EPL clubs still seeking rich backers despite the global financial crisis

By David Conn, Special to SI.com, World Soccer

Streamlining West Ham this week sold Craig Bellamy to Man. City; the club was without a shirt sponsor as recently as last month. Bryn Lennon/Getty Images

Keith Harris, the prominent deal-maker for the many English clubs desperately seeking a takeover, spoke to the International Football Arena in Zurich, Switzerland, in November, warming to his theme that English soccer is in rude and cheery health.

He derided the public warning given by Lord Triesman, the FA chairman, that debts in the English game are up to $4.4 billion and "at high risk levels" in a global economic crisis. Harris scorned the challenges posed persistently by UEFA president Michel Platini, about where foreign ownership of clubs, dominance of overseas players and coaches is sending the game's English identity.

Harris, a City of London merchant banker, is wrestling with the financial downturn in his daily work, but he talked up the Premier League's fortunes, and described as inevitable the continued takeovers of clubs -- which, incidentally, he is paid handsomely to facilitate.

Yet speaking to journalists afterwards, a more nuanced picture emerged from Harris' experiences in soccer finance. He reflected that of the four most recent club deals he has introduced and worked on as the merchant banker (his first, Roman Abramovich's purchase of Chelsea, was in 2003), Aston Villa's takeover by the U.S. credit-card magnate Randy Lerner and Hull City's by English property investor Russell Bartlett, have gone swimmingly so far.

However, two others turned quickly into basket cases. Thaksin Shinawatra, the former Thai Prime Minister, was advised by Harris when he bought Manchester City for $31.6 million in June of '07. At the time, Harris and the club's directors rejected any suggestion that the longstanding allegations of human-rights abuses by Thaksin, even the corruption charges laid against him in Thailand and the freezing of his assets, meant a soccer club ought to be cautious about being owned by the man.

As it turned out, both Thaksin and his wife were found guilty on corruption charges and fled the country. Just before Harris gave his address in Zurich, U.K. immigration minister Phil Woolas refused the Thaksins permission to enter the country. "The briefing said, quite rightly, [Thaksin] has been charged with fraud and he's not a desirable person," the minister said -- a clear-eyed view of which soccer's custodians had been incapable.

Harris acknowledged that lessons should be learned, that clubs should not, after all, be sold to a person facing criminal prosecution. He accepted that his City deal had turned out badly and, admirably, didn't try to avoid the issue by pointing out that, in the shape of Sheikh Mansour of Abu Dhabi, truly one of the richest men on earth, it seems to have turned out happily ever after for the club.

Harris was also the banker when the very wealthy Icelander Björgólfur Gudmundsson bought West Ham United for $124 million in November '06. The club was not in financial difficulties; it had stabilized after relegation in '03, but only by selling what became half an England team: keeper David James, defender Glen Johnson, midfielders Joe Cole and Michael Carrick (Frank Lampard had gone to Chelsea for $16 million in '01) and striker Jermain Defoe. Chairman Terry Brown, never the first love of the Upton Park bubble-blowing faithful after that, made $64.4 million personally from selling his shares to Gudmundsson, who was to spend considerable money building the Hammers up.

Unlike the U.S. owners at Manchester United and Liverpool, Gudmundsson didn't fund his takeover with debt loaded on to the club. He paid cash, and then invested another $44 million into West Ham, much of which was spent in a rash of signings by the first Icelandic chairman, Eggert Magnússon, who was soon replaced.

Then, this autumn, the credit crunch bit, Iceland's bank-based wealth melted down and the wheels came off. Landsbanki, in which Gudmundsson's company had a 40 percent stake, was nationalized, losing him $366 million. Two of his other companies are in insolvency procedures, and much of his wealth is in Icelandic krona, which has collapsed. His advisor and West Ham's vice chairman, Ásgeir Fridgeirsson, didn't seek to make light of the extent of the damage. "Mr. Gudmundsson's fortune has been severely affected by the global credit crunch, and the extreme nature of things in Iceland of course put pressure on him as an investor," Fridgeirsson acknowledged.

It seems inevitable that West Ham will be sold; indeed, Harris expected to be instructed to do so, almost exactly two years since he sold it to Gudmundsson. Harris pointed out that "nobody could have envisaged" the scale and speed of Iceland's economic collapse which took Gudmundsson with it, but nevertheless this experience does suggest the road to salvation for a soccer club may not necessarily lie with being flogged off to an investor.

Harris cautioned that fans will have to accept that not all deals will go well in the turbulent current climate. He said, too, that likely buyers are hesitating now, wondering if this is really the right time to be buying what he describes as "essentially trophy assets."

Premier League soccer is still, as Sheikh Mansour described it when he took over City, "one of the greatest entertainment products in the world." But despite all the scorn thrown at Triesman, and Platini for their warnings about debt, the financial makeup of the leading clubs, in particular, is not above concern.

There is Abramovich, putting in $846 million as an interest-free loan to transform Chelsea. Premier League and European champions Manchester United owed, at the last accounts, $976 million, with swinging interest charges, the cost of being taken over by the Glazer family in '05. Liverpool has a $512 million facility with two banks which have been badly hit, Royal Bank of Scotland and Wachovia. Arsenal owes $381 million, borrowed to build the Emirates Stadium, and unlikely, in the current property slump, to reap the planned bonanza from the plush apartments it has built at Highbury.

The message seems to be that the Premier League, rich, international and all-conquering, still sparkles, but there's plenty of grit in the detail.

This article originally appeared in the January 2009 issue of World Soccer magazine. To subscribe, click here.