After many years when Premier League debt levels were relatively flat, this has really taken off in the last few years, rising from £3.2 bln in 2017 to a high of £5.2 bln in 2020.
This then dropped to “only” £4.0 bln in 2021/22, but the
decrease was a bit misleading, as it was only due to Chelsea writing-off £1.5
bln of debt following Roman Abramovich’s forced sale of the club.
Over half of the debt is at just three clubs, namely Everton
£1.0 bln (new stadium and squad investment), Tottenham £851m (new stadium) and
Manchester United £547m (the lingering effects of the Glazers’ leveraged
buyout). In addition, four other clubs
owe more than £300m (Arsenal £342m, Liverpool £314m, Chelsea £303m and Brighton
£300m).
In the Premier League, 41% of the financial debt was from
the club’s owners, while 59% was external debt.
However, 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, e.g. in the EFL
Championship over 80% of the financial debt has come from generous owners. This is partly because mainstream banks are
reluctant to provide debt to clubs outside the Premier League.
In 2024 four clubs owed their owners more than £300m:
- Everton
£451m – a shareholder loan from Farhad Moshiri, which the club considered
to be equity, because there is no agreed repayment date, but other clubs
treat such “friendly” loans as debt. Since the arrival of the Friedkins,
this loan has been converted into equity.
- Arsenal
£324m – a loan from Stan Kroenke, initially to refinance the bonds related
to the construction of the Emirates Stadium, subsequently increased to
provide funds for investment in the squad. Unlike many owners loans, this
bears an interest charge, though the rate is not specified in the
accounts.
- Chelsea
£303m – all owed to the parent undertaking, though a lot less than the
£1.5 bln of debt built up during Abramovich’s tenure, when he regularly
provided cash injections, which was written-off as part of the club sale.
- Brighton
£300m – owed to Tony Bloom in the shape of an interest-free, unsecured
loan. Thanks to large profits on the back of substantial player sales, the
club has been able to make substantial repayments to the owner, reducing
his debt by £106m in the last two years. It is also worth noting that
£200m of Bloom’s remaining debt has been switched into convertible loan
notes, laying the foundation for conversion into equity at a future date.
Owner debt can be advantageous to football clubs, especially
if the loans are interest-free, as there is often no fixed repayment date, but
there are still risks associated with this form of financing. As Tracey Crouch, the MP that led the UK’s
review into football governance, warned, this type of debt relies on the
“willingness and continuing ability of owners to fund significant losses”.
The growth of external
loans
Nevertheless, the majority of the rise in Premier League
debt in the last few years has been driven by external loans, which have grown
by £1.6 bln in the last seven years from £1.2 bln to £2.8 bln, including a
£164m (6%) increase in 2023/24.
The largest external debt by far was at Tottenham £851m,
followed by Everton £594m and Manchester United £547m. These three clubs on
their own accounted for over 70% of the Premier League’s third party loans. However, four clubs have no external debt at
all (Brighton, Chelsea and Luton Town), while Fulham and West Ham owe less than
£1m.
The reason that debt is not immediately problematic for the
leading English clubs is that so much of it is structured via long-term
financing, though it’s worth noting that long-term here is classified as
anything more than 12 months. The four
clubs that have the highest financial debt hold almost all of this in long-term
debt, i.e. Tottenham £851m, Everton £815m, Manchester United £511m and Arsenal
£342m, so that is something to be taken into consideration.
Servicing debt
While it is important for a club to have the capacity to
ultimately pay off its debt, the ability to service the debt via interest
payments is absolutely crucial. A logical
consequence of the rising debt in the Premier League is a steep increase in
interest payments, i.e. the actual cash outlay. So payments in each of the last
four years were north of £100m, due to more bank debt and rising interest
rates, but this would have been even higher without the owners providing many
interest-free loans. Even with this
assistance, the £625m interest paid in the last five years was much more than
the £366m in the preceding 5-year period.
