Hot topics close

Life after Abramovich: Can Chelsea avoid administration?

With a wage bill running into the tens of millions every month, analysts estimate Chelsea have enough cash in the bank for just two more Premier League fixtures.
By David Hellier and Irene Garcia Perez
March 12, 2022 — 4.41am
Normal text sizeLarger text sizeVery large text size

Top hotels, private jets and meticulous catering are just part of the package for a footballer playing in Europe’s richest league. The sanctions imposed on Chelsea’s Russian owner Roman Abramovich have left one of the world’s most successful clubs with rather more basic things to figure out.

“As long as we have enough shirts and a bus to drive to the games, we’ll be there and will compete hard,” head coach Thomas Tuchel said on Thursday night after his team had beaten Premier League struggler Norwich City.

Sam Kerr scores for Chelsea in the FA Cup final against Arsenal at Wembley in December

Sam Kerr scores for Chelsea in the FA Cup final against Arsenal at Wembley in DecemberCredit:Getty

The UK’s freezing of Abramovich’s assets casts a long shadow over the current European champions – and what happens next is still being decided.

The club is in talks with the government about ensuring it can continue to fulfil games, starting with its home tie against Newcastle United on Sunday. Heavily in debt and reliant on Abramovich to pay player wages, the obvious question becomes: can the club avoid going into administration?

Chelsea is unviable in its current form without the largesse of its billionaire patron, a reflection of a sport whose parlous finances would sink just about any other industry. In short, it doesn’t matter how much something costs if you haven’t got the money.

The latest accounts show it costs the club about £500 million ($893 million) a season to run, including everything from running matchday hospitality to paying the eye-watering salaries of its players – among them Matildas captain Sam Kerr.

Roman Abramovich in the stands at Stamford Bridge.

Roman Abramovich in the stands at Stamford Bridge.Credit:AP

The London club is now limited to a budget of £500,000 to host a game and £20,000 to play away from home.

Under the license from the UK government, Chelsea has to limit fan attendance at its Stamford Bridge stadium and stop selling merchandise. That means it would lose about £600,000 of income every game based on tickets that now will remain unsold, according to Richard Moffat, an analyst at betting tipster OLBG.

Advertisement

The club can’t cover the cost of what it takes to host a match, a person familiar with the situation at Chelsea said. The club has about 8000 corporate season-ticket holders, many of whom enjoy hot meals and fine wines. The £500,000 mandated by the government needs to cover stewards, first aid and so-called club ambassadors, who are usually past players who come back to entertain guests.

Such risks to a club should a rich benefactor leave were highlighted in a recent review of the sport by a former sports minister, said Kieran Maguire, lecturer in football finance at the University of Liverpool.

The conclusion was “that too many football clubs are owned by one owner where they are only one decision away from a catastrophe if the ownership can no longer subsidise the club,” he said. The crisis at Chelsea has strengthened the argument for an independent football regulator, he said.

Chelsea said on Thursday it was in talks with the government, pushing to have the conditions amended. The immediate aim is to work out how to carry on operating until the end of the season.

The sum of £20,000 to travel to an away game is expected to be too small for some matches, especially those abroad in the Champions League.

The UK government is open to discussing amendments to the license, but there are unlikely to be major changes, according to a person familiar with the matter, speaking on condition of anonymity. The government is trying to strike a balance between preventing Abramovich from benefiting from the asset, while not penalising fans and players. Conversations with the club are ongoing.

A leaked government document highlighted the value of the club to the Premier League pyramid and to the British sporting and cultural environment.

A quick sale is looking necessary to avoid total meltdown at the club. Abramovich put Chelsea up for sale before he was sanctioned and promised to donate any profits to help Ukrainian victims of Russia’s invasion.

Yet on Thursday night, New York-based Raine, the bank advising on the sale, emailed all bidders that had registered an interest to advise them that they were pausing the process for 24 to 48 hours. The government now has to approve any sale before it can go ahead.

Romelu Lukaku, Chelsea’s highest paid player, in action against Arsenal.

Romelu Lukaku, Chelsea’s highest paid player, in action against Arsenal.Credit:Getty Images

Chelsea attracted interest from the likes of Todd Boehly, the former Guggenheim Partners president, Josh Harris, co-founder of Apollo Global Management, and property developer Nick Candy. For one, Candy is still keen. “We are examining the details of [the] announcement and we are still interested in making a bid,” a spokesperson for Candy said.

Another option is putting the club into administration, an English process whereby an external accounting firm typically runs the club. Company directors are personally liable if they are aware the business is in a desperate financial situation and don’t place it into administration. That would allow Chelsea, which sits third in the league, to keep running.

“At the moment the suggestion is the club has a wage bill of £28 million a month and has sufficient cash in the bank to fulfil the next two Premier League fixtures,” said Julie Palmer, regional managing partner at Begbies Traynor, who dealt with football club AFC Bournemouth’s administration in 2008.

“The question then is what happens with the liabilities beyond that point and whether it pushes the club towards some form of administration.”

Meanwhile, sponsors remain in doubt. The sanctions prompted shirt sponsor Three to suspend its contract, which runs until 2022. Other big backers include Nike, which is believed to be reconsidering its links with the club. A spokesperson Trivago, the online hotel search website that also sponsors Chelsea, said it was sticking with the club in the hope a buyer would be found.

But that calls into question the longer term if a buyer doesn’t emerge quickly. By far the biggest burden on football clubs is the wages bill for players. Chelsea is prevented from buying and selling players, or agreeing new contracts.

Last year, the team’s cost of sales, which include player wages, amounted to £355 million, filings show. Romelu Lukaku, who joined last northern summer from Inter Milan, is said to be the highest earner on £325,000 a week. Even a more peripheral player like Timo Werner is reported to earn £270,000 a week. Chelsea’s accounts show it had £16.3 million in cash as of June 2021.

For now, it’s the short term the club has to confront. After hosting Newcastle, the next two games are away – firstly to French side Lille for the Champions League and then to Middlesbrough in north-east England for an FA Cup fixture. How they get to future games remains in doubt.

Bloomberg

News, results and expert analysis from the weekend of sport sent every Monday. Sign up for our Sport newsletter.

Most Viewed in Sport
Similar shots