Injuring Chelsea FC is an interesting way to make a point towards Putin

Outside Chelsea FC’s Stamford Bridge stadium, graffiti has appeared on a set of hoardings.

“Leave our club alone,” read the rippled spray can writing, “Europe is funding the war – not the CFC.”

The message was a direct objection to the unprecedented sanctions the club was hit with last week by the British government.

The action taken against Chelsea owner Roman Abramovich has effectively prevented him from bringing in any significant capital, ticket sales are banned, TV money is frozen and merchandise cannot be sold.

Prime Minister Boris Johnson explained that the stunning development was part of efforts to speed up sanctions against oligarchs the UK deemed aligned with the Russian government.

“There is enough connection, enough connection between the Putin regime and the individuals in question to warrant action,” he told Sky Sports.

Abramovich was in the process of trying to sell Chelsea and it seems unlikely the British state’s decision to act now was unrelated.

Although the oligarch promised “all net proceeds from the sale [would] be given for the benefit of all victims of the war in Ukraine,” Westminster Powers intervened before a deal could be reached.

The question is, what is the UK government’s objective in blocking the sale?

Count on money in the bank

With all their ways of making money restricted, Chelsea are in a tough spot.

As any accountant will tell you, it’s not revenue, profit or loss that businesses rely on, it’s money.

If cash is not flowing through a business properly, even the most successful businesses can quickly collapse.

Premier League clubs need a lot of money because their expenses are remarkably high, due to high player salaries.

In Chelsea, weekly salaries are in the region of $195,000, which is a heavy cost to bear even in times of plenty.

Fortunately for the team, its cash position, according to its latest accounts for the year ended June 30, 2021, is relatively healthy. The club’s cash in bank and cash was $20 million.

Based on this figure, the club would be able to cover the cost of wages on their own for at least 10 weeks.

But other bills will have to be paid during this time and the huge expense of staging games at Stamford Bridge. So a critical point could come sooner.

Chelsea, like many businesses, will be used to having times when the money coming in and the payments going out don’t quite match and it has to borrow money.

In the past, the club, unlike other companies. who has to borrow money from the bank, could call on the wealth of its owner Roman Abramovich through his company Fordstam Limited, Chelsea’s ultimate parent company, for funds.

The amount requested by the club varies, last year its net borrowing was around $24m, but during the Covid-19 hit in 2020 it was as high as $324m. Not everything was loaned out by Abramovich, but a lot of it was.

It is quite enough to cope. But there have also been reports that corporate credit cards have been temporarily suspended, while business partners Three and Hyundai have withdrawn their sponsorships following the sanctions.

What happens when the money runs out?

If Chelsea find themselves in a position where they are unable to cover their outstanding commitments and pay their creditors, they risk having to go into administration. When an outside accounting firm steps in to manage the business on behalf of creditors.

It’s a possibility that some experts expect to emerge soon.

“I don’t think they have enough money in the business, without the support of the owner, to meet their ongoing obligations, such as paying players. I suspect administration will be on the table soon. “said a football finance expert at Sheffield Hallam University. Independent newspaper.

Before adding; “If that happens, player sales would be allowed, but you would expect them to be at a much lower value. The administrators’ role will be to pay creditors, a task made easier [because] Roman Abramovich would not be one, because the shareholding is diluted under administration.

But it’s not like a normal administration, where a failing company has lived beyond its means. This is the result of the sanctions, so the question is; would the UK government sign some sort of deal where the club was sold but Abramovich did not benefit from the sale?

It’s hard to know. Putting Chelsea in this situation is a public way for the British state to show that it is serious about its sanctions against the Russian oligarchs.

However, you must be wondering what the ultimate purpose of this is. Chelsea’s administration is likely to cause far more grief in west London than in the Kremlin.

It’s a point London Mayor Sadiq Khan made when he described fans as “completely innocent” in the whole debacle.

“It’s important to separate Chelsea and what’s happening in Ukraine,” he said. “They were a big club before the current owner and they will be a big club after the current owner.”

Comments are closed.