Roman Abramovich

[Keegans Export]

1 minute ago, Manxst said:

Government have signed the deal off now, so it’s done.  
 

Confirming the terms of the deal, Chelsea said in a statement: "Of the total investment being made, £2.5bn will be applied to purchase the shares in the club, and such proceeds will be deposited into a frozen UK bank account with the intention to donate 100% to charitable causes as confirmed by Roman Abramovich.

 

In addition the proposed new owners will commit £1.75bn in further investment for the benefit of the club.

"This includes investments in Stamford Bridge, the academy, the women's team and Kingsmeadow and continued funding for the Chelsea Foundation.“

 

so the actual sale is ‘only’ £2.5bn? Or as per the media, £4.25bn (once the guaranteed investment is included)? 

I guess it's just different terms - the "sale" from the sellers point of view is worth £2.5bn but the "sale" will cost the buyers £4.25bn.

[gbandit]

24 minutes ago, Manxst said:

Government have signed the deal off now, so it’s done.  
 

Confirming the terms of the deal, Chelsea said in a statement: "Of the total investment being made, £2.5bn will be applied to purchase the shares in the club, and such proceeds will be deposited into a frozen UK bank account with the intention to donate 100% to charitable causes as confirmed by Roman Abramovich.

 

In addition the proposed new owners will commit £1.75bn in further investment for the benefit of the club.

"This includes investments in Stamford Bridge, the academy, the women's team and Kingsmeadow and continued funding for the Chelsea Foundation.“

 

so the actual sale is ‘only’ £2.5bn? Or as per the media, £4.25bn (once the guaranteed investment is included)? 

Aye, we’ll see what happens there. No news for a few years then it’ll get deposited into the Charity for Yacht Redevelopment, owned by Mr. R.A.

[LV]

1 hour ago, gbandit said:

Aye, we’ll see what happens there. No news for a few years then it’ll get deposited into the Charity for Yacht Redevelopment, owned by Mr. R.A.

Im sure he’ll find some way for the money to eventually end up in his hands 

[loki679]

But he put £1.5bn into the clubin the form of loans and that now just disappears for FFP purposes?

[r0cafella]

5 minutes ago, loki679 said:

But he put £1.5bn into the clubin the form of loans and that now just disappears for FFP purposes?

No. It doesn’t the FFP position carry’s over regardless of ownership. 

[TRon]

2 hours ago, LV said:

Im sure he’ll find some way for the money to eventually end up in his hands 

 

If it's his money that's where it should end up. Chelsea have a had a nice long ride to the top on the back of it, they can hardly complain they were robbed.

[Manxst]

1 minute ago, r0cafella said:

No. It doesn’t the FFP position carry’s over regardless of ownership. 

But the company itself will be debt free to the tune of £1.5bn, having just had it simply written off? Doesn’t this give them an advantage of increased financial security now compared to other clubs? Or the ability to build that level of debt again with no penalty? I’m no business expert by a long way, but surely there must be some repercussion and consequence for this? Or is it because it was Abramovich’s own money, they can just say it doesn’t matter, as it’s himself losing out?  

[Anderson]

13 minutes ago, loki679 said:

But he put £1.5bn into the clubin the form of loans and that now just disappears for FFP purposes?

 

FFP is based on profit and loss, so it wouldn't impact. It's likely just been converted from debt to equity as part of the sale process. Could be wrong mind, not looked into it in any detail, but the loan write-off provides no benefit re: FFP.

[r0cafella]

3 minutes ago, Manxst said:

But the company itself will be debt free to the tune of £1.5bn, having just had it simply written off? Doesn’t this give them an advantage of increased financial security now compared to other clubs? Or the ability to build that level of debt again with no penalty? I’m no business expert by a long way, but surely there must be some repercussion and consequence for this? Or is it because it was Abramovich’s own money, they can just say it doesn’t matter, as it’s himself losing out?  

The accounts of the club and the FFP calculation are separate. 

[Manxst]

2 minutes ago, r0cafella said:

The accounts of the club and the FFP calculation are separate. 

Yeah, I’m not bringing FFP into it. Just wondering from a company finance point of view- no debt makes them a better/stronger club, no? 

