September 04, 2010, 06:17:25 PM

Author Topic: English football is walking financial tightrope, says Nick Leeson  (Read 1573 times)

Offline the dude abides

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English football is walking financial tightrope, says infamous trader Nick Leeson

The Premier League’s ‘Fit and Proper Persons’ test for prospective club owners has always appeared to be as taxing as those set by daytime television programmes which offer a multiple choice answer to questions such as ‘what colour is the green grass on your lawn?’

Thaksin Shinawatra, the deposed prime minister of Thailand whose human rights record was questioned by Amnesty International, was somehow allowed to take ownership of Manchester City in 2007, a subterranean low-point for those charged with maintaining the Premier League’s global reputation.

The disturbing financial situations of Manchester United, Liverpool and, most perilously, Portsmouth have led to questions over the morals, if not the integrity, of the owners of each of those clubs.

But with recent figures suggesting that the combined debt of the Premier League’s 20 clubs now exceeds £3.1bn, few of the chief executives and owners in charge of English football’s elite operations could sit through a screening of the movie 'Rogue Trader' without seeing themselves in Ewan McGregor’s portrayal of the subject of the film, Nick Leeson.



Yet Leeson, who earned notoriety - and a six-and-a-half year prison sentence - as a result of his gambling on the futures’ market which caused the 233-year-old investment bank, Barings, to collapse with $1.3bn of liabilities in 1995, is witnessing the football’s financial meltdown from within as chief executive of League of Ireland Premier Division club, Galway United.

Leeson’s ‘previous’ would ensure his inability to pass the Premier League’s ‘Fit and Proper Person’ test, but as the personification of a financial poacher-turned-gamekeeper, he fears that English football is walking headlong into a Barings-style collapse, with even Manchester City, the club he has supported since childhood, providing cause for concern.

Leeson said: “I do fear for some of the clubs in the Premier League and I would be would be surprised if Portsmouth get out of the situation they are in at the moment.

“Manchester United, under the Glazers, are obviously in a really difficult position with their debt, but United’s identity will always be their saving grace.

“Somebody will always come to the rescue of clubs like United or Liverpool, but those down at the other end don’t have that global identity to save them.

“Clubs cannot continue to operate with such debts. The only way to stem the losses is to cut the wage bills, but that is very difficult when you have players on four and five-year contracts.

“Even City must be careful, despite the backing they receive from Sheikh Mansour. His money has placed City into a different realm to everybody else and, although he has recently written off his loans and made them debt-free, how could the club service its wage bill if the sheikh pulled out?

“I remember the days of former chairman Peter Swales when City overspent on fees and wages. It took the club 10 years to recover.”

While Abu Dhabi’s petrodollars continue to fund their ambitions, City appear immune from the cashflow problems affecting many of their rivals.

Across Manchester, United are straining under the heavy burden of their £716.5m debt, and Leeson admits that the club’s recent bond issue to raise £500m should set alarm bells ringing.

He said: “We dealt with bonds at Barings in Singapore and they are all well-and-good for raising funds, but they are really only a measure that forestalls the inevitable.

“Virtually everything that United generate goes towards servicing the interest on the debt and the situation they are now in is no surprise based on the Glazers’ business plan.

“There was something fishy about it right from the start and all they have done is raised even more debt. They aren’t dyed in the wool United supporters, so what is their motivation?

“If the fans stop buying season tickets and the income streams begin to slow, then the Glazers will have to go back to basics and look at their wage structure, but that will not be easy.”

Leeson, whose marriage to the County Meath-born Leona, his second wife, prompted his move to Ireland, has been running Galway’s affairs from his basic office at Terryland Park since 2006.

With Ireland’s once-vibrant ‘Celtic Tiger’ economy on its knees, he admits that Irish football is suffering as a result - a possible early warning for those clubs on this side of the Irish Sea.

He said: “Some clubs in this division are paying wages of £3,000-a-week which is ridiculous. Our top earner last year earned £700-a-week and I will have to reduce that this year out of necessity.

“Galway is an affluent city, but the property boom has bust and there is no money around.

“Would I want to work in English football? My name works for me and against me, but I am enjoying my lifestyle in Ireland and, although it is an uphill struggle, it is one we can overcome.”
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Offline the dude abides

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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #1 on: February 05, 2010, 06:50:35 AM »
A few interesting points raised.

“I remember the days of former chairman Peter Swales when City overspent on fees and wages. It took the club 10 years to recover.”

Across Manchester, United are straining under the heavy burden of their £716.5m debt, and Leeson admits that the club’s recent bond issue to raise £500m should set alarm bells ringing.

He said: “We dealt with bonds at Barings in Singapore and they are all well-and-good for raising funds, but they are really only a measure that forestalls the inevitable. Virtually everything that United generate goes towards servicing the interest on the debt and the situation they are now in is no surprise based on the Glazers’ business plan. There was something fishy about it right from the start and all they have done is raised even more debt. They aren’t dyed in the wool United supporters, so what is their motivation?"

