Cosmo
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http://www.bbc.co.uk/blogs/thereporters/robertpeston/
I've obtained a copy of the financial analysis of Arsenal that was made by the investment bank Lazard Brothers in support of Alisher Usmanov's proposal that the club should raise up to £150m in a rights issue.
It's a chunky 35-page document. But its conclusion can be summed up very simply: Arsenal has too much debt to pose a serious challenge to Europe's biggest clubs; or to use the jargon, it is over-leveraged, too thinly capitalised.
This is a verdict that has been rejected by Arsenal's board, which has been advised by NM Rothschild.
The North London club's directors argue that paying down debt would have only a marginal impact on the availability of financial resources.
Of course, as an Arsenal-supporting BBC journalist, I couldn't possible take sides in this dispute between the Uzbekistani plutocrat and Arsenal's directors.
But some of you will be interested in Usmanov's point of view.
Here are a few bullet points from the Lazard document:
1) It believes that Arsenal's earnings before interest, tax, depreciation and amortisation (EBITDA) will fall from between £55m-60m in 2009 to £35-40m in 2010. The most striking contributor to this squeeze that it cites is a 12-14% increase in costs to £179m "as a result of players being compensated for tax changes and a number of step-ups in wages for individual players".
2) It predicts that cash flow will fall by more than that because of some pre-payments on assorted deals that were taken in 2007.
3) It says that Arsenal's fans are already paying 40% more than the average for the big four English clubs for match tickets and 24% more for season tickets - implying there's little scope to increase gate revenues, especially in a recession.
4) It calculates Arsenal's gross average annual spend on new players as £18m, compared with £37m for the big four; and the net annual spend, including sales, as precisely zero, compared with a £20.2m big four average
5) Perhaps most germanely of all, it fears that redevelopment of Arsenal's former Highbury stadium into luxury apartments may not turn out to be profitable - and that refinancing £140m of property-related debt over the next couple of years will be neither cheap or easy.
So Usmanov - the second-biggest shareholder in Arsenal with a 25 per cent stake - suggests that investors stump up a maximum of £150m via a rights issue of new shares.
This would provide additional funds for Arsene Wenger to augment the playing squad, and/or pay off some of the property debt, and/or pay down a substantial portion of the £242m of separate debt incurred to fund the development of the new Emirates stadium.
As I say, Arsenal's board has said no to all this, following detailed scrutiny by bankers from Rothschild - which included those bankers sounding out the most important individual at the club, Arsene Wenger.
The advice to the board from Rothschild was;
a) paying down the Emirates-related debt would save a maximum of £5m a year;
b) there are better ways to rehabilitate the Highbury redevelopment, including a putative cunning plan under negotiation right now - and even if the worst came to the worst, there should be no direct financial contagion to the club, since the providers of the property loans have no recourse to the footballing assets;
c) perhaps most controversially, the chaps from Rothschild don't believe Arsene Wenger is seriously constrained by lack of finance in his ability to develop the playing squad - and, more importantly, they don't believe that he feels fettered (if you see what I mean).
All of which would be described by some as a courageous blocking tackle: turning down equity finance during a sharp recession, and while the worst conditions in living memory for property developers prevail, well that's quite ballsy.
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Ben J
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Registered: 31st Jan 05
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So in simple terms......were are as fucked as everyon else even tho we are a "self sufficient" club.
So we may as well look for a sugar daddy?
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Cosmo
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No, really you're more fucked than everyone else as you're not winning things (or even close to).
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Marc
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Registered: 11th Aug 02
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quote:
Originally posted by Ben J
So in simple terms......were are as fucked as everyon else even tho we are a "self sufficient" club.
I wouldn't say you were self sufficient!
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Danny P
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Registered: 20th Nov 02
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I'm giving it a couple of years before a major team in England goes bust.
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Cosmo
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No major team will go bust, as too many investors will jump in to save them.
Saying that it depends what you class as major.
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Nath
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Registered: 3rd Apr 02
Location: MK
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quote:
Originally posted by Cosmo
No major team will go bust, as too many investors will jump in to save them.
I agree with that.
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liamC
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Registered: 28th Feb 04
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We will go into administration this year. I am sure of it.
