I see that the recently published fiqures regarding football finance put NUFC as the most in-debt club in the premiership. Can this be true? I knew the club borrowed alot to do up SJP but I thought this loan was to be changed into shares at some point or something like that. No wonder Stonehouse left!

Does anyone with any financial know how understand this? Is turnover for a PLC not one of the most important factors? The report also says we spent £37 M more than we mad in 1999-2000. I expect that the fiqures for last season will be very different.

My visa bill is someway near to NUFC's debt so I would love to hear someone who understands business finance to throw some light on this!!!

-- Anonymous, August 15, 2001

Answers

Cue Roly - the makem with an interest in our finances

-- Anonymous, August 15, 2001

Oh no - I wanted some insight not some predjudice and spite!!! We shouldn't worry about it though - given the miserly approach last season we'll probably be in profit of £37M. My visa bill is a different story though.........

-- Anonymous, August 15, 2001

As the loan is debt at the moment, we have to recognise it as debt until it is converted. Prudence etc. I thought we made a profit in 99/00.

If some of our spending is capitalised in 99/00 then we can spend more than we earnt as we are getting the benefit over a eriod of time.

-- Anonymous, August 15, 2001

Hi Lynda. NUFC's debt is large as we took out what is effectively a mortgage (£55m ish) to expand SJP. Our turnover is also one of the largest in the Premiership which is why the banks and finance institutions are prepared to advance these funds. Remember that we now have an extra 16000 seats as a result of that expansion so all the cost of that mortgage is met by the extra gate money and the conferencing facilities in the new building.

The bit about conversion to shares you are confusing with the NTL loan of £25m. This amount is repayable in shares in 3 or 4 years time. One big risk here is that if we were relegated the amount would be repayable in cash which would do serious damage.

So we are able to have large debts because we are a large club. And there's nothing to worry about.

(BTW has anyone else noticed how hard it is to type with your fingers crossed?) :-)

-- Anonymous, August 15, 2001

Our debt is repayable over 17 years whereas I think Chelsea's are repayable over a much shorter time. As long as we stay in the Premiership and fill SJP to around 42000 per league game, we are OK. Roly could submit a PhD on our finances, he's that sad, but no doubt he does have something to say about this....

-- Anonymous, August 15, 2001

to me this converts to:

Do i buy a new shirt even though it's got the disgraceful ntl logo on it? by RIGHTS it should be the brown ale or blue star logo. For me, it's part of the kit. Help...

-- Anonymous, August 15, 2001

Min - buy the kit(s) and help the charity!

-- Anonymous, August 15, 2001

Min - maybe you could swap a new one for a multi-coloured, Broon Ale logo'd one? That way, things will be camouflaged when you.............no, let's not go there.

-- Anonymous, August 15, 2001

We should buy the shirts after demanding that the club crest is bigger than the adidas logo

-- Anonymous, August 16, 2001

My visa bill is someway near to NUFC's debt so I would love to hear someone who understands business finance to throw some light on this!!!

Dickens' Micawber has the answer here.

Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and sixpence: result, happiness. Annual income twenty pounds, annual expenditure twenty pounds and sixpence: result, misery

It's difficult to gainsay this iron law of economics even though Dickens was unaware of Visa at the time of writing. :-)

-- Anonymous, August 16, 2001

ahhhaaaaaaa

my work has paid off

at least you lot now recognise your liabilities and the risks associated with it....

and maybe..... why you were desperate to be in the Intertoto..... because you need to keep the secutisation syndicate happy with gate receipts.....

quite right it is the NTL loan that is convertible.... but the worry must be as NTL are rapidly running out of cash what their attitude is to the loan if you default,,,, although the conversion price is in your favour at present not theirs'''''

BTW.... I do a lot of reserach on all football (and sporting) club finances....

For thoise of you who have a few quid to play with NUFC Plc shares provide an excellent return at present based upon its ever low share price.... a yield of something like 8.6% if you were to buy at present based upon the board's current dividend policy.... although that might chagne!!!!

hardly concise or analytical but thats enough from me today on this subject... as I'm working on the refinancing and "rescue" of one of the top employers in the North East ... which is unfortunate AND the news has not even hit the media yet.... which is unbelievable

got to go...

