This week has seen administration in football hit the headlines with Pompey going into it for the second time in a couple of years and Rangers probably being the biggest club to face such action. Whilst the supporters of these clubs have every sympathy, I remember our dark days in 2000, the actual penalty they face for spending money they don't have is actually laughable in the grander scheme of things. 10 points to Rangers, for example, means they will finish 2nd instead of 1st. Pompey will be in the relegation zone and, even if they go down, will have the opportunity to regroup and, with their support, will come back in a year or two as a strong Championship side, no massive penalty for financial buffoonery. Many clubs plod on in their respective divisions, struggling to stay afloat but being prudent don't have these exaggerated successes 'paid' for with money they don't have. The best example of this has to be Leeds who went bust for £35 million with Old Greybeard cynically using every facet of the 'game' in getting the debt wiped out with creditors getting 1% of their debts. They are once again in with a chance of the Premier League when really they should have been extinct. My view is any club going into administration should be demoted two divisions and also be barred from promotion unless they balance their books. That way if they learn to budget at the lower level and not spend money they do not have there would be far less of the boom and bust we currently see. In Germany clubs are not allowed to have debts which makes for a far healthier way of running their league. I know our club are currently spending a fortune that cannot be balanced on normal gate receipts and sponsorship, we have to look at the big dream possibly becoming our worse nightmare. What do you think?
Pompey is the strange one. Everybody appears to own a piece if the club in someway shape or form, and different people own big parts of the surriunding grounds around Fratton Pk. There is an "Administrator" in charge of things - the same one that was appointed AFTER they came out of administration last time and I just wonder exactly what qualifies someone to become an administrator of a football club? also Michael Appleton was appointed manager recently - how could they justify the finances of the club or does the obvious lie they told him, offer him an escape route out? On MOTD Claridge stated that Pompey were still paying Premier League salaries, which again promps me to wonder aobut the competency of the administrators running the club? I feel sorry for the Pompey fans and hope that someone comes in and buys the club and surrounding grounds but do not have that much hope for them.
Agree there Ninj, Pompey fans must be wondering what they've done to be in this situation again but when you look at it they won the FA Cup with a team that was paid for by, and earning wages paid that were not the club's money, in other words they were cheating their way to success. It appears they are still trading in a similar fashion but only, once again, getting a ten point penalty...
If transfer fees and player wages aren't capped into a sensible regulatory system, we're gonna be watching park football within the next couple of decades. Looking at the mercenary **** we've been subjected to in recent times, park football seems an attractive development to me.
The sad truth is that there are too many pro clubs in this country. Some sort of wage cap would certainly help but football in this country needs to be re-structured massively so clubs can maximise revenue. A big club needs to go to the wall for the others that need to do so to get their acts together.
It is certainly true that some clubs are operating well beyond their means. But there is also a serious problem with how financing is structured in many clubs. Buyers are financing their investment into a club via a mixture of debt and equity. The issue is that the proportion of debt can be significantly - and I mean significantly - greater than the proportion of equity. Whilst equity is risk capital (i.e. not secured against the assets of the club and with no guaranteed return), debt capital is the very opposite. In this way, the acquirer of a club not only has control in boardroom, but is also the club's major creditor in the event that the brown stuff should hit the air conditioning unit, whilst also possibly enjoying a regular cash stream in the form of interest payments (at a rate potentially greater than normal bank debt). The debt has to be repaid within a defined term too. They've got their cake and they're blooming well gonna gorge on the lot! Of course, banks and other financial institutions often put up some of the dosh in such deals too, with such debt ranking ahead of the acquirers. Just more snouts in the trough. The Football League, Premier League, UEFA, FIFA and the Girl Guides Association need to take action now. Whilst capping wages and so forth is a good start, I would suggest that rules are changed to prevent clubs from being so thinly capitalised. If a wealthy businessman wants to acquire a football club, then he should be prepared to stuff more of his money in as pure equity risk capital and not debt. This will most likely change his behaviour (for the better) towards the management and governance of the club. Further, he won't be able to get his dosh out as easily, except maybe in the form of dividends (for which there are conditions to meet before such payments are possible). Naturally, this will dissuade the many suitors of some clubs, but most of these are predatory bastards anyway. But maybe, just maybe, we'll all get the game and our clubs back.