With Ireland’s once-vibrant ‘Celtic Tiger’ economy on its knees, he admits that Irish football is suffering as a result - a possible early warning for those clubs on this side of the Irish Sea.  He said: “Some clubs in this division are paying wages of £3,000-a-week which is ridiculous.
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Offline Tes

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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #2 on: February 26, 2010, 09:52:30 PM »
Portsmouth are flailing about wildly but are just about staying on. With debts of circa £70M it be interesting if they can be saved so they can continue in the Championship next season.
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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #3 on: February 28, 2010, 04:26:19 PM »
hope they can be saved.....the are an omportant team down in that area (along with Southampton).

Reding in today's paper of these new UEFA rules re clubs not being allowed to play in Europe while operating at a loss........comes into force in 2012-13.

I wish it were in force from next season.  It will certainly bring some sanity back into the game.....make it a lot fairer.....and discourage carpetbaggers and leverage-buyers from owning clubs.

http://www.dailymail.co.uk/sport/football/article-1254277/Liverpool-Chelsea-kicked-Champions-League.html
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Offline Tes

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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #4 on: March 02, 2010, 08:43:17 PM »
I just hope the rules are really tight so that only revenue a club brings in can be used in the calculations and not the way Mansour and Abramovich have done it.

City's account will be interesting as whilst wiping off transfer fees could be easier it would be more difficult to hide the wages.

The rules need to further and limit wages and transfers to a percentage of real turnover. Also there must be an allowance for clubs to have debt if it's related to new stadia or stadium improvements/expansion as not all countries are uniform in how a stadium is provided. In Italy and other countries local authorities build stadia and the clubs lease them whereas in other countries, like the British ones, clubs are expected to provided their own. No club can afford such a purchase without taking on debt.

It's about time the Premier League got it's house in order. Banning purchase debt being levelled on clubs and/or holding companies especially as holding companies and clubs are regarded as one and the same where things like administration is concerned. Maybe we could then avoid the farce which Pompey fans have endured of having four different owners in a year.
http://www.notapennymore.net/     Hicks and Gillette, forever in THEIR debt!!

Offline Tes

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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #5 on: May 21, 2010, 09:09:33 PM »
Ian Watmore quit the FA in frustration over need for reform

David Conn   Wednesday 19 May 2010 22.44 BST


The former chief executive of the Football Association, Ian Watmore, resigned in March due partly to what he felt was a negative response from the Premier League to his suggestions for financial reform of the game. Watmore had warned in a discussion paper seen by the Guardian that professional clubs faced 20 serious "financial challenges", with "a significant number said to be on the brink of severe financial troubles" as a result of "dangerously high" spending on wages.

Around the turn of the year, he presented his paper at a regular Friday meeting between the chief executives of the FA and Premier and Football Leagues, arguing that they should consider reforms to deal with the problems. Insiders say Watmore felt his document had met a negative reaction from the Premier League's chief executive, Richard Scudamore, and that the atmosphere was as if Watmore "had left a bucket of sick in the room".

The Premier League emphatically rejects that account, saying that while the league does want control over its own affairs, Watmore's paper was received in a "collaborative" spirit. The league issued a reply, setting out the action it is already taking to address some of the concerns, and Watmore is understood to have said he agreed with it, but felt they should look to see how the issues could be resolved.

In March, with the process not advanced any further, Watmore resigned. He is known to have been frustrated by feeling that the FA is constrained by the Premier and Football Leagues from acting firmly as the game's governing body, and was also angered by the refusal of Wembley executives to consider having fewer events on the pitch.

In the paper, which the Guardian has seen, Watmore wrote that some club owners are under financial pressure themselves due to the recession, and the cost of debt "is putting pressure on cash flows". The "limited number of super-benefactors" were having the effect of inflating wages and transfer fees, he argued.

Watmore suggested that the authorities should "collaboratively explore" 10 different measures to wrestle the game into better financial governance. The Premier League argues that it is already improving the governance of clubs' finances with a series of measures, including the requirement that clubs present their budgets for a season in advance, and tightening up the rules on who is "fit and proper" to own and be a director of a club.


http://www.guardian.co.uk/football/2010/may/19/ian-watmore-fa-resignation-reasons

After presiding over the destruction and financial meltdown of the top tier of English football, no doubt Richard Scudamore will walk off into the sunset with an equally lucrative contract for another position tucked in his back pocket.
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Offline Tes

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Re: English football is walking financial tightrope, says Nick Leeson
« Reply #6 on: May 21, 2010, 09:18:33 PM »
Clubs morally obliged to live within their means, says League chairman

Owen Gibson Friday 21 May 2010 20.11 BST


The sun will shine on Wembley this weekend for what has become one of the most eagerly awaited and best remunerated matches in the football calendar. Amid the silly hats, tears and triumph there will be the usual hype about how tomorrow's play-off final is the most valuable match in world football.