-- Anonymous, August 16, 2001

ahhhaaaaaaa

my work has paid off

at least you lot now recognise your liabilities and the risks associated with them....

and maybe..... why you were desperate to be in the Intertoto..... because you need to keep the secutisation syndicate happy with gate receipts.....

quite right it is the NTL loan that is convertible.... but the worry must be as NTL are rapidly running out of cash what their attitude is to the loan if you default,,,, although the conversion price is in your favour at present not theirs'''''

BTW.... I do a lot of reserach on all football (and sporting) club finances....

For thoise of you who have a few quid to play with NUFC Plc shares provide an excellent return at present based upon its ever low share price.... a yield of something like 8.6% if you were to buy at present based upon the board's current dividend policy.... although that might chagne!!!!

hardly concise or analytical but thats enough from me today on this subject... as I'm working on the refinancing and "rescue" of one of the top employers in the North East ... which is unfortunate AND the news has not even hit the media yet.... which is unbelievable

got to go...

-- Anonymous, August 16, 2001

So Nissan are going down the tubes again are they?

-- Anonymous, August 16, 2001

As Nissan were rescued by Renault a couple of years ago I can assure you that there are no financing difficulties at Nissan. I would not know as to the business arguments for Nissan in the NE.

-- Anonymous, August 16, 2001

Yesterday's Chronic reports that Nissan are cutting back production and adjusting shifts to cope with reduced demand. A bad blow for the North East if it continues.

-- Anonymous, August 16, 2001

Roly, I read that line about out shares in the Mail on Sunday, too.

-- Anonymous, August 16, 2001

Financial Mail on Sunday...yup I saw it too....

-- Anonymous, August 16, 2001

I'm a good tipster eh?

-- Anonymous, August 16, 2001

I wouldn't recommend the shares of any football club as an investment. As a lifetime season ticket to the AGM however, they are well worth it. Presumably you could buy just one? 30p plus £20 handling fee. I'm sure the broker would be well p1ssed off. :-)

-- Anonymous, August 16, 2001

As Chelsea agreed to pay West Ham £11 million for Frank Lampard last Thursday, they inched closer to Real Madrid as the most indebted club in Europe. Another massive transfer fee underlined Chelsea's continued ambition to be the very best. It was the same commitment to excellence that prompted chairman Ken Bates to describe his club as the 'Manchester United of the south' and compare them to the biggest and best in Europe four years ago, after Ruud Gullit had delivered the FA Cup to Stamford Bridge.

'Why would Ruud want to go to AC Milan when we will be as big as them,' pondered Bates. Chelsea very nearly are as big - at least in the debt stakes. Madrid, backed by the wealth of King Juan Carlos and buoyed by their successes in the Champions League, had medium- and long-term debts that were in the region of twice Chelsea's. But that figure will be wiped out following the sale for £120m of their city- centre training complex to the consortium leading Madrid's 2012 Olympic bid. Milan's debts are more difficult to assess, but are thought to be considerably less than Chelsea's. When Bates elevated Chelsea to Milan's level back in 1997, the new Chelsea Village hotel overlooking the stadium was ready to open and the luxury penthouses about to go on sale.

Now, Chelsea's parent company is running liabilities totalling more than £120m, they have a £75m Eurobond to repay to the City in six years and, according to Bates, the interest payments on that bond - amounting to £19,000 a day - are not presently being covered by the club. Even before the end of the past Premiership season, stockbrokers acting on the club's behalf - Seymour Pierce - had concluded that indifferent form, spiralling wages and the huge bill for redeveloping Stamford Bridge would treble losses this year to £9m. They held some grounds for optimism, however, by suggesting that Chelsea would rebound into the black next year. But Observer Sport can reveal that this is unlikely because of the team's failure to make next season's Champions League and the slow take-up of executive boxes at Stamford Bridge.

Instead of making a £10m profit next year, brokers are saying that Chelsea may - again - not make a profit at all. Seymour Pierce's Catherine Bond said: 'My original calculations were based not only on the team playing Champions League football but the club selling out its hospitality facilities. I am not convinced that will happen at the original selling prices and, therefore, I am having to make quite a radical revision to my forecast. I still require the full figures from the club but without them I can say that the difference may be in the region of £10m.' Chelsea Football Club is wholly owned by Chelsea Village plc, which includes the leisure and hotel complex adorning the redeveloped Stamford Bridge - the complex having cost about £150m. The village umbrella company covers the club, hotels, travel agency and other leisure facilities on the site.