This was what caused the major objection to the Glazer's takeover of ManUre, largely financed by loans, some of which were at extortionate rates and gobbled up most of Cristiano Ronaldo's transfer fee. The difference there is that the 'brand' is so strong that they can sell up whenever they like a vast profit. Most club owners won't have that luxury and the pair that owned Liverpool found themselves with a 'brand' that was past it's 'sell-by date'. There will always be buyers for really big clubs with strong Champions League credentials, it's those just below and downwards that are most at risk...
While sympathetic to Pompey's unsecured creditors in the first administration, those that lose out in the recently announced one surely have only themselves to blame. As a trader, would you let a Pompey or a Leeds or a Rangers run up a large debt at your expense. I suspect quite a few of the unsecured creditors this time will be the players, ground staff etc. Not much sympathy for the players, on a day when Tierry Henri is spending £250,000 on a new fish tank. I know they're not all as rich as him, but they do pretty well in the Champonship. Whenever there's a debate about the future of professional football in this county, I find my views divided between the objective and the subjective. Objectively, the position is as Alan Sugar set out on TV a year ago. Current way of doing business is unsustainable for all but a selected few clubs. Uber's call for greater capitalisation seem to make good sense. Subjectively, if the Mitt-Ferds at QPR want to heavily finance the club as an accoutrement to their own business empires, should I be complaining? There's a risk they could walk away of course. (In our case, we do seem to have double indemnity). Isn't it the same at Man City or Chelsea, or are these clubs more secure because another wealthy buyer is likely to be found because they're a big name? Are we a Portsmouth or Leeds of tomorrow? It may ultimately come down to one person. Lakshmi Mittal. And I hope he comes to love us...
Pompey should be liquidated. Theyve cheated time and time again by outliving their means. i think 100% of debts must be paid or the club gets demoted out of the league. I also think no owner should be able to loan money to the club or mortgage the club to get money to buy it. It only digs a deeper hole. Also, a wage cap should be introduced and if they cant do it in the PL, they must do it in the FL, a 5K, 2k and 1k cap for the 3 leagues. No more paying people 30k like Pompey are doing.
Flyer I can understand you saying that Pompey should be liquidated, however, the questions I would love to see answered are 1) Exactly what did the last administrator do for the football club as appears from an outsider that they have been as useful as a chocolate teapot in the desert? and 2) Who allowed for various different parts of Fratton Park, and the surroundng areas to be sold off for individuals rather than one overall person / owner?
Correct me if I'm wrong. But didn't Pompey manage to get their ten point deduction effectuated when they were already certain to be relegated from the Premier League instead of starting the next season in the Championship with -10? And how is it possible to be placed in administration twice, once while you're in the Premier League and second when still under the parachute payments? Excuse me if I feel zero sympathy for them. Not paying your ambulance, police stewarding and tax bills are unexcusable, the ones who end up paying the price are the tax payers.
For starters some form of wage cap or structure needs to be created because its ridiculous that some players earn over 5x the average national yearly wage in a week. Clubs are playing football, not sending men to the moon so they don't need a larger budget than NASA. The idea of only spending what you earn is repeated over and over again in these economic times, so why should football clubs be immune. Platini at UEFA appears to have got something right by saying that clubs will be banned from competing in Europe if they can't balance their books. As far as clubs that are put into administration goes, I think the two division relegation is a bit harsh especially on the fans. I would be more in favour of instant relegation (some clubs do stay up inspite of the 10 point deduction). Also no more of this paying back 1p for every pound they are in debt. I would say that the club has to pay back the full amount and then balance their books and until that happens they cant be promoted back up. However, most importantly I would give a lifetime ban for any chairman that leads a club into administration (how Ken Bates or Peter Ridsdale are even allowed to be assosciated with football clubs let alone own them is beyond belief)
The thing is with a 10 point deduction is it can lead to relegation anyway and often teams will be heading that way, so it's just an inconvenience. A two division drop would be a severe sanction that actually may be a reality check to bring some of these persistent offenders into line. Allied to a no promotion sanction it may go some way to stem the tide of clubs seeing this as an easy way out of self-inflicted financial mires. I believe in Ireland and a lot of other countries clubs are licensed and have to meet a number of strict criteria to obtain a 'Premier' or 'Second tier' licence. Clubs are relegated automatically if they fail to obtain the appropriate licence. Something like that with financial obligations should be introduced here...
