Manchester City’s owners have followed the lead of Chelsea by converting the club’s debt pile into equity. From the point of view of fans, this means that both clubs are debt free. It also means that they should escape any Uefa sanctions directed against clubs thought to have too much debt. One point that has been missed in some of the commentary is that it also makes the clubs easier to sell should their owners wish to do so. A buyer would not have to acquire a pile of debt but would able to make an offer for the club which would allow the owner to recoup some of his investment.
Manchester City’s owners have followed the lead of Chelsea by converting the club’s debt pile into equity. From the point of view of fans, this means that both clubs are debt free. It also means that they should escape any Uefa sanctions directed against clubs thought to have too much debt. One point that has been missed in some of the commentary is that it also makes the clubs easier to sell should their owners wish to do so. A buyer would not have to acquire a pile of debt but would able to make an offer for the club which would allow the owner to recoup some of his investment. This is probably most relevant to the case of Chelsea, given that Sheikh Mansour’s investment at City is very recent. He has converted £304.9m of shareholder loans into equity and has also purchased further shares to the value of £89.9m. We have always been sceptical about stories that Abramovich wants to sell at Chelsea and we see no reason to change our mind. However, it would now be easier for him to sell up if he wanted to. The problems that a pile of debt can cause for new owners are evident at ‘pay up Pompey’ where £3m of television money has already been diverted by the Premier League to pay debts to other clubs.
Manchester City’s losses in the year ending 31st May amounted to £92.6m, only eclipsed by Chelsea’s losses in their first two seasons under Russian ownership. The net operating loss at City was ‘only’ £34.2m, with the balance made up by the cost of buying players. The losses for the next financial year are likely to be even higher considering last summer’s transfer outlay and a soaring wage bill which is now among the highest in the Premier League. There will also be compensation costs for Mark Hughes and his coaching staff and a no doubt substantial sum that had to be paid to bring in Roberto Mancini as manager. On the income side, City’s turnover rose by only 6 per cent from £82.3m to £87m in the course of the financial year. The club are clearly spending well beyond their means, but the board anticipates a big rise in reveenue in coming years. Qualification for the lucrative Champions League is an essential part of that plan. From the perspective of City fans, they are hoping for some silverware after a gap of 33 years with the Carling Cup the first target.