[r0cafella]

1 minute ago, Manxst said:

Yeah, I’m not bringing FFP into it. Just wondering from a company finance point of view- no debt makes them a better/stronger club, no? 

It depends on the owner. Chelsea’s debt to RA clearly didn’t stop them from spending massive amounts of money. 

[Manxst]

1 minute ago, r0cafella said:

It depends on the owner. Chelsea’s debt to RA clearly didn’t stop them from spending massive amounts of money. 

But that was because the previous owner put his own money in to keep them afloat. Say, for example, the current/new owner can’t sustain/afford that and would want to borrow from elsewhere. Surely a £1.5bn debt would mean lenders are less willing to give them the money? 

[Mike]

FFP is up there with Handball on the "I thought I understood it." mantle.

[r0cafella]

Just now, Manxst said:

But that was because the previous owner put his own money in to keep them afloat. Say, for example, the current/new owner can’t sustain/afford that and would want to borrow from elsewhere. Surely a £1.5bn debt would mean lenders are less willing to give them the money? 

If you look at the debt, it was to RA and not from any commercial lender. Even if we look at Clubs like Man United and Spurs they have a lot of debt but can still spend huge sums. 
 

It all depends on the type and source of the financing. 

[Manxst]

1 minute ago, r0cafella said:

If you look at the debt, it was to RA and not from any commercial lender. Even if we look at Clubs like Man United and Spurs they have a lot of debt but can still spend huge sums. 
 

It all depends on the type and source of the financing. 

Sorry to be a pain- this isn’t really my thing at all!
 

my point is that the new owners haven’t put anything towards the previous £1.5bn debt in their purchasing of the club as far as I’m aware- it’s simply been written off and disappeared. Hence, it gives them an immediate advantage of not having to service that debt once they get the ownership rights. Just seems drastically unfair on other teams who may need to go into debt themselves, simply because the government has said the Chelsea debt must vanish. Or am I totally fucking this up?! (Probably!)

[r0cafella]

Just now, Manxst said:

Sorry to be a pain- this isn’t really my thing at all!
 

my point is that the new owners haven’t put anything towards the previous £1.5bn debt in their purchasing of the club as far as I’m aware- it’s simply been written off and disappeared. Hence, it gives them an immediate advantage of not having to service that debt once they get the ownership rights. Just seems drastically unfair on other teams who may need to go into debt themselves, simply because the government has said the Chelsea debt must vanish. Or am I totally fucking this up?! (Probably!)

The debt wasn’t serviced previously. The loans were interest free from RA. I’m not sure if the debt was written off, or it was included in the purchase price however. 
 

I understand your frustration and confusion, it’s the bit of football where business comes head to head with football and muddies the waters. 

[Abacus]

Abramovich bought Chelsea prior to FFP (2003?), and I think much of the loan was incurred prior to those rules coming in.

 

In any case, FFP is based on losses over the most recent 3 year period, rather than the whole length of time of an ownership so it's not that relevant.

 

In theory, though, writing off the £1.5 bn does make them a more valuable asset. But there's no indication he was calling in the loan anyway and besides, even if the value of the club as an asset goes up, it makes no difference to FFP anyway.

 

Though, I'd be interested to see how they account for the debt write off - I'm assuming it would have to be done below the line, rather than as a direct profit.

 

Regardless, in their shoes, I'd be more worried that they regularly lose money anyway. Longer term, they won't be such big spenders any more I'd guess.

 

 

Edited May 25, 2022 by Abacus

[Manxst]

Just now, r0cafella said:

The debt wasn’t serviced previously. The loans were interest free from RA. I’m not sure if the debt was written off, or it was included in the purchase price however. 
 

I understand your frustration and confusion, it’s the bit of football where business comes head to head with football and muddies the waters. 

Thanks for the explanation and understanding! 🥴👍

[r0cafella]

Just now, Abacus said:

Abramovich bought Chelsea prior to FFP (2003?), and I think much of the loan was incurred prior to those rules coming in.

 

In any case, FFP is based on losses over the most recent 3 year period, rather than the whole length of time of an ownership so it's not that relevant.

 

In theory, though, writing off the £1.5 bn does make them a more valuable asset. But there's no indication he was calling in the loan anyway and besides, even if the value of the club as an asset goes up, it makes no difference to FFP anyway.