Greg Clarke, the new Football League chairman, says: "It just works. The fans love it, it's great television, it helps us make some money for the clubs. The players love it, the managers love it, the boards love it."

According to Deloitte, victory is worth £90m due to the increased Premier League parachute payments the Football League eventually agreed to this month despite a backlash from League One and League Two clubs. "Usually, you get a bit of an induction, a bit of a honeymoon period, you haven't got pitbulls hanging off each arm within two weeks," Clarke says ruefully.

Football League attendances have hit a 50-year high, at more than 17.1m, despite gloomy predictions this time last year. But in his first interview, Clarke warns of trouble ahead. "We will see major corporations crash and burn, we will see major economies crash and burn. Fundamental economic problems have social consequences, they have consequences for businesses, they have consequences for football," he says.

"I don't want our clubs to adopt a Cassandra mentality. The attendances are brilliant, the number of young people coming into our grounds is great. But the reality is that we live in perilous economic times."

Clarke's predecessor, Lord Mawhinney, helped resuscitate a Football League brought to the brink by the ITV Digital fiasco. Yet many clubs continue to spend recklessly on wages as they gamble on reaching the next tier. Clarke, who illustrates his points with examples from a high-flying and globe-trotting business career in telecoms and construction that may or may not resonate in lower-league boardrooms, says his style will be different from the Tory peer's: "I am not going to be a poor man's Brian Mawhinney. I have a different skill set."

A week into the job, Clarke was forced to try to heal a bitter divide over whether to accept a "take it or leave it" offer from the Premier League that proposed a vastly improved £400m deal on parachute and solidarity payments, but came with strings attached. The proposal faced serious opposition from League One and League Two clubs, who feared it would open a financial chasm between the Championship and the rest. Clarke carried the day but a substantial minority voted against, many angry at what they saw as the "bullying" attitude of the Premier League.

"What I saw was a tough commercial negotiation. If the Premier League hadn't chosen the best possible time to get their deal done quickly, they wouldn't be the highly effective commercial outfit they are," reasons Clarke, who met with all League One and Two chairmen to hear their concerns and stresses his "humility". "It's not my way or the high way," he says.

He promises to continue work done by his predecessor. "Do people deserve to know who owns their football club? Yes. Do we want fit-and-proper people running our football clubs? Yes. Do we want to make sure that clubs can't take huge risks and not pay the taxman? Of course, it's outrageous." But he warns there is "no silver bullet" and that the league will continue to balance costs and benefits.

"It is impossible, even if I wanted to, to tell the clubs what to do. We have got good cost management in League Two and we'll be debating how to drive that into League One and the Championship. But the higher you go up the harder it gets."

Clarke has yet to decide whether the football creditor rule – which demands debts to other clubs and players are paid first and in full – is good for the game. "We use the football creditor rule to make sure if one clubs fails it can't easily drag down the rest. There are benefits but there are also moral hazards. If you are selling assets to football clubs because you are protected from risk, are you doing dumb things? It's not clear to me where the balance of that argument is."

He has sympathy with recent public outrage. "How on earth can you screw the local pie supplier and St John Ambulance and your charity partner, and pay other football clubs? That's morally indefensible."

Clarke, who ran Cable & Wireless and Australian property giant Lend Lease, has first-hand experience. A lifelong Leicester City fan, he was chairman when the club went into administration in 2002 and led a consortium which included Gary Lineker that brought it out again. "We nearly lost the club. I mean altogether. My mum lives there, my two sisters are there, I've got loads of mates there. It wasn't just the fact I couldn't have walked up the high street again," he says.

"Living on a council estate is a pretty crap existence. I was lucky enough to go to a decent grammar school and get out of it. But there are lots of people who have hard jobs, can't afford proper holidays, can't get off the estate. Their one ray of sunshine is that their club might get a result on a Saturday. To take that away from them and carry that burden, you can't imagine it."

He draws an analogy with coalmines. "They are businesses. But have you seen what happens to a mining community when they lose their pit? This is more than a business, this is a way of life and a defining pillar of the community."

Which brings us back to the orange and blue hordes heading up Olympic Way today, dreaming of the Premier League but knowing deep down that whoever wins is likely to be back in the Championship this time next year with memories and £48m parachute payment windfall over four years to show for it.

"They have got different risk profiles. Blackpool have run their club sensibly and prudently. They have got one of the lowest wage bills in the Championship and they don't waste money," says Clarke. "Down the road at Cardiff, they have great players and a great manager as well but they have a different risk profile and different prospects. It just shows there isn't one route to the Premier League."


http://www.guardian.co.uk/football/2010/may/21/football-league-chairman-warning-finances

At least he appears to 'get it' where fans are concerned. Let's see if he acts on it.
http://www.notapennymore.net/     Hicks and Gillette, forever in THEIR debt!!