Ashley will die a cunt.
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Cosmo
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I personally think Newcastle fans only have themselves to blame.
Ashley has come in having bought the club for an inflated price imo, and then removed all the debt from the club.
Yet its the actions of the Newcastle fans that have forced him in to making stupid decisions to try and make you happy (Keegan, Shearer, etc.).
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liamC
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Registered: 28th Feb 04
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Well, other than the fact that he hasn't removed all the debt, and the fans didn't force him into appointing Keegan and Shearer you're absolutely spot on. The former was a shock to everyone.
Don't believe what you read in the papers.
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Cosmo
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Im only going off quotes direct from him where he has said he has removed all the debt. If he has lied and has not then fine. You have any linsk to any more details on this (as admittedly I am only going by what Ive read in the media).
And he only appointed Keegan to keep the fans happy, he certainly didnt do it down to Keegans great managerial skills.
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liamC
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Registered: 28th Feb 04
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According to the financial shit that gets released once a year (of which the actual name of it escapes me), Ashley has cleared the debt as it stands, but the club owes him it all back and it is currently sitting in as an interest free loan as long as he owns the club.
Ashley has indeed mentioned he has cleared the debt, but fails to mention that it's a loan and he wants it all back.
Ultimately, there is not just one person to blame given our current shambolic pathetic situation. We have been on a downward spiral for years.
Keegan takes a portion of the blame, as does fat bastard shepherd, that cunt Allardyce, however, the majority of the blame lies at Ashley's door.
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Tom
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Registered: 3rd Apr 02
Location: Wirral, Merseyside
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quote:
Originally posted by Cosmo
Im only going off quotes direct from him where he has said he has removed all the debt. If he has lied and has not then fine. You have any linsk to any more details on this (as admittedly I am only going by what Ive read in the media).
And he only appointed Keegan to keep the fans happy, he certainly didnt do it down to Keegans great managerial skills.
TBF it's not really the fans fault he didn't have the back bone to recruit someone who could do the job 
Still, the fans are generally a bunch of deluded so and so's
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Cosmo
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quote:
Originally posted by Tom
TBF it's not really the fans fault he didn't have the back bone to recruit someone who could do the job
Agreed, but when your customers are demanding something its probably not the best business sense to go against it
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Tom
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Registered: 3rd Apr 02
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quote:
Originally posted by Cosmo
quote:
Originally posted by Tom
TBF it's not really the fans fault he didn't have the back bone to recruit someone who could do the job
Agreed, but when your customers are demanding something its probably not the best business sense to go against it
Depends if you feel you are acting with your customers best interests at heart surely. I reckon he saw how deluded they all were and thought he needed to step in and make sure future generations of geordies didn't all end up with the mental issues there parents have 
Or maybe he's just a fucking clown
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Marc
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Registered: 11th Aug 02
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Keegan inherited a shower of shit and had Wise deciding who was signed, as we're led to believe.
So can't really blame him.
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Cosmo
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Of course you can blame Keegan, the guy is fucking fruit loop.
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Nath
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Registered: 3rd Apr 02
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quote:
Originally posted by Cosmo
Of course you can blame Keegan, the guy is fucking fruit loop.
x2
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Marc
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I don't think he was back long enough to have made any bad impression on the team.
He could have led them to a 16th finish 
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Robbo
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Registered: 6th Aug 02
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The Arsenal report Usmanov had commissioned is bollocks, plain and simple
The accounts speak for themselves IMO
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J da Silva
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Registered: 10th Apr 03
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I cba to read all that above, summary?
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Cosmo
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quote:
Originally posted by J da Silva
I cba to read all that above, summary?
Arsenal are going out of business. FACT.
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Cosmo
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quote:
Originally posted by Robbo
The Arsenal report Usmanov had commissioned is bollocks, plain and simple
The accounts speak for themselves IMO
You've got a major cash flow problem coming up as you took a large part of sponsorship deal cash upfront to help fund the stadium so you wont have that coming in soon. Plus with City spending as they are, you getting that 4th place is more important than ever, if you dont think I think you'll be in major trouble.
£150m being paid off your debt would save you something in the region of £7.5m a year in interest and £6m in capital....thats not a bad amount.
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