Five-star hotels, private jets and first-class catering are the minimum that the players of the European champion, a team that plays in the richest league on the continent, demand. But the sanctions imposed on Chelsea’s Russian owner Roman Abramovich have left his club with more prosaic problems to solve. “As long as we have enough jerseys and a bus to go to the game, we will be there and compete,” manager Thomas Tuchel said Thursday night after his side beat Norwich City in a day of off-pitch chaos.
After the UK nationalized Chelsea due to sanctions against Russian oligarchs, the situation is so dire that the team will barely have money for “the next two games”. The club is negotiating with the Government to obtain a little more liquidity and be able to continue fulfilling its sporting commitments, starting with the home game against Newcastle United on Sunday. According to the British press, Barclays has temporarily frozen all the club’s accounts, while it studies the conditions of the extraordinary license granted by the Government after its nationalization.
What has already been exposed is that Chelsea is unviable without the generosity of its hitherto billionaire owner, a reflection of a sport whose finances would sink almost any other industry. In short, it doesn’t matter how much something costs or how much money you have in the bank if you are prohibited from paying.
The most recent accounts show that the club’s budget is around 500 million pounds per season, which goes into everything from the VIP stand on match days to paying their players’ salaries. But the leonine conditions of the Government limit the London club to a budget of 500,000 pounds to host a game and 20,000 pounds to play away from home.
The new rules force Chelsea to limit the capacity of its Stamford Bridge stadium and stop selling merchandise. That means a hole of around £600,000 of revenue per match in tickets alone, according to Richard Moffat, an analyst at betting adviser OLBG.
The club cannot cover the cost of organizing a match, according to club sources. The team has some 8,000 VIP season ticket holders, who receive first class catering washed down with fine wines at each match. The government-mandated £500,000 must cover administrators, first aid and so-called club ambassadors, who are usually former players who entertain guests.
Abramóvich put Chelsea up for sale before being sanctioned, but the process was blocked on Thursday
Chelsea said on Thursday it was in talks with the government, pressing for them to change the terms. The immediate goal is to unlock enough money to keep trading until the end of the season. £20,000 to travel to an away game is too little for some games, especially Champions League games abroad.
A quick sale seems necessary to avoid the total collapse of the team. Abramovich put Chelsea up for sale before he was sanctioned and promised to donate the proceeds to help Ukrainian victims of the Russian invasion. However, on Thursday night, Raine, the bank advising on the sale, sent an email to all bidders who had indicated interest to inform them that the process was stalled. The government now has to approve a sale before it can go ahead.
The club has attracted interest from the likes of Todd Boehly, the former chairman of Guggenheim Partners, Josh Harris, co-founder of Apollo Global Management, and property developer Nick Candy.
Another option is to put the club into administration, an English process whereby an external accounting firm normally manages the club. Company directors are personally liable if they know the company is in dire financial straits and do not put it into administration. That would allow Chelsea, which sits third in the league, to keep going until the end of the season.
“At the moment the club has a salary bill of £28m a month and barely enough cash in the bank to see them through the next two Premier League games,” said Julie Palmer, regional managing partner at Begbies Traynor, who he took over the administration of AFC Bournemouth in 2008. “The question is what happens to the responsibilities beyond that point, and the club will eventually be forced to ask for some form of administration.”
Meanwhile, the sponsors remain in doubt. The sanctions prompted shirt sponsor Three to suspend his contract, which was due to expire this year. Other big sponsors include Nike and Trivago. A Trivago spokesman said on Friday that he would stay with the club in the hope of finding a buyer soon.
salary cost
But even so, long-term survival remains in question if a buyer does not emerge quickly. By far the biggest burden on football clubs is the players’ salary bill. Chelsea is prohibited from buying and selling players and accepting contracts.
Last year, the team’s cost of sales, which includes player salaries, amounted to 355 million pounds, files show. Romelu Lukaku, who joined in the summer from Inter Milan, is the top earner at £325,000 a week. Even more minor players like Timo Werner earn £270,000 a week.
At the moment, it is the short term that the club faces. After hosting Newcastle