Gudmundsson also owned 41% of Landsbanki, another collapsed Icelandic bank.

Creditor banks of Straumur have agreed to a restructuring process and are putting together a creditors co-ordination committee that is likely to be led by BayernLB. Members of this committee are also expected to become Straumur’s board of directors once creditors have taken control.

An announcement on the composition of the creditors committee is not expected for several weeks, but one person familiar with the matter suggested that it might be formed by six banks, which would represent the total of roughly 45 creditor banks.

As well as BayernLB, leading creditors include Commerzbank and Lloyds TSB. At the end of 2008, Straumur had about €1.5bn of outstanding debt, of which about 28% was denominated in Icelandic kronor.

The Icelandic government and the local market regulator, the FSA, are currently engaged in securing retail depositors’ funds, which account for about €250m of the €450m total deposits – the remainder is held by pension funds, corporates and others not covered by government protection.

This is being done in accordance with emergency legislation passed in late 2008 that gives the government the power to take temporary control of a troubled bank. The government enacted this power in the case of Straumur when the bank finally ran out of liquidity in early March this year (see “Straumur runs out of cash”, IFR 1774 p4). At that point, a three-month moratorium on all debt was granted to the bank.

Creditors can do nothing until the government has completed its actions relating to deposits. The transfer of deposits to Islandsbanki – the institution that was recently created out of the ashes of collapsed bank Glitnir – was expected to have taken place last Friday, but is now likely to be completed on Monday, after which the government is expected to end its involvement in Straumur.

Straumur CEO William Fall resigned in the wake of the bank’s collapse, but CFO Stephen Jack remains in place to work on the restructuring of the firm.

Also on board is Jorour Felix Haraoson, attorney to the supreme court of Iceland, who has been appointed as Straumur’s moratorium supervisor – the equivalent of an administrator. He is working with Straumur’s resolution committee, which was appointed in the wake of the bank’s collapse.

Although the debt moratorium period lasts three months, it is likely that Straumur will emerge from the moratorium sooner than that, once the major creditors and new owners have secured working capital. The bank’s assets will then be managed by a residual team of about 25 people – a far cry from the 600 that the group employed at the time of its collapse.

According to a statement from Straumur last week announcing the plan to form a creditors committee, the current focus of the restructuring plan is on “due diligence of the assets and liabilities, establishment of the future business plan for the asset management operation and addressing the legal issues related to the structuring of the future platform”.

The decision to avoid any rapid sale of West Ham is in keeping with the likely approach of creditors to much of Straumur’s €3bn balance sheet.

Those working on the situation say that there is no question of a huge firesale of assets, and that many assets will be managed by the creditors for years to come.

Some subsidiaries have already been offloaded. Shortly after Straumur collapsed, the partners at UK subsidiary Wood & Company exercised an option to buy out the 50% owned by Straumur, while about half the 80 staff at brokerage Teathers were taken on by Singer Capital Markets – which was itself formed after an MBO of the capital markets division of Kaupthing when it collapsed last year.

So the implications are that West Ham look to be safe under this re-structuring but being owned by a consortium of creditor banks is unlikely to be a recipe for West Ham to be given any money for transfers etc. Getting the remaining £50k+ a week boys off the payroll is going to be an even greater priority this summer I ould have thought.

[mickbrown]

I realise I am biased and looking for good news but what strikes me as strange about West Ham is that they still seem to be running the club for the long term. They have tied most of the young players down to long term contracts and are currently in discussion with Zola to extend his contract.

I realise this makes the club more saleable and the assets more valueable but why tie Zola down to an improved deal ? More to the point why would Zola sign a new deal if the club is going to the dogs......

The possibility of the Banks running West Ham secures their short term future, but I cannot see them putting any money into the running of the club and slowly selling the assets, thus forcing Zola's hand as to whether he sticks around, so the long term future looks bleak.

There is always the chance of the takeover but in the current climate that is looking unlikely unless the asking price drops way below £100 Million.

[Hughesy]

I realise this makes the club more saleable and the assets more valueable but why tie Zola down to an improved deal ? More to the point why would Zola sign a new deal if the club is going to the dogs......