In 2023/24 three clubs were responsible for more than half
of the interest paid, namely Everton £44m, Manchester United £36m and Tottenham
£29m. Tottenham’s £29m interest payment
would have been even higher if they had not managed to refinance their stadium
debt at the right time, i.e. before the rise in interest rates. The club
advised that over 90% of its financial borrowings are at fixed rates, with an
average interest rate of just 2.79%.
United have paid out a staggering £834m in interest since
the Glazers’ leveraged buy-out in 2005, money that could have been used in
other more productive ways, such as refurbishing Old Trafford or investing in
the squad.
Premier League debt levels would have been even higher
without owners writing-off £1.8 bln owed to them in the last ten years, while
also converting £1.6 bln of their loans to equity. Adding that £3.4m back to
the £4.7 bln in the accounts would take Premier League debt up to a hefty £8.1
bln.
The conversion of debt to equity has clearly shown that many
of the loans at football clubs are of the “soft” variety. This process
strengthens the balance sheet, as it reduces liabilities, while increasing
equity, which helps improve some of the financial ratios used to satisfy PSR
financial regulations.
The business model at Fulham has basically been owner Shahid
Khan funding losses via loans, which are subsequently converted into equity,
adding up to £620m in the last decade. Other significant equity conversions in
this period include Everton £200m, Nottingham Forest £187m, Bournemouth £124m
and Newcastle United £89m. Following
the acquisition by the Friedkins, Everton’s debt has been completely
refinanced, including the conversion of the £451m loaned by the previous owner
into equity after the 2023/24 accounts closed.
In addition, owners have directly provided £2.5 bln of
capital injections in the last ten years, obviating the need for loans. Aston Villa received the most capital, as
owners Nassef Sawiris and Wes Edens have invested £688m in order to strengthen
the squad, first securing promotion from the Championship, then survival in the
Premier League and ultimately qualification for the Champions League. Other substantial capital injections in this
period included Chelsea £526m, Everton £329m and Newcastle United £303m.
As the ownership profile has changed in England’s top flight
to welcome more overseas owners, there has been a clear increase in the amount
of equity provided by owners.
Tottenham Hotspur
Tottenham’s gross financial debt has grown to £851m, mainly
representing the loans used to finance the new stadium. This is entirely made
up of external debt, but over 90% is at fixed rates on a very attractive
average interest rate of 3.16%. The average maturity of the borrowings is 18.6
years, some of which stretch until 2051.
Despite the numerous complaints from their fans, Spurs have
in fact greatly increased their spend on player purchases (£830m in the five
seasons up to 2023/24), but much of this has been on credit. As a result,
transfer debt has increased by around £250m from £88m in 2019 to an incredible
£337m.
Everton
As per the club’s definition, debt should exclude the £451m
shareholder loan from Farhad Moshiri, which Everton consider to be equity,
though all other clubs treat such “friendly” loans as debt.
However, external debt has also greatly increased, rising to
£594m in 2024, including loans from Rights & Media Funding, MSP Sports
Capital and 777 Partners. Everton’s
transfer debt was a relatively small £74m (assumed to be 90% of trade
creditors), lower than the £97m peak in 2018/19. This is due to the limited
transfer spend in recent years as a result of PSR restrictions.
The club would have owed even more without Moshiri
converting £200m debt into equity in the last few years. The good news is that the situation is now
very different after the arrival of the Friedkins, as the £451m shareholder
loan has been converted into equity, while the previous external borrowings
have been repaid, replaced by a 5-year revolving credit facility that the new
owners have taken out with JP Morgan Chase.
In addition, they have put together a £350m senior debt
package from a consortium of lenders to complete the stadium financing with a
30 year maturity at 7.38%. The
replacement debt has been secured on more favourable interest rates, thanks to
the Friedkins’ credibility with the capital markets, which was much needed, as
Everton’s interest payments had significantly increased in the last few years,
rising from less than £2m in 2018/19 to £44m in 2023/24.
Manchester United
Even after all of the various refinancings and the hefty
interest payments, Manchester United’s debt is still not much lower than the
£604m placed on the club as part of the Glazers’ leveraged buyout in 2006. In
fact, it had increased to £731m in the half-year results in 2024/25, which was
the club’s second highest ever, only surpassed by £773m back in 2010, mainly
due to an increase in the revolving credit facility.
