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PITY THE POOR MILLIONAIRES

4:00pm Thursday, 10th December 2009

There's an old saying in football circles that goes something like this: 'How can you make a small fortune owning a football club?' The answer is invariably along the lines of, 'Start with a large one.' Few can doubt it.

News this week that the once appropriately named Columbian club, Millionarios, may be going down the pan was received with little surprise. The Bogota team first came to fame - or notoriety - in the late 1940s when it poached Alfredo di Stefano from a football-strike ridden Argentina. The then world's greatest player went on of course to sign for Real Madrid in 1953 (to the eternal chagrin of Barcelona) and led them to five consecutive European Cups - a feat which established the 'brand' of Real forever.

Now the Columbian Millionarios are being pursued by the VAT collectors for a few million quid they owe, and failure to pay could close the club down. Oddly (though perhaps not considering this is Columbia), the largest stakeholder in the Club is the National Narcotics Directorate who own 27% as a result of a seizure of the assets of a major drug dealer a decade ago. The players haven't been paid for three months.

The curse of the 'poor millionaires' spreads far beyond the shores of Columbia however. The recent release of the accounts at Everton FC shows how difficult it can be for even a well run club and an exceptionally well managed team - with a large and loyal fan base - if the substantial amounts required for essential investment cannot be found.

Trapped in a (by modern PL standards) 'antique' stadium where half the seats have supporting pillars between the viewer and the pitch - and around 4,000 are 'restricted view' and rarely occupied - the news of the collapse of the new stadium plan for Kirkby is devastating for the Club's owner, Bill Kenwright. Despite the numbers which show turnover up by around £4m, the revelation that Everton's wage bill is around a quarter of Chelsea's shows just how unfair the competition is between the 'poor' millionaires and the rich ones.

Even a club like Man Utd, with a turnover nearly four times greater than Everton's, looks vulnerable to the 'lack of money' problem. An analysis at the excellent www.footballeconomy.com claims that the owners' current attempts to restructure the most expensive element of their debt are not going easy. In addition to over £500m of debt which rests with the Club, the Glazers themselves are holding around £175m of PIK loans from a couple of hedge funds at an interest rate of 14.25% pa. That was negotiated during the previous restructuring in 2006, but it's a very different world out there today and shopping for lower rates might prove arduous. Both debts are growing too as some interest payments get rolled over.

Meanwhile Liverpool's 'millionaire' American owners are seeking further investment into the Club through an equity raise which would significantly dilute their individual holdings. Last summer, the Club's parent company, Kop Football, revealed losses of £42.6m, and £36.5m of that was down to interest payments on loans. Early relegation from the Champions League to the Europa League this term won't improve their earning prospects, and as to the finance for a new stadium...... No one's holding their breath.

As the old song goes, 'Who wants to be a millionaire?' Well, we don't, not unless we can be 'rich' ones.

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