Mr Creosote and Football's crisis
By Boris Mellor
October 14 2008
Football fans are, for the most part, blind to economic reality, at least where the game is imvolved. For most the last week has been a boring interval, one caused by the International break. Yet news wise this has been one of the most exciting periods ever, and football is involved.
After all British fans now have a share in the banks, I bet you can't wait to be invited to the board meeting at the Ritz, or you are excited you will never have to pay bank charges again. How about a letter to the CEO telling him he is overdrawn and fined £25.
I digress, how many fans have noticed that Arsenal shares have dropped from £9000 to £6750 a unit? No doubt Hammers have noticed that their owners are bankrupt, indeed their country, Iceland, is bankrupt. Is Freddy the only player ever to bankrupt a nation? Also barcodes are frustrated that Ashley can't sell the club, there are no buyers unless it's a fire sale. Maybe we will see one soon.
Peanuts
But all of this is peanuts; Abramovich and Usmanov have lost billions in the last few weeks. It is reported that Mr Creosote has lost £6.7 billion. Some might say it is only paper money, but if they tried to sell up now they would get half of what they could have a year ago. Oil and steel prices are dropping, as is the production of these commodities. Even the Arabs may feel the pinch.
£60 million is a bagatelle to Usmanov; to him it is more important that his mining and metal company succeeds. It has been rumoured that he was planning a merger that would have seen his company go public and be worth billions. However the big crashes of the last few weeks had made that impossible, and seen the notional value of his company written down. The state of the world markets has forced Usmanov to put plans to go public on hold. The big bonanza has been delayed.
All this being the case why is he bothered about a small investment in Arsenal Football Club? If he sells now he will lose a percentage of his original investment, possibly 20% or more. If he delays he might lose even more. There again he could add to his portfolio as shares become cheaper. Dein got out a good time, and I bet you thought he did it because he loves the Gunners. The days of Arsenal shares forever rising are over, and the reason is property prices.
A year ago Arsenal were expecting a big bonus on property sales, but things are grinding to a halt. All over London large building projects are being mothballed, and Arsenal is not immune. Take a look at Queensland Road; there are no bulldozers, just a ghost town. Yes they are waiting planning permission, but they already have permission to level the site, but nothing stirs. The new plans are certain to go through, but there is no sign of haste, only tumbleweed. What of the old stadium? No doubt all the flats will be sold, or rented in the next couple of years, but even the Arsenal Annual Report urges caution:
"The Group expects to derive income from the
sale of certain property development sites
over the next two years - the main element of
this being the sale of some 680 private
residential apartments at Highbury Square.
The achievement of these sales may be
affected by the current downturn in the UK
property market and the difficult conditions
in the mortgage lending sector. The Group is
monitoring the position closely.
The bank facilities which the Group has used
to fund the Highbury Square development
are ring-fenced from the financing of the
football segment of the business. The final
profits and cash to be released to the Club
on completion of these property
developments has not been budgeted by the
Club and will be treated as a "bonus" when
received - accordingly, there is no
commitment to use any such profits and
cash at any specific time for any specific purpose."
At one stage there was speculation that the property sales could pay off some of the debt, and pay a dividend to shareholders. Other rumours suggested that Usmanov would insist that the bonus be paid out in full to shareholders. But the bigger question now is will there be a bonus.
A Gamble?
Did Usmanov buy Arsenal shares to make a quick profit on that basis? There was much talk of the club being undervalued, but now with the bonus melting like snow in summer, and the debt, although manageable, continuing into the distant future, the club is not looking such a good deal. Usmanov might just enjoy a gamble, maybe the idea of taking over lock stock and barrel is not so attractive in the new economic climate. However he claims reports that he is selling up are not true.
Yes turnover is good, but TV revenues are not guaranteed, will the unemployed keep funding Sky? Will prawn sandwich eaters continue to turn up? Is it just me that has noticed that club level is always a third empty this season? Yes the tickets are sold, but the owners of the seats are not interested in turning up; and if they don't turn up they don't spend. Meanwhile many cannot afford to buy a club level seat that is offered for one match. Some club level holders are selling their seats below cost. What of the corporate boxes? Who will buy them off bankrupt companies?
In the 1930s Arsenal thrived in the depression, there was no TV, DVDs and computer games. Work stopped at 1 pm on a Saturday, it made sense to go straight to the match. Football was relatively cheaper, now it is very expensive, even some of the middle classes find it hard to maintain the financial investment. The business plan of funding the club on 7000 premium seats might have to be reviewed.
It's the economy stupid
Scudamore was angry with Triesman for daring to mention that four clubs have £3 billion debt, how dare Triesman bring reality into the picture, whilst he was planning the 39th game. Even Chairman Buck believes that clubs will have to trim their sails, and he included Chelsea.
The banks have been partially nationalised, Man U is sponsored by the Federal Reserve, and Newcastle by the Bank of England, but no one has stepped in to replace the bankrupt West Ham sponsor. Why should public money be used to sponsor the Premiership?
Scudamore wants to keep his head in the sand, how dare Triesman mention the debt, and millions of fans will back him on that. They can't see the crisis, true it has not impacted on the real economy yet, but it will. Season tickets have been sold for this year, but how many next year (I am not just referring to Arsenal here)? At some stage the whole bloated balloon will burst.
Football, and football fans will be living in a very different world by the beginning of next season. The financial crash is the economy's 9/11 and I will feel sorry for most of those affected; but there will be some I will be glad to see go, and Mr Creosote will be one of them.
Oct 14 2008
Russian billionaire Alisher Usmanov has "no intention" of bowing to global economic pressure by selling his Arsenal shares - because he loves the club too much.
Despite an international financial crisis which has reportedly wiped significant value from the personal fortunes of both Usmanov and his fellow mega-rich Russian, Chelsea owner Roman Abramovich, he will be making no concessions when it comes to the Gunners.
"I'm in love with Arsenal. I have no intention of selling my stake," Usmanov told The Guardian.
His emotional attachment to the club is akin to an intimate human relationship - leaving him with no other option but to keep it intact.
"When a man loves a woman he can't conceivably sell that love," Usmanov explained.
From sundaysun.co.uk
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Like he said, lovign Arsenal is like loving a woman and get to screw her as well...
Warning: Supporting Arsenal is not for the faint at heart... It requires hard balls...