United’s transfer debt shot up to £331m in 2024, its highest
ever, which means that the amount owed to other clubs almost doubled in just
two years.
United’s debt is subject to the vagaries of the USD/GBP
exchange rate. The amount owed on the underlying USD denominated senior secured
notes has been unchanged for a while at $650m, but the balance reported in GBP
has changed with each set of accounts.
Chelsea
Chelsea’s gross financial debt in Chelsea FC Holdings
Limited more than doubled in 2024 from £146m to £303m, all owed to the parent
undertaking, though it had been much higher before Abramovich wrote-off £1.5
bln of debt after the sales of the club.
However, the ultimate holding company, 22 Holdco Limited,
has £1.2 bln of external debt, up from the previous year’s £410m, split between
a £755m revolving credit facility repayable by July 2027 and a £410m loan from
Ares repayable by August 2033.
These are high interest loans, so the £755m is at 7.75%
(SONIA + 3.25%), while the £410m is at 12% (SONIA + 7.5%). The latter arrangement is similar to the
infamous Payment In Kind (PIK) loan notes used by the Glazers when they
acquired Manchester United, whereby interest payments are usually deferred
until the loan matures, i.e. greatly increasing the amount ultimately
repayable.
Chelsea don’t separately report transfer debt, but assuming
that this represents 90% of Trade Creditors, it was up to £498m in 2024, which
meant that this has almost quadrupled in just two years as a result of the
club’s unprecedented transfer spend.
This is obviously a modelled number, but it is supported by the
club attributing the significant increase in creditors to “the amounts owed in
relation to player trading”.
Barcelona
Barcelona have had a major issue for a while with financial
debt, which is now up to £1.6 bln, the highest in the world. This comprised
£1.2 bln bonds, £280m bank loans and £38m other financial liabilities. This is largely driven by the debt taken out
for the Espai Barca project, including the Camp Nou redevelopment, organised by
Goldman Sachs and JP Morgan via a series of loans from 20 different investors.
The good news is that Barcelona have replaced much of their
expensive short-term debt with longer-term debt, including a grace period, so
the vast majority is scheduled for repayment in 2032/33 and beyond. That said, the club will need to repay £24m
in both 2025/26 and 2026/27, before finding another £129m in 2027/28, as per
the revised schedule. The new debt is at interest rates between 5.94% and
7.22%.
Debt will continue to grow in line with the €1.5 bln stadium
development, as will the interest payments, though the club believes that this
will be funded by the projected additional revenue from naming rights, sponsorships,
VIP boxes, tickets, catering, events and the museum.
Barcelona’s transfer debt has fallen to £127m, significantly
down from the £283m peak in 2020. In fact, this was the club’s lowest since
2018, highlighting the impact of La Liga’s economic cost controls.
Real Madid
Real Madrid’s gross financial debt has also significantly
increased to £1.2 bln, though this is almost entirely due to £1.1 bln stadium
debt for the redevelopment of the Santiago Bernabéu. The club said that this
would contribute a “very significant increase in income”, both from match day
and the commercial exploitation of the stadium. Bank borrowings were relatively
small at £66m.
Real Madrid’s transfer debt increased from £110m to £124m in
2023/24, though this was still a long way short of the £172m peak four years
earlier. The €1.3 bln (£1.2 bln)
stadium loan is made up of three elements: €575m taken out in 2019, €225m in
2021 and €370m in 2023. The club has done well to secure the funding at fairly
attractive interest rates, which average out to 3.2%.
After a €15m repayment in 2023/24, the outstanding balance
was €1,155m. Adding €72m invoices payable and a €62m stadium adjustment gives
€1,289m gross debt. Each of the three
tranches had a grace period before repayment started, though the club said that
annual payments would ultimately add up to €66m. The final repayment date is
November 2053.
What is clear is that debt (in all its forms) has
significantly increased in the Premier League, so it’s become a very important
consideration for almost all football clubs.
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