Is chelsea debt free?

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Post by Lord Hades Sat Jun 25, 2011 4:34 pm

i was on a debate on fb with some chelsea fans arguing bout the revenue that the club generates and apparently roman turned their debt into equity.. is it true .. here are some links

https://www.facebook.com/l.php?u=http%3A%2F%2Fwww.chelseafc.com%2Fpage%2FLatestNews%2F0%2C%2C10268~2055740%2C00.html&h=e89ad

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Post by EarlyPrototype Sat Jun 25, 2011 4:45 pm

No I think they are still in debt, but that wont stop them from spending.
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Post by Art Morte Sat Jun 25, 2011 7:38 pm

They are debt free, Abramovich has just been bankrolling them and turned his loans into equity and Chelsea aren't burdened by any sort of interest fees.
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Post by RealGunner Sat Jun 25, 2011 7:46 pm

roman cleared all their debt when he took over iirc
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Post by fatman123 Sun Jun 26, 2011 1:22 am

he cleared all our debts again a few seasons ago too and he paid for all off the torres and DL transfers, they went on chelseas balance sheet as gifts not expenditure
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Post by Kick Sun Jun 26, 2011 4:22 am

Yes we are, We'll have a small debt after we sped this transfer period though.

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Post by Messi Sun Jun 26, 2011 4:46 am

does man city have debt?
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Post by Art Morte Sun Jun 26, 2011 8:22 am

fatman123 wrote:he cleared all our debts again a few seasons ago too and he paid for all off the torres and DL transfers, they went on chelseas balance sheet as gifts not expenditure

Gifts, wtf man xD
It's expenses allright, signing players, just in this case the money was made available by Abramovich. But it all does show in the club's balance sheet.
"We've got no player trading expenses, we get 'em all as gifts." xD
Sorry man, couldn't resist Razz

Messi wrote:does man city have debt?

It should be noted that City are not quite debt-free yet, as they still have £36 million of outstanding loan notes and bank loans plus £39 million provided for future stadium rent, giving gross debt of £75 million. If cash balances of £35 million are taken into consideration, the net debt is only £41 million, which is still very low, though the accounts also reveal that City owe other football clubs an amazing £81 million, most of which falls due within one year.
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Post by M99 Sun Jun 26, 2011 10:55 am

From what I heard, Abramovich cleared their debts after he took over something, dunno.
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Post by fatman123 Sun Jun 26, 2011 12:08 pm

Art Morte wrote:
fatman123 wrote:he cleared all our debts again a few seasons ago too and he paid for all off the torres and DL transfers, they went on chelseas balance sheet as gifts not expenditure

Gifts, wtf man xD
It's expenses allright, signing players, just in this case the money was made available by Abramovich. But it all does show in the club's balance sheet.
"We've got no player trading expenses, we get 'em all as gifts." xD
Sorry man, couldn't resist Razz

alright business 101 (remembering all football clubs ARE businesses, even if they are horribly run)

a business exists as a separate entity to its owner(s) so in this case the accounts, finance, assets and debts of Roman are separate and completely unrelated to those of chelsea football club

as the owner of the business Roman has the right to invest unlimited funds into his business (chelsea FC) if he wishes, this is called owners equity and it is a debt of Chelsea FC which is to be repaid to the investor in the form of return on shares (this debt is considered by FFP as part of the 45mil allowance) although in the short term it becomes a cash asset of chelsea FC

so when a Roman clears chelseas debt what he's really doing is investing 100mil in owners equity, this then becomes a cash asset of Chelsea FC (remembering cfc and roman are separate entities) and Roman decides that on behalf of the owners he will act in their best interests to use the 100mil cash Chelsea FC has available to pay off its debts. Chelsea FC will pay back this 100mil in return on shares in the super rare occurrence it makes a profit (so invest your money in aresnal!). This technique is used when the investor wants his money back in the future, obviously he wont get it through return on shares but when Roman sells his stock in chelsea fc whoever he sells his share to and/or Chelsea FC its self will have to repay all the money (owners equity) roman invested

Ok so its similar sort of thing when roman wants to pay for a player on chelsea behalf but wants the money back in the future, again he invests owners equity and decides to use this cash in the best interests of the owner to buy player X, so Chelsea FC (not roman) uses its cash to pay for player X. Like with the debts the money invested by Roman goes down as a debt called owners equity on the balance sheet and will be repaid to Roman when he sells his share in Chelsea and/or through return on shares.

Now gifts are slightly different as the amount invested does not need to be repaid,
lets use torres as an example and assume Roman paid for all 50mil of the transfer fee, remember the accounts of roman and Chelsea FC are separate.
Roman would've taken 50mil from HIS account and paid that directly to Liverpool FC, not via the accounts of Chelsea FC. this 50mil goes directly to Lvierpool FC as Liverpool owned the rights of Torres not its owners. Now the rights of Torres are the property of Roman, not chelsea (this is how co-owner deals where investors are involved work eg Tevez was still owned by a company even after his united contract expired and city had to be this company a fee for his rights).