There is always the chance of the takeover but in the current climate that is looking unlikely unless the asking price drops way below £100 Million.

Same reason? Bigger & Better contract = bigger compo if he gets cherry picked by a bigger club.

Mick - Quick question - Do West Ham have a waiting list for Season tickets?

[mickbrown]

Same reason? Bigger & Better contract = bigger compo if he gets cherry picked by a bigger club.

Mick - Quick question - Do West Ham have a waiting list for Season tickets?

Nope, no waiting list.

[Billy Castell]

I can see the creditor banks wanting to stabilise the situation at the various Icelandic banks in a mess, and therefore no allowing West Ham much money for wages etc. as it will be needed elsewhere. Long term, West Ham may see a decline in their team and their budget, but they will probably be healthier in the accounts department. So they may end up a bit like us, no money, but with a reasonable set of accounts that don't cause panic. In the short term, I can see a lot of painful decisions about players being made, and the team suffering. They had better hope they don't go down during this process, or else things will get seriously messed up.

As for Portsmouth, they seem to be in as much trouble. A lot of their top players are on big wages, and may not want to leave as quickly as the accountants want. Add to that the drama over the new stadium, or the changes to Fratton Park or whatever the hell they are supposed to be planning (I haven't been following the story), and we have another mess. The stadium needs expanding, or there needs to be a new stadium, but there is no money, and debts need to be paid. The fans want good players, but the players there need to be offloaded, which may turn fans away..............and so on.

Whoever follows Ferguson had better hit the ground running and win everything, or else they're up the creek, and there may even be a fire sale should they get a 'Paul Ince MkII' in charge. And over at Anfield who knows if or when the Kuwatis or DIC will sweep Hicks and Gillette off their feet and lob cash into that black hole. Or whether Hicks will sell to Gillette, or whether they'll keep on fighting like a bag of ferrets and Liverpool will get walloped with debt.

This interpretation of events may all be utterly wrong, but there is a lot of ifs and buts about the financial health of these clubs and their owners. And one thing high finance fears is uncertainty. If this recession is so utterly immense a lot of clubs will be feeling the pain in the next few years.

[philipl]

Mancs getting Glazer crunched.

[Hughesy]

Everton, Fulham, Manchester City, Middlesbrough, Newcastle, Portsmouth, Sunderland and West Ham United have all offered reductions on season-ticket prices next season. The more cynical will claim the need to fill rows of empty seats is ­driving the pricing strategies at Manchester City and Sunderland but that ­argument does not apply to Portsmouth.

Fratton Park has been more than 95% full this season, yet some punters will be able to sit in the same seat for £120 less in August - Well done to pompey for that one!!

It will be interesting to see what Rovers are doing - although some of our board members already know the answer to that!!

[jim mk2]

Congratulations to Alistair Darling on doing his bit for English football in yesterday's Budget.

Hopefully the galactico mercenaries currently playing for ManU, Liverpool, Arsenal, Chelsea, Man City et al will resent paying 50 per cent tax and more on their earnings and leave for Italy and Spain creating a more equal competition for the rest of us.

[Guest Vinjay606]

I don't think we need to worry about what BRFC are doing. Glenn knows and said he's excited about what the club are planning for season tickets.

It's a good thing Jack Walker avoided heavy taxation though isn't it? I don't think avoiding tax is something BRFC supporters can complain about.

[leftfooter]

Congratulations to Alistair Darling on doing his bit for English football in yesterday's Budget.

Hopefully the galactico mercenaries currently playing for ManU, Liverpool, Arsenal, Chelsea, Man City et al will resent paying 50 per cent tax and more on their earnings and leave for Italy and Spain creating a more equal competition for the rest of us.

So increasing taxes will get rid of 'the foreigners'?

'British jobs for British footballers'

Thus spake Commissar Jimski.

[broadsword]

Congratulations to Alistair Darling on doing his bit for English football in yesterday's Budget.

Hopefully the galactico mercenaries currently playing for ManU, Liverpool, Arsenal, Chelsea, Man City et al will resent paying 50 per cent tax and more on their earnings and leave for Italy and Spain creating a more equal competition for the rest of us.

For pity's sakes.

That's such an obvious wind-up it doesn't even need rubbishing.