Skip to main content

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).

 

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...
1 comment
Read more

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to ...
Post a Comment
Read more

Millwall punch above their weight

Millwall’s season was overshadowed by the tragic death of owner John Berylson following a car accident. The American had been an exemplary owner, beloved by the fans for his leadership, passion and generosity. Millwall’s finances had been pretty good during his tenure, which we shall explore by looking at the most recent accounts from the 2022/23 season, when the club narrowly missed out on a place in the play-offs after finishing 8th. Millwall’s pre-tax loss slightly reduced from £12.6m to £12.2m, as revenue rose £0.8m (4%) from £18.6m to a club record £19.4m and player sales improved from a £0.1m loss to £2.5m profit. However, other operating income dropped from by £1.1m from £1.3m to £0.2m, while operating expenses increased £1.7m (5%) from £31.6m to £33.3m. The main driver of the revenue increase was broadcasting, which rose £1.1m (12%) from £9.1m to £10.2m, though match day was also up £0.4m (7%) from £5.8m to £6.2m. In contrast, commercial fell £0.7m (19%) from £3.7m to £3....
Post a Comment
Read more