Now what happens now is Roman decides to gift the rights of Fernando Torres to Chelsea FC. After this happens the rights of Fernando Torres appear as an asset on Chelsea FCs balance sheet but because $0 in owners equity was invested into Chelsea FC, there is no debt to be repaid to anybody and as far as Chelsea FC are concerned Fernando Torres was bought for free!

And thats how you used to be able to gift players to clubs, the owners of Man City used to use the same method

Although under FFP there is a limit to the value of gifts on a clubs balance sheets (cant remember the figure but its really low) and because of that the "gift method" cant be used to undermine FFP

before some asks, the reason clubs havent made all their transfers using "gifts" in the past is because mainly because their owners cant afford to do it but also because the clubs believe they can recoup the transfer fee somehow else (CR7s fee was completely repaid in CR7 shirt sales)

yesterday the owners of Juve used the first technique and invested owners equity into Juventus FC and now they've got a large transfer kitty available without the club having to generate the funds itself, obviously it was much more complex then that but you get the idea

Im sure all thats right but if im wrong please let me know



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Post by Art Morte Sun Jun 26, 2011 3:27 pm

Ooookay, dude... I'm absolutely sure that that sort of gifting isn't legal under Premier League's rules, but since don't feel like going searching for those rules, I'm just gonna ask this: How come Chelsea's all previous transfers have been marked down in their balance sheets as Player Amortisation expenses and have greatly counted towards Chelsea's massive losses during Abramovich's era if they can simply get all their players as free gifts?

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Post by fatman123 Mon Jun 27, 2011 7:04 am

Art Morte wrote:Ooookay, dude... I'm absolutely sure that that sort of gifting isn't legal under Premier League's rules, but since don't feel like going searching for those rules, I'm just gonna ask this: How come Chelsea's all previous transfers have been marked down in their balance sheets as Player Amortisation expenses and have greatly counted towards Chelsea's massive losses during Abramovich's era if they can simply get all their players as free gifts?


the reason any business wont completely fund itself via "gifts" is because
1. its unsustainable. If roman himself goes bankrupt or decides to sell his share in Chelsea FC, the business would be screwed as its primary source of capital is lost
2. its immoral/unethical to run a business purely off gifts, believe it or not, people like Roman DO have some sort of morals
3. and perhaps the most obvius, Roman doesnt get his money back if he funds he business 100% from gifts as nothing is owed to him, like i said in my other post so why would anybody invest in a business that wont give them ANY return on investment?

and thats why pretty much every transfer bar torres and DL (Sheva may have been a "gift" too) has been marked down as an expense of Chelsea FC

As for the leaglities of it all, under PL rules co-owner ship is illegal so the owner cant hold onto some share of the player, another disincentive and under FFP the amount of "gifts" a business can have is limited

so whats why Chelsea or nay other club hasn't been fully financed by gifts and never will, hopefully that answers ur question
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Post by Lord Hades Wed Jun 29, 2011 9:31 am

http://www.scribd.com/fullscreen/55741334

this site says that chelsea carried 29 percent of the epl's total debt Neutral
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Post by iNFINITY9910 Wed Jun 29, 2011 10:20 am

That site is BS apparently Smile
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Post by BeautifulGame Wed Jun 29, 2011 11:38 am

I read in an article in Guardian a year back that Chelsea is in a way debted to Roman.Some sort of bonding were all the money invested by Roman has legal underwritings against the Chelsea FC.

I cant remember it exactly but it was when the H&G saga in our club was at its peak.I just cant find the article now and can only remember vaguely.So i might be completely mistaken too.
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Post by Guiltybystander Wed Jun 29, 2011 11:49 am

Hahahahaha, gifts?

"Oooooooh, you shouldn't have done that! But I have always wanted a Torres for my birthday!"

:flower:
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Post by El Chelsea Fuerte Thu Jul 07, 2011 12:38 am

BeautifulGame wrote:I read in an article in Guardian a year back that Chelsea is in a way debted to Roman.Some sort of bonding were all the money invested by Roman has legal underwritings against the Chelsea FC.

I cant remember it exactly but it was when the H&G saga in our club was at its peak.I just cant find the article now and can only remember vaguely.So i might be completely mistaken too.

immediately afterwards the club gave a statement that they owed nothing to roman and that roman clearedc all debts from transfers etc

so yes were debt free

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Post by SUPERCARTTS Thu Jul 07, 2011 1:00 am

The bottom line is that Chelsea probably couldn't sign a player over £10m using their own bank account...without a gift from Roman Laughing
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Post by El Chelsea Fuerte Thu Jul 07, 2011 1:02 am

SUPERCARTTS wrote:The bottom line is that Chelsea probably couldn't sign a player over £10m using their own bank account...without a gift from Roman Laughing

And you know that because you're one of our accountants right?


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Post by SUPERCARTTS Thu Jul 07, 2011 1:07 am

english_jewel wrote:
SUPERCARTTS wrote:The bottom line is that Chelsea probably couldn't sign a player over £10m using their own bank account...without a gift from Roman Laughing

And you know that because you're one of our accountants right?


Dude, come on! Read between the lines; essentially, the majority of your 'major signings' are so called "gifts". Now, let's look at it this way- if Abramovich stopped sponsoring Chelsea, I would be a surprised if you broke even, whilst operating at the rate that you do.

Thank you for listening.
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