In fairness to Bates it is my understanding that Leeds United were already heavily in debt when he first bought into the club, so I don't believe that he can be held responsible for that. I believe that was under the Ridsdale tenure? The club entering into administration did take place after his buy-in, and he did then lead a consortium that acquired the club 'debt free' from the administrator for a relatively modest sum, but the administrator is obliged to secure a deal that's in the best interests firstly of the creditors of the club, so I can only imagine that Bates' offer was the best (and perhaps only) one on the table. I am curious that he is so hated by the Leeds faithful. As with Flav & The Diminutive One, I am no supporter of Bates. But the fact that he effectively rescued the club from the dark days of impending insolvency seems to passed by unnoticed by the Elland Road crowd. Perhaps its simply because he was previously associated with Chelsea that he is hated by Leeds and Rs fans alike? Anybody, please put me right if this somewhat simplistic, macro-level account is incorrect.
The Bates 'buy-out' was dubious to say the least, officially he should have had nothing to do with the company buying from administration, i.e. buying from himself, but the 'consortium' were un-named and operating from a 'shell' company in the Cayman Islands and after purchase installed Bates as Chairman (conveniently). He then 'bought out' the consortium last season when the Premier League started asking awkward ownership transparency questions. All in all £35 million debt was settled for £350k and Bates sold and bought the club in between. Remember, he put them into administration 10 minutes from the end of the season when relegation was certain so to take a ten point hit. The rules were changed because of that. I wouldn't buy a used car from him!...
Thanks, Sooperhoop, appreciate the info. Was it Football League rules that prevented Bates overtly buying from himself, as this kind of thing can (and often does) happen with companies outside of football that are in administration or insolvency? At least in an adnministration deal creditors have the chance of getting 'X' pence in the pound back almost straight away, whereas in an insolvency situation they could wait 2+ years and get three-tenths of five-eighths of bugger all. And let's not forget that equity investors generally have little choice but to write off 100% of their investments. None of this, however, explains why the Leeds faithful hate him. Looks to me like he's acted in the best interests of the club, its fans and (yes) him. Would they prefer that their club had remained in debt to the tune of £35M, or started the season on -10 points... or worse still had been wound up? Of course, to an outsider there may be questions to answer. But if somebody had come in and done this to my club, I'd probably be quite please... as we all were with the Flav & Don Estelle deal at the time*. [*Although similar, of course the Rs circumstances and story are a little different]
Here's an article which shows what a slippery bugger Bates is: http://www.guardian.co.uk/football/...s-united-ken-bates-owner?INTCMP=ILCNETTXT3487
I thank you once again, Sooperhoop. An interesting article. But, I ask again (tho' in a different way)... if you were a fan of Leeds United and they were £35M in debt and in danger of being wound up, would you really hate Bates for coming in, taking control and wiping out that debt? Of course there are transparency issues here, but the Big Four administrator would have had to satisfy himself of the legitmacy of the deal before waving it through. He has a case to answer. As for Bates subsequent acquisition of the club from these Nevis-based investors, yeah it smells. If I was a Leeds United fan, cloth-capped and fully whippeted up, I frankly wouldn't give a toss. Perhaps that's the unabashed capitalist in me.
If QPR were £35 million in debt in similar circumstances would we care who bought us and how and why? Probably not, but there were a lot of creditors stitched up by the methods Bates used and the way he did it. Prices for fans have gone through the roof, Donny supporters were charged £35 yesterday and there's little investment in the team, 35 loanees in three years says a lot. Grayson sacked at the close of the window so Warnock will do what? Yep, loans. If he gets them promotion on a shoestring don't be surprised if there is deja vu as Bates suddenly sells a BIG club for megabucks and sails off into the sunset laughing his arse off and Warnock is starved of funds until the takeover is done...
