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The Jolly Roger

January 14, 2010
This is a year of big turmoil in British football. (Okay, soccer, if that’s what you call it.) In Scotland, it seems that Rangers are being run by the bank; although they deny it, their present financial policy would be the same if they were.
In England, Liverpool are in free-fall, on the pitch and off; it is rumoured that  Rafa Benitez is still in post only because his new contract is so good that the club can’t afford to sack him. That’s how clever the two American owners are. Nice people too. The son of one of them has just had to resign from the board after a seriously abusive email to an enquiring fan. Man U, arguably the most famous club in the world, are in bother too. So why should this be? What is the background to this crisis for two massive institutions, with their global built-in customer bases?
Answer? In my view, it’s UK company law. In theory, you or I, if we were opportunistic bastards, could go out and buy, let’s say,  Chelsea or Spurs, with nothing more than a business plan and a glib tongue. The legal apparatus in Britain allows people to buy a debt-free cash rich plc entirely with borrowed money and then lets them secure that borrowing against the purchased asset, just like a mortgage on a house, but with one big difference. The asset itself funds the interest on the loans, and their repayment. That’s what the Glazer family did with Man U, and Hicks and Gillett with Liverpool.
None of them actually own a stick. In reality, their lenders do; they simply let them hold titles, wield the power, and take millions out of the businesses. Man U’s debt is said to be £700m; some of its money has gone  to the Glazers in ‘management fees’, but it seems that the company is being drained of cash simply to fund the borrowing with which they ‘bought’ it . Of the £80m they took from the  Ronaldo transfer to Madrid, 40% has gone to offset a loss. How are  they going to trade their way out of that position? The answer is . . . they’re not. At the bankers’ private insistence, assets, including players and property will be sold, and the club will be significantly weakened.
What needs to happen? In my view, three things, and this model should apply to other situations; one, the Glazer family should be held personally responsible for its borrowing, two, the shares of  the company should be offered for sale to supporters, privately and in associations and trusts, and three, its constitution should then be altered to mirror those of Real Madrid and Barcelona, where the executive head of the club is elected by its owning membership.
Mega-rich buyers of football clubs are one thing. Corporate pirates are another. Something has to be done to clear them out. There was a time when Tony Blair was happy to be seen on the training ground with Sir Alex Ferguson. Football needs government intervention now, to plug this loophole, but its political friends are nowhere to be seen.
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