The Future of Chelsea?

March 11, 2022
Following the freezing of Ramon Abramovich’s assets, Chelsea are in real trouble. In fact, there’s a significant chance that this will be an absolute disaster for them – I will explain why.
Before we dive in, we should understand that the football club is a limited company that is 100% owned by a Holding Company called Fordstam Limited. Forstam owe about £1.5bn to Abramovic – he uses Fordstam to fund the football club. Losses have been reduced in recent years but it often does not break even and the owner needs to fund any annual financial loss. Although Abramovich owns Chelsea, the stadium and pitch are actually owned by the Chelsea Pitchowners Plc – it’s a well-meaning company that effectively holds the ground in trust.
The club pay around £35m a month on player wages – this level of outgoings cannot continue indefinitely. Sponsors such as Three bring in huge commercial income each year to Chelsea and although not all that income will disappear, much of it will. Three will have cancelled the sponsorship under a ‘morals’ clause whereby it can walk away immediately if the association will damage the reputation of the sponsor – other sponsors will inevitably follow. The club will soon be experiencing real difficulties paying the bills. Indeed, the govt have advised that they want the ownership matter resolved by the end of May.
The only way the club can be saved from Administration is if the following three conditions occur:
  1. Abramovich is willing to write off his £1.5bn debt
  2. Abramovich is willing to sell the club for £0 (a condition the UK govt has insisted on)
  3. Abramovich is willing to work with the UK Government to come to an agreement on the sale and conditions.
It is this third condition that is likely to be the showstopper – I will explain why.
Abramovich has been sanctioned because of his connections to Putin. If we read the sanctions terms, we see that the UK Govt believes him to be a tool or enabler for Putin. Putin appears to have some real control and influence over Abramovic. If we run with this assumption, we then need to consider how Putin would like this scenario to play out.
Putin hates the UK and is effectively in a proxy-war with us. We therefore need to understand what outcome would have the biggest harm on UK’s culture, influence and prestige? The answer is obvious: the biggest adverse impact for the UK would be Chelsea imploding and going out of business altogether. It’s a hugely prestigious club that delivers sporting success for the nation in our national sport and one that has an army of loyal supporters who would be willing to make life difficult for the UK govt. Chris Bryant MP has been pushing for oligarch sanctions and recently explained that he had received an unprecedented level of online abuse from the more myopic Chelsea fans. Make no mistake, if Chelsea were to be liquidated, it would bring embarrassment for UK sport and tie up govt bandwidth at an important time.
When day-to-day finances start to be too difficult, the Chelsea Board can appoint an Administrator. This would incur a 9 point deduction for Chelsea both this season and next (assuming Administration before the end of the Season). But I suspect that would only be the start of the decline.
The Administrator’s role is a temporary one – they are appointed to to see if they can sell or restructure the company as a going concern – i.e. as a way of avoiding liquidation. If Abramovich refuses to play ball (under pressure of influence from Putin), liquidation would inevitably follow. No other outcome would be possible - it either exits Administration or it doesn’t.
Although Abramovich clearly has genuine affection for the club, there are strong indicators that the influence from Putin would be to be too hard to withstand. He would not wish to displease Putin.
Interestingly, the financial outcome for Abramovic is identical whether he allows the club to go into liquidation or whether he opts to work with the UK govt to sell the club. In both scenarios, he loses his £1.5bn and receives £0 for the club. However, if he plays ball with Putin, he is likely to be avoid punishment from Putin, and possibly even be rewarded. For me, liquidation looks the most likely scenario.
So, what happens if the club is liquidated?
The player contracts would become null and void – all players will be able to join whatever club they wish and with no transfer fee.
All sponsorship and commercial contracts will cease.
Chelsea Football Club, founded in 1905, will cease to exist and will be kicked out of the Premier League. Liquidation is the corporate equivalent of a death.
Fortunately, the Chelsea Pitchowners group will ensure the Stadium and ground are not liquidated. Inevitably, we can expect them to create a Phoenix club. This club will be able to play at Stamford Bridge, but is unlikely to be permitted to start any higher than the Vanarama South.  Depending on the timing of this, it is possible that the team can play in the 2022/23 season – however it is quite possible that they will be formed too late to play next season.
It is likely the new club will be able to attract a reasonable sponsor and very healthy crowds. In this scenario, it looks quite likely that the Pitchowners would sell the club to a wealthy new owner. However, the club will have to build itself up from 5 or 6 steps down the footballing pyramid.
There are other implications, should Chelsea be liquidated?  In this scenario, only two Premier League clubs would be relegated this season (so as things stand, Burnley would be saved). Further down the league, Oldham (currently second bottom in the Football League) would also escape relegation to the Conference.
The scenario facing Chelsea would not be dissimilar to what happened to Rangers. Rival fans would inevitably point out that the ‘Chelsea’ that won all the titles, had ceased to exist in 2022.  Effectively all the trophies won by Abramovich’s Chelsea would not belong to the history of the Phoenix club (although the ‘new Chelsea’ would inevitably claim them). It has often been a jibe that Chelsea ‘have no history’. Ironically, from the perspective of rival fans following a liquidation, that would no longer be a matter of debate, but instead would be a statement of fact.
For what it is worth, the only likely  where I can’t see liquidation happening is if Putin’s influence over Abramovich isn’t as strong as the government believes it to be – that in itself would be rather enlightening.