 

Though, I'd be interested to see how they account for the debt write off - I'm assuming it would have to be done below the line, rather than as a direct profit.

 

Regardless, on their shoes, I'd be more worried that they regularly lose money anyway. Longer term, they won't be such big spenders any more I'd guess.

Unfortunately, I think they will spend as much as the rules allow. It’s the only way for them to maintain such a valuation. A midtable team isn’t worth anything close to that amount. 

[Abacus]

1 minute ago, Manxst said:

Thanks for the explanation and understanding! 🥴👍

It's not simple, and it's quite unclear as to how it will have accounted for.

[Abacus]

6 minutes ago, r0cafella said:

Unfortunately, I think they will spend as much as the rules allow. It’s the only way for them to maintain such a valuation. A midtable team isn’t worth anything close to that amount. 

I expect that's true. I'd just wonder how they'll be able to justify it given the landscape has changed since RA took over.

 

If you've had inflated related party sponsorships to boost your income, that's one thing. You can at least point to precedent to back up those future deals.

 

But if you've been reliant on an a wealthy benefactor and are still making losses despite you probably being as successful as you'd expect to be, it'd be tougher to justify that level of spend.

 

 

Edited May 25, 2022 by Abacus

[r0cafella]

Just now, Abacus said:

I expect that's true. I'd just wonder how they'll be able to justify it given the landscape has changed since RA took over.

 

If you've had inflated related party sponsorships to boost your income, that's one thing. You can at least point to precedent to back up those future deals.

 

But if you've been reliant on an a wealthy benefactor and still making losses despite you probably being as successful as you'd expect to be, that'd be tougher to justify that level of spend.

Yeah, I’m with you. I am scratching my head on how they actually make money from this. The conclusion I came to is they are betting on the premier league to continue to grow and despite any annual losses the value of the club offsets it plus profit. 
 

Worst case scenario, list it on an exchange and let retail hold the bag? It’s what VC does. 

[Manxst]

3 minutes ago, r0cafella said:

Yeah, I’m with you. I am scratching my head on how they actually make money from this. The conclusion I came to is they are betting on the premier league to continue to grow and despite any annual losses the value of the club offsets it plus profit. 
 

Worst case scenario, list it on an exchange and let retail hold the bag? It’s what VC does. 

I read from somewhere a while back that the new owners expect the Chelsea company (and other top elite teams) to be worth approx £10bn each in the next decade or so, and hence the seemingly inflated fee now.  

[Manxst]

Found it:

 

“The lender’s co-founder Joe Ravitch was quoted in the Financial Times saying he expected the near $4 billion valuation of the club to more than double in the next five years.

“My guess is that Chelsea and all of the top Premier League clubs will probably be worth in excess of $10 billion in five years,” he told the newspaper.

Kishner agreed that, while the price might look eye-watering compared with any deal that has gone before, a sense of long-term perspective was required.

"These clubs have a history of just appreciating in value,” he added, “at the time the deal is done it's like, ‘oh, my goodness, how can anybody in their right mind pay that much money for a football team?’ Fast forward 10 years? And it's like, ‘wow, that was a great deal.’

“You're probably going to pay more because it's such an iconic franchise. But ultimately, I suspect in the long term the owner is going to do rather well.” 

 

https://www.forbes.com/sites/zakgarnerpurkis/2022/04/28/chelsea-fc-10-billion-future-valuation-suggests-big-changes-to-the-english-game/amp/

 

[Abacus]

1 minute ago, Manxst said:

I read from somewhere a while back that the new owners expect the Chelsea company (and other top elite teams) to be worth approx £10bn each in the next decade or so, and hence the seemingly inflated fee now.  

 

The thing is, those asset valuations only make sense if you expect income will continue to grow as they have done.

 

So, I expect r0cafella is right, and it's a gamble by their new owners that TV money continues to increase exponentially.

 

I'm more of a pessimist there, since we seem to be heading towards a global recession, and it has the feeling of a bubble ready to burst. Meaning I don't know what supports that pyramid scheme idea of constant growth.

 

That said, whilst I correctly called the tech bubble bursting, I also thought the internet in general was just a fad for nerds.

 

So what do I know?

 

And here I am now, come to think of it.