Bates continues to remain bullish and insists the costs of redevelopment are wise. 'Facilities at Chelsea Village could have been built for less than this £150m, but the quality finishes and high standards we have set would have been compromised. This decision by the board is a far-sighted option.' But for Chelsea to 'factor in' qualifying for the Champions League in their financial projections - which they rarely looked like achieving in the run-in to last season - is remarkable. Not even Manchester United, winners of the Premiership in seven of the past nine seasons, do that. Experts claim that the difference between finishing in the Premiership's top three and gaining a Champions League spot and playing in the Uefa Cup can be as much as £12m. However, they argue that it's not only the failure to win games but Bates's decision to create a leisure complex, Chelsea Village, which is at the heart of the club's continuing difficulties.

To get the Bridge redevelopment underway, Bates secured the £75m Eurobond from City financiers USB Warburgs. The loan is due to be repaid in full in 2007, but Chelsea's slide in fortunes is hampering their chances of doing so. In only three years, the club have seen a £2m profit turn into a projected £9m loss and Bates recently conceded that - for the time being at least - Chelsea were unable to cover interest payments totalling £19,000 a day. Writing in the club's interim report, published in March, Bates said: 'Our central overheads, including interest, will not be covered until all operations are fully established during the next financial year.' Analysts say that failing to cover the payments is serious for any business.

Should such a position prove to be more than just a one-off it becomes what one specialist described as 'an unsustainable practice', something that could cause grave concern among City institutions and possibly lead to lenders deciding to call in loans. There is no suggestion, however, that Warburgs have contemplated taking such a course of action.

For Chelsea, the cost of building a team equipped to qualify and compete in the Champions League is rising all the time. Chelsea's total wage bill last year rose from £28m to £44m even though a dozen people left the company during that time. Bates had hoped that the off-pitch assets would turn in a profit, thus subsidising the team. So far that hasn't happened. Last year, the hotel, travel agency and other operations which make up the Village together lost £3.5m and, given the brokers' admission of the serious state of the club's finances, it is unlikely to change over the next couple of years. In a further appeal to Chelsea's more affluent fans to increase turnover, the club had unveiled new executive boxes - named the Millennium Suites - some of which cost up to £1m per season. But, says Catherine Bond, slow sales will have a big impact. 'Effectively, the money generated by the Millennium Suites goes straight to the bottom line of the balance sheet,' she said. 'Chelsea need that income to be able to do things like paying the interest on the Eurobond loan.'

Simon Banks, football consultant for the SportBusiness Group, says the change in forecast for Chelsea's immediate financial future adds to doubt about the viability of Bates's vision. He said: 'There have been questions raised about the wisdom of the Chelsea Village business model in terms of borrowing large amounts of money to build extra assets which would, in turn, increase profits. This scepticism appears to have been shared by the potential backers of Wembley Stadium who were presented with a similar model by Wembley National Stadium Limited, then chaired by Bates, and rejected it. The whole idea of adding hotels and leisure facilities to a club in order to increase profits is unproven. Until Chelsea Village turns in a sufficient profit, it will remain so.'

Chelsea Village plc's chief executive, Michael Russell, said there 'had not been any problems' with their lenders but admitted failing to cover interest payments on their Eurobond was a concern. 'I accept that it's a serious position but we were aware of it,' he said. 'We knew that this year interest was going to be a problem but we are in the process of developing a business and in the early years of doing so, when you're in that development phase, you accept that you may make a small profit or loss until the business is established, when it should begin to make a profit. As such it's about how you manage your cash. We have sufficient cash resources.'

And, against that background, what about the wisdom of buying Lampard for £11m? One football finance expert, Alex Fynn, who helped to design the blueprint for the Premier League, said: 'This is the sort of situation that could only happen in football. Banks are prepared to extend credit almost indefinitely so that clubs can afford to go out and buy players because they see income rising by about 25 per cent each year. But the money spent on wages and transfers gets clubs into more trouble. The proportion of Chelsea's total income made up by its wage bill is far too high. Many Premiership clubs spend 60 per cent of their incomes on wages and that figure is basically unsupportable. Chelsea's is more like 80 per cent.' But Russell claimed the deal was no problem for Chelsea. 'We had the necessary cash resources. We will have paid the Lampard fee within 12 months. We have to under the FA and Premier League rules. From a profitable situation over, say, a five-year deal the transfer is amortised at £2.2 million a year so the impact on our profits is spread.' When asked if Chelsea would have to issue a profits warning, Russell said: 'I'm not going to comment on what our anticipated position will be this year or next year against the brokers' statements.'

-- Anonymous, August 16, 2001