THAT was the week that never was…
So, we are up and running again after a frustrating spell abandoned in a layby on the information super-highway, silenced by circumstance at the worst possible time. My deadline day blog was a sad and lonely affair. Everyone knew it was on and there would be beer and everything but no-one turned up, a bit like Afonso’s leaving do.
But we have time to make up. Here’s what I would have said.
Where’s the money gone?
We’ve spent it. All of it. All the TV money, all the gate income and much more besides –
was spent and it still didn’t cover the wage bill. Transfer fees were extra and the tab for the shortfall created the toxic debt (which stood at a reported high-water mark of ÃÂ£93m less than a year ago) – debt either directly to Steve Gibson himself or to banks with the chairman and his companies acting as guarantors.
Most of the dosh went on players. Loads of them, all the players the fans demanded, the big names, the internationals, the foreign Fancy Dans we saw on YouTube, and all on big fees and/or massive wages – and we never got a penny back to fund their replacements when we sold them – Maccarone, Ugo, Viduka, Southgate, Zenden et al. That failure to recoup and the need to borrow more to replace them added to the growing deficit – but we all demanded more.
And the dosh went on building the structure of a new club light-year away from the ramshackle outfit at Ayresome Park, a club with a new ground, state of the art training facilities, a highly respected academy that has churned out first team players and provided internationals at every level, and on a community initiative that runs education and inclusion projects in some of the most economically deprived areas in the country, an added extra that does little for the team but everything to reinforce the precious organic link between the club and the community.
And the cash was splashed on chasing the dream. It is easy to slag off the powers that be for running up debts with wild abandon but maxing out Gibbo’s plastic paid for three trips to Wembley, it paid for Juninho, Ravanelli, Ince, Gascoigne, Boksic, Yakubu, Alves and all the usual suspects and it paid for Steve McClaren’s highly paid off the peg team that made history and won silver at Cardiff and went close again at Eindhoven after a still barely believable European adventure.
It was a golden age and not one Boro fan, not even the congenitally grumpy, would change it for the world. Neither, if they really admitted it, would they trade it for the humdrum mid-table grind of Bolton or Fulham or any of the other clubs we are now supposed to suddenly envy… or Stoke, no matter how many of our millstones they buy.
But now it is time to pay the bills and that is why the trophy players were cashed in. Lamby admitted in a retrospective statement of the obvious through lips prised open with a post-deadline crowbar that the loss of income after relegation forced Boro’s hand and prompted a major refinancing that revolved around slashing debt and wages through player sales. The ÃÂ£20m plus raised by the exit of Downing, Huth, Tuncay and Alves went to pay the banks.
The recent radical turn to actually selling key players for a hefty profit – Downing and Tuncay especially on that front – is a painful but necessary development if the club wishes to stabilise and regroup successfully.
And if it hadn’t been done – and this is the real bottom line – Boro may not have got through the season intact. If the agreed debt reductions had not been achieved Boro would have been in breach of banking covenants and the creditors could have called in the administrators to get their cash back. That would have meant a fatal point deduction and the exit of far more players.
For the foreseeable future we will need to use loans, frees and the bargain bin to plug the gaps and accept that our newly lowered wage ceiling will prevent us signing many World Cup winners, household names or 20 goal a season international hitmen – or even Rob Hulse.
We are not unique in that. Doom-mongers (*puts up hand sheepishly*) have been saying for years that the crazed Premier League spending frenzy was unsustainable and sooner or later a club was going to go belly-up because they over reached. Such voices have been shouted down by the intoxicated who have readjusted their blindfold and urged their precarious clubs to raise their credit limit and smash the transfer record again and again without the slightest concern for financial reality.
But the financial landscape has changed drastically. Credit is now hard to get and very expensive. Ask anyone trying to get a mortgage. And the bigger the sum being borrowed the more punitive the charges, tighter the payment schedules and steeper the penalties for defaulting. Clubs asking for loans or have existing overdrafts rescheduled are being told to slash debts dramatically or face being taken over by the banks.
Portsmouth have admitted twice almost going under during the summer. Peter Storrie revealed the club’s summer fire sale was to slash ÃÂ£60m in debt and to repay a ÃÂ£36m loan to Standard Bank due this week.
