Life after Abramovich – Can Chelsea avoid administration?

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The club cannot cover the cost of what it takes to stage a game, a person familiar with the situation at Chelsea has said. The club has around 8,000 corporate membership holders, many of whom enjoy the hot meals and fine wines. The government-mandated £500,000 is to cover stewards, first responders and so-called club ambassadors, who are usually former players who return to entertain guests.

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Such risks to a club should a wealthy benefactor leave were highlighted in a recent sports review by a former sports minister, said Kieran Maguire, lecturer in football finance at the University of Liverpool.

The conclusion was “too many football clubs are single-ownership where they are one decision away from disaster if the ownership can no longer subsidize the club,” he said. The crisis at Chelsea has strengthened the case for an independent football regulator, he said.

Chelsea said on Thursday they were in talks with the government, pushing for terms to be changed. The immediate objective is to determine how to continue operating until the end of the season.

The sum of £20,000 to travel to an away game should be too small for some matches, especially those away in the Champions League.

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The UK government is open to discussing amendments to the license but there are unlikely to be any major changes, according to a person familiar with the matter, speaking on condition of anonymity. The government is trying to strike a balance between preventing Abramovich from benefiting from the asset, without penalizing fans and players. Discussions with the club are ongoing.

A leaked government document highlighted the club’s value to the Premier League pyramid and to Britain’s sporting and cultural environment.

A quick sale seems necessary to avoid a total collapse at the club. Abramovich put Chelsea up for sale before being sanctioned and promised to donate all proceeds to help Ukrainian victims of the Russian invasion.

Yet on Thursday evening, New York-based Raine, the bank advising the sale, sent an email to all bidders who had expressed an interest to inform them they were halting the process for 24 to 48 hours. The government must now approve any sale before it can move forward.

Romelu Lukaku, Chelsea’s highest-paid player, in action against Arsenal.Credit:Getty Images

Chelsea has attracted interest from people like Todd Boehly, the former chairman of Guggenheim Partners, Josh Harris, co-founder of Apollo Global Management, and property developer Nick Candy. On the one hand, Candy is always enthusiastic. “We are looking at the details of [the] announcement and we are still interested in making an offer,” a Candy spokesperson said.

Another option is to put the club into administration, an English process in which an external accounting firm usually manages the club. Company directors are personally liable if they know the company is in dire financial straits and do not put it into administration. This would allow Chelsea, who sit third in the Championship, to continue running.

“At the moment the suggestion is that the club have a wage bill of £28m a month and have enough cash in the bank to fulfill the next two Premier League matches,” said regional managing partner Julie Palmer. of Begbies Traynor, who took over the administration of AFC Bournemouth football club in 2008.

“The question then is what happens with the responsibilities beyond that point and whether that pushes the club into some form of administration.”

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Meanwhile, the sponsors remain in doubt. The sanctions prompted shirt sponsor Three to suspend his contract, which runs until 2022. Other big backers include Nike, who are reportedly reconsidering their ties with the club. A spokesman for Trivago, the online hotel search website which also sponsors Chelsea, said it remained loyal to the club in the hope that a buyer would be found.

But this jeopardizes the longer term if a buyer does not emerge quickly. By far, the biggest burden for football clubs is player payrolls. Chelsea are prevented from buying and selling players, or entering into new contracts.

Last year, the team’s cost of sales, which includes player salaries, was £355m, according to filings. Romelu Lukaku, who joined the north from Inter Milan last summer, is said to be the biggest earner on £325,000 a week. Even a more peripheral player like Timo Werner would earn £270,000 a week. Chelsea accounts show he had £16.3m in cash in June 2021.

For now, that’s the short term the club have to deal with. After hosting Newcastle, the next two games are away – first at Lille for the Champions League, then at Middlesbrough in the northeast of England for an FA Cup match. How they arrive at future games remains unclear.

Bloomberg

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