Football spending dangerous game

MORRIS DALLA COSTA, QMI Agency

, Last Updated: 9:52 AM ET

Football's financial doomsday is close at hand and it's about time.

It has been predicted for several years. The wanton spending by big-market teams in not only the English Premier League but also La Liga in Spain and in previous years Italy's Serie A, has many of those teams on shaky financial footing. Their debt is staggering

The January transfer headlines are more often than not dominated not by players changing teams but by team ownership indicating that there will be no major purchases made in this window. There isn't enough money.

That type of restraint may be too little, too late.

Liverpool may be forced to sell assets, including players, to deal with their debt issues. Manchester United is trying to raise money through a bond issue. They are by no means the only teams troubled by spending patterns practised so that their teams remain highly competitive. It is the proverbial vicious circle. They spend more to stay competitive, forcing them into further debt so that they need to spend more to stay competitive enough to pay that debt.

SERVICE ITS DEBT

That is no more evident than in Manchester United's disclosure to potential investors. Last year, United sold Cristiano Ronaldo to Real Madrid. It did so in order to service its debt.

United paid $60.9 million in interest on their debts in the past financial year. Ronaldo's sale turned a $53.1-million loss into a $80.5-million profit. But the $1.1 billion still exists and the interest will continue to accrue.

In the prospectus for potential investors in the bond issues, United delivers a snapshot of what ails big-spending football teams.

"In the Premier League, recent investment from wealthy team owners has led to teams with strong financial backing," the document says. "Other European football clubs are spending substantial sums on transfer fees and player salaries.

"Competition has led to higher salaries for our players as well as increased competition on the field. The increase in competition could result in our first team finishing lower in the Premier League ... and jeopardizing our qualification for or results in the Champions League, (which) could materially adversely affect our match-day, media and commercial revenues and our overall business."

None of those big spending clubs is pleased by UEFA president Michel Platini's push for a spending cap.

"UEFA has proposed certain spending restrictions on clubs participating in the Champions League and Europa League competitions," the United documents continue. "There is a risk that ... the 'financial fair-play' initiative could limit our ability to acquire or retain top players ... materially adversely affect the performance of our first team."

It shows how far gone some of these teams are.

At a time when teams should be talking about restraint, they are talking about spending more money.

It is becomes increasingly difficult to understand how these teams are so blind to the financial meltdown that is on their doorstep.

Owners aren't the only ones with their heads stuck in the clouds. Fans and players scream for owners to buy more players.

Restraint is a word they all refuse to acknowledge.

Well, it's going to be forced on them. Their financial house of cards is going to collapse.

It will be a good thing.

With all the risk factors in today's economic times, major investors will not be spending money on football clubs that provide debt and little financial return.

There won't be more money to play with. Teams will have to sell assets (players) and by default, a competitive balance will be restored. UEFA will install a spending cap.

Teams used to winning all the time and getting everything they want will have to settle for much less.

It is a good thing.

MORRIS.DELLACOSTA@SUNMEDIA.CA


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