Neymar's PSG Transfer and the Break-Even test

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Neymar’s likely transfer to PSG clearly raises a number of FFP issues. UEFA’s FFP rules require club losses to be kept within E30m over a three-season period. Crucially for PSG, the test is retrospective and is based on the accounts for the three previous seasons. We should probably disregard the stories about Barcelona asking UEFA to carry out an immediate FFP investigation; for one thing, there is no facility within the rules for one club to lodge an appeal against a potential breach of...

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'Profit and Sustainability' (FFP) tests in Championship 2016/17

March 10, 2017

Along with Death and Taxes, you can be certain that there will always be new set of Financial Fair Play rules to get your head around. This is actually my second attempt at explaining this season’s rules in the Championship – my effort to 23 December contained an error so I’ll start this one again. I am particularly grateful to Mike Thornton (twitter: @AdrianTeakdesk) for identifying the issue and for his input into this new article.

New Rules

This season (2016/17), new ‘Profitability a...

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Premier League update their FFP rules

April 25, 2016

Premier League clubs have voted to continue their Short Term Cost Control (STCC) rules; updated rules will come into effect from next season (2016/17) and will apply for three-year duration of the next TV deal.  The STCC rules first came in three years ago and are designed to help ensure sustainability of the top-flight clubs by ensuring that clubs don't spend the TV deal on hugely increased wages.

Clubs will be able to increase their wage spend by £7m each season from 2016/17 to 2018/19 (an ...

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January 31, 2016

It’s not a popular view but; all credit to FIFA. It must have taken some guts to investigate and then impose transfer bans on Real Madrid and Atletico Madrid for contravening their rules on signing players aged under 18. The rules are in place to prevent clubs from hoovering up young, mainly impoverished teenagers, then transporting them round the world in the hope a few of them can make a profit for the clubs and agents.

Under FIFA’s Article 19, the only scenario that would permit a playe...

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Leicester accused of 'creative accounting' in bid to avoid £8m charity bill

January 13, 2016

OK, admittedly, the above headline has been deliberately created for maximum impact (and to make a point). However it is not with some validity - I will explain.

During their promotion season, Leicester spent heavily (by Championship standards) on wages. When you exclude around £9.4m of bonuses paid for gaining promotion, their wage bill was just short of £27m (for comparison Derby’s last reported wages were £13.5m).

The Championship FFP rules in place when Leicester were promoted (2013/14...

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Premier League Profit & Sustainability rules for 2015/16

January 4, 2016

Premier League Profit & Sustainability rules for 2015/2016 4 Jan 2016

For the current season (2015/16) there are two elements to the Premier League’s financial constraint regulations. The rules can be found within the 2015/2016 Premier League Handbook.

The Premier League shy away from calling these rules ‘Financial Fair Play’ but they have pretty-much the same aim: a set of rules and regulations to ensure financial sustainability. The two elements are:

1. Profit & Sustainability

2. Short Te...

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Platini announces FFP rules to be 'eased

May 18, 2015

The announcement that FFP rules are to be 'eased' has left both critics and supporters of the rules wondering what this means for the European football.

The FFP rules and their concept of 'break-even' look set to stay, but crucially, the rule that prevents a wealthy owner from injecting cash into the club to fund losses appears about to be scrapped. In many ways this isn't hugely surprising; UEFA's 'sustainability' argument always looked the most vulnerable in respect of a wealthy benefactor ...

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QPR's accounts released and heading for £50m fine

March 14, 2015

QPR’s controversial accounts were released this week.  As anyone following this story will be aware, the club recently announced profits via a vague Press Release which claimed that surprisingly low losses of just £9.7m had been made in 2013/14.  A number of people raised questions about how this could have been achieved without some accounting ‘slight-of-hand’ (see my previous article).

Now we have the accounts, it transpires that the club owners wrote off £60m in loans and classed th...

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QPR figures not all they seem

March 2, 2015

QPR issued a press release on 2 March to announce that the club had improved on losses of over £65m in 2012/13 and had made losses of just £9.8m in 2013/14.  Not only that, but the owners had paid off loans of £60m. On the face of it, a terrific improvement and stories about the club being hit by a £30-£40m FFP fine were clearly wider of the mark.  However, things are not quite as they may initially seem

The improvement was both stunning an unexpected. And as we know, when something seems...

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