“I don’t want to talk about what would have happened. I want to talk about the future. It isn’t a gamble. It simply had to be done. The most important thing for us was to keep Portsmouth Football Club afloat. Because of the credit crunch, our previous owner felt that he had to sell the club. It is a situation that could happen to several clubs.
“We had the assets to be able to adjust to that. The money from selling players has gone to the banks and so has the TV income. We have managed to get the payroll down to a sensible level. People should give us a bit more credit for doing what we’ve done, rather than just shutting up shop.”
West Ham were also close to going to the wall. Already in a mess after Iceland went bust – the country, not Kerry Katona’s wholesale party snack supplier – the Hammers’ losses last season put them in breach of their credit terms and only the goodwill of the banks prevented administration.
They lost ÃÂ£37.4m for the year ending 2008 which they covered by more borrowing to push their net liabilities over ÃÂ£100m. They too embarked on a drastic series of cuts and sold ÃÂ£12m worth of players to pay debts but still broke their banking covenants. That meant the five banks that had funded emergency loans of more than ÃÂ£20m just to pay their bills and keep trading after the Iceland implosion could have demanded immediate repayment – a move that would have plunged them immediately into administration and condemned them to a ten point penalty and relegation.
While we’ve been down I received the annual pre-season Equifax accountants credit score index for the Premier League clubs (I am on some fascinatingly dry mailing lists) and it does not make good reading.
Ten clubs, including many who fans often insist we should “be more like” – Fulham, Villa, Portsmouth, Everton, Chelsea, Bolton, Wigan, Hull, Stoke and Burnley – are now technically insolvent and have liabilities that outweigh their assets and income and so find themselves, like West Ham, dependent on the confidence and indulgence of the bankers. If they look like going down – and hence having their income halved – if could prompt their money men to take drastic action to take their cash out first.
Elsewhere in the list Liverpool have hauled themselves out of that category by an expensive summer refinancing and Manchester United, Arsenal and Spurs all have high debt levels but the banks are happy to support their continued borrowing because they have strong revenues.
Hull (spend, spend, spend on fees and wages…. ÃÂ£12m invested in Jimmy Bullard alone) are judged to be at most risk and have a credit rating of ZERO out of 100. Portsmouth are still seen as very vulnerable with a credit rating of just 2 along with Stoke, Burnley and Wigan who do not have the income to meet their debts if they go down.
Boro’s controlled but drastic debt cutting approach has won some praise in the press but has not gone down well with fans grown used to lavish spending.
Tough. We have to wake up to the reality. No amount of anguished wailing will change club’s direction. It is not a whim. Or pique. Or profit taking…. there is no profit to take. And unless some billionaire with a Boro tattoo on his bum turns up with a magic chequebook there really is no alternative.
ALVES has left the building… a ÃÂ£13m PR stunt that turned sour. They thought they were buying a new Juninho with a built in bums on seats guarantee that could electrify the team and galvanise the crowd. It turned out they were buying the Brazilian Missimo Maccarone, a player who looked good if only you squinted but who failed to deliver and who was an unmitigated financial disaster.
We all wanted to sign him because he looked great on YouTube but his signing was ill researched, over-priced, came with a red tape nightmare and ultimately the money could have been better spent on James Beattie and creative midfielder.
Those who want to use him as a stick to beat Southgate with are free to do so… he wasn’t used right, he wasn’t managed right, he was allowed to drift and become demotivated etc. But at the end of the day he had plenty of chances on the pitch to show what he could so – and missed them all. He was physically weak – and his mental attitude can be clearly seen in that he would rather go and play in a glorified rich mans’ hobby league in a football backwater than prove himself in a competitive one.
Meanwhile, the blog may have been down but I’ve been running a truncated service on Untypical Boro’s Twitter, the trendy celebrity micro-social network where me and my A-list bessies like Stephen Fry, Jonno Ross and Darren Bent hang out.
Here’s a things of interest that I’ve linked to over the last week.
Which current Boro hero – described as “Tall, slim, speedy, scores goals… sort of van Basten” – has been put in the spotlight by the big club schoolkid slave trade row?
“This is British Pathe News at Ayresome Park….” some fantastic grainy black and white news reel footage of George Camsell and the lads in training back in 1936
And here’s a brilliant DIY lower league cyber scouting tool. Simply put in the qualities and position you are looking for and a division to search in and it ranks all the players that match. Try putting in “striker,” “workrate” and “Championship” and see who it recommends….