When Lehman Brothers declared bankruptcy, there were bound to be some repurcussions in the financial markets all over the world. Slowly, many economies have been hit and various sectors seem to have been affected.
Now, it's football's turn.
West Ham United and the Icelandic Connection
Iceland's banks seemed to be living dangerously even before the Lehman fiasco, as the economy had a debt-to-earnings before interest, taxes, depreciation and amortization (ebitda) ratio of six.
What this means is that Iceland was borrowing six times its means.
Naturally then, Iceland was an economy which was vulnerable to the global economic crisis. So, when Landsbanki Bank's (a local bank) board was dismissed and the bank became nationalized, it was bound to lose a considerable amount of its share value.
Where's the connection in all of this?
West Ham United's owner Bjorgolfur Gudmundsson, along with his son, owns a whopping 40% share in the bank and now faces a considerable loss in his fortune.
West Ham United are also taking on Sheffield United in the "Carlos Tevez Saga", which threatens to burn a hole in thier finances to the tune of £30 million.
However, the clubs' Chief Executive has come out to reassure supporters that the club will not be affected as such by this.
This is in contrary to the West Ham's vice-chairman, who said that the club will not be invest in player purchases during the January transfer window.
American Woes for Manchester United and Liverpool?
The first set of fans who would've been worried at what has conspired in the USA has to been the ones supporting the aforementioned clubs. Both these clubs have American owners, and must have had some exposure to the sub-prime crisis.
Work on the new Stanley Park Stadium in Liverpool has been halted, with the club's Chief Executive stating that despite the project being stable in the long-run, continuing work in the current scenario would be "risky".
Manchester United have issued a statement stressing that the club hasn't changed its loan structure. However, with their shirt sponsors, AIG, being nationalized and their overall position being unclear—a potential £14 million per year is on the line for the Red Devils. That said, it will not be a major problem for them to replace AIG.
Either way, the clubs with the American owners will be affected one way or the other—of course, Aston Villa don't seem to be affected at all, as of now.
All Quiet on the Arsenal Front
While most clubs have come out to say that their exposure to this crisis doesn't mean doom and gloom, nobody from the Arsenal board has come out to reassure the Arsenal fans. This could be because there really is nothing to worry about, or even because there is something huge to worry about.
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about 1 month ago
Very shaky times indeed. I think next season will be real crunch time. The season tickets are sold for this year so clubs have insured themseves against this in a way but next season when it comes to renewal time the english football fans are gonna be wondering if they can really still afford it and thats gonna mean disaster for a lot of clubs. Great article Shyam.
from about 1 month ago
Yeah, exactly.. so clubs like Chelsea and Arsenal might have to reduce their ticket prices - which are exorbitant indeed.
Thanks for the comment Anthony.
about 1 month ago
great article shyam. great play on words, "middle eastlands" - love it. very interesting, i never knew how much the credit crunch would affect all these football clubs. my local team gillingham are in £9million debt; i just hope the fa and the football league forget about us, otherwise we'll probably be in trouble. it's not a lot compared to united or chelsea's debt, but for a club like ours in the 4th tier of english football, it's a lot of money.
from about 1 month ago
The press has been on about Middle Eastlands since the takeover Yoosof!
Yeah, the credit crunch seems to be hitting everyone today - let's hope that we all ride the storm.
Thanks for the comment.
about 1 month ago
Great article Shyam.
I think once again it could be the smaller clubs that suffer like Yoosof said in the case of Gillingham.
Manchester United and Liverpool are too big a club to have to worry about going under. Although while Chelsea may not have to worry for now they may in the long run, I really think Ambramovich uses the club as a play thing and more than anything wants to create an all powerful Russian club side so I've a feeling he may up and leave sooner rather than later. No disrespect to Chelsea (well maybe a little) they have not got the support or history of Man Utd, Liverpool or Arsenal.
Being honest someone from the middle-east (our Man City friends) would buy Arsenal in a heartbeat if they could. The ground can fill week in and week out and the club has a far bigger following world wide. I read the article on clubs with debt and Arsenal owe it on the new stadium as apart from United and Liverpool whose investors brought in debt with them.
Besides Le Boss is well read in economics so we're in safe hands ;-)
from about 1 month ago
The major policy decisions are made by the Board in any case, and the credit crunch might hit some clubs in the top-tier as well.
Of course, the so called smaller clubs will suffer - but profligacy in expenditure is the main issue here.. top-tier clubs seem to be doing that too much.
about 1 month ago
Like many are saying the problems will lie with the smaller clubs and I just wonder if the rule about deducting points when clubs go into administration will worsen the problems.
from about 1 month ago
Interesting thought Ricky - but poorly run clubs have to be punished in some way or the other - monetary sanctions are simply not possible, hence the points deduction but I get where you're coming from.
about 1 month ago
Great article Shyam.
from about 1 month ago
Thanks Daniel.
about 1 month ago
Great article Shyam, regarding these rich businessmen. They aren't immune to this at all, Abramovich has had 13 billion pounds written off. So perhaps now we are going to see an end to this spend spend spend era in football. For too long has the game been operating in a different reality to everyone else. Now, just like the rest of society, football and sport in general will have to rein in its excesses and cut its costs, certainly for the foreseeable future. Hopefully it will take nothing away from the spectacle.
from about 1 month ago
Good to see some reality coming back to Chelsea :)
As I said, the credit crunch basically hasn't spared anybody and your article also comprehensively shows that Abramovich is not immune to this..
Thanks for the comment!
from about 1 month ago
Oops! Sorry, that was Willie's article.. my bad :)
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