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Debt not so problematic for top English clubs

Cautioning that there are many problems in measuring debt, the authoritative Swiss Ramble looks at the top clubs in the Deloitte Money League (other than Zenit St. Petersburg).

While it is important to be able to ultimately pay off debt, the ability to service the debt via interest expenses is absolutely crucial. The highest interest payments (in cash terms) in 2020/21 were FC Barcelona £29m, Atleti £23m, Manchester United £21m, Spurs £18m and Inter £15m.

Three English clubs have the largest gross debt: Chelsea £1.5 bln (Abramovich funding, soon to disappear), Spurs  £854m (new stadium) and Man United £530m (Glazers’ leveraged buy-out). Then come the Spanish giants: Real Madrid £515m and FC Barcelona £472m. Bayern Munich have zero financial debt.

As you work your way down the leagues, it is often the case that the majority of a club’s debt is provided by the owner. A good example is the EFL Championship, where over 80% of the financial debt has come from generous owners.

Leading clubs that have benefited from debt largely being provided by their owner are mainly in England, the poster child being Chelsea (£1.5 bn). Other clubs with owners that have provided more than £200k loans: Everton £250m, Leicester City £218m and Arsenal £202m.

Spurs have highest external debt of £854m, though their new stadium will be a major revenue generator and it’s a long-term loan at a low interest rate. Next highest are Manchester United £530m, Real Madrid £515m and FC Barcelona £472m.

Unlike Tottenham Hotspur’s debt, which was used to invest in a state-of-the-art stadium, Man United debt is a very different story, being used to fund the Glazers’ purchase of the club. Incredibly, the debt is virtually unchanged since the LBO in 2006– despite paying nearly £750m interest.

One reason why FC Barcelona have more problems with debt than English clubs is that so much of it is short-term, i.e. needs to be repaid within the next 12 months. £269m of Barca’s £676m is short-term, while for Chelsea it is only £94m of £1.5 bn, and for Spurs £57m of £1.0 bn.

With an alternative UEFA definition, seven clubs have over half a billion of gross debt: Chelsea £1.7 bn, Spurs £1.0 bn, FC Barcelona £676m, Man United £667m, Juventus £589m, Real Madrid £586m and Inter £552m. The lowest amounts owed are at the two German clubs: Borussia Dortmund £147m and Bayern Munich £48m.

The reason that debt is not so immediately problematic for the leading English clubs is that so much of it is structured via long-term financing, e.g. Spurs owe just over a billion in financial/transfer debt, but £966m is long-term with bank loans only maturing in 22 years.

Both Spanish giants have seen significant debt growth, but there are different drivers, Real Madrid debt has risen £466m to £586m since 2018, mainly due to £375m stadium debt. FC Barcelona debt is up £575m to £676m in just 4 years, largely spent on players (transfers and wages).

 

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