Chelsea Debt

[Gribz 743]

After reading a post from Calscot (cant remember where) that said Chelsea are 180 million in debt im slightly confused.

 

How on earth can they be in this sort of debt if Abramovic is a billionnaire or more to the point WHY are they in debt. I thought it was his money that they used to buy players and not funding from elsewhere.

 

I have higher Accounts from school but im no accountant as that was 9 years ago, but i can still work out that 180 million debt creates a lot of interest to be paid back.

 

Why would Roman use elsewhere funding and then pay back interest when he can use his own funds. All it says to me apart from stupidity is that he could walk away tomorrow and Chelsea wouldnt exsist!

 

Can some maybe explain???

[calscot 0]

I didn't supply the figures but that's the rumour.

 

The reason they are in debt is probably because, just like DM and Romanov, even though Abrahamovich is filthy rich, he doesn't want to risk his own money. If he leaves then he will sell Chelsea with the debt there.

 

Also like DM and VR he will have guaranteed the loans so that they will never be called in or be put under much pressure to repay it early.

 

The huge debt with probably have a decently low interest rate similar to a mortgage as it will probably also be secured on the Chelsea real estate. So say about 5% or 9M a year.

 

With over 200M turnover, they can easily afford to service that debt.

 

At least their debt is for money spent on football, Man Utd's debts are there to pay for the club - they are paying off the Glazers' debts and so they'll eventually own the club for free. Any of us could do the same to own a big club for free - you just need a big enough credit rating and a club which is almost guaranteed to make a profit. I think it should be illegal.

[craig 5,198]

Anothe reason that Abramovich might not be paying off the debts is that he may make MORE money on the cash he keeps than the cost of debt.

 

Our company have went througgh about $3 billion of financings in the last 3 years and one of the reasons for doing so is that the cost of debt has been low while the returns on our investment portfolios is high.

 

Eg for Abramovich using calscot's numbers.....

 

1. The club has debts of 180 mill and cost of debt is 5% fixed - 9 mill a year cost.

2. He obtains through his investment managers a return of 8% on his investment portfolios - 14.4 mill a year.

 

This means by having 180 mill of debt on Chelsea's books he makes a PROFIT on the debt of 5.4 mill a year.

 

Also it means that the profit is HIS, not the club's because the investment portfolio is from his own investments whilst the club's debt is its own, although it is guaranteed by Roman.

 

In effect, each year he actually gets income into his own bank account of 14.4 mill and, as calscot says, as long as Chelsea can service the debt and reduce the debt balance (even if only in small amounts) then he actually makes even more money.

 

I am not sure if DM has guaranteed the loans, has he ? VR is a slightly different scenario, he doesn't really need to guarantee the loans as they are from his own company anyway, benig the bank.

 

I agree Re the Glazer's that it is criminal to basically buy a club, or any business for that matter, without putting up any capital of your own - they will eventually own a very successful, very rich, football club and have paid nothing for it. However, sadly, that is the business, and even football, world these days. Sad times indeed and without scruples.

[calscot 0]

Just shows you, it's easy to make money when you're rich...

 

Re DM and guarranteeing loans: I think Rangers liabilities are linked to his holding company which is backed by MIM.

[calscot 0]

PS that was when we had a debt significantly bigger than our turnover, I'm sure with our lower debts that MIM has no connection nor guarantee.

[craig 5,198]

The connection or guarantee of the debt once in place will be at the whim of the bank to take it off guarantee.

 

I would think the bank would take it off the guarantee, but you just never know.

 

Yes, another old adage "It takes money to make money" - and it is true, it is much easier to make money when you are rich - the sad thing is that the vast majority aren't.

[Wija 0]

Are the debts not to Obramovich's own companies.... thus it isn't actually a debt - and is also a way of laundering money (oh did I say that out loud!!!)

[allyW 0]

there debt is nothing more than a mirage.

 

it LOOKS like 180m in debt but abramovich won`t ever let them go this far, and if the worst came to the worst the cost of the players transfer would pay for the entire debt and they would be back to square one but with a bigger name throughout the world.

 

as calscot correctly pointed out though, abramovich is `probebly wisely` keeping his book seperate from the clubs books.

 

that is why he is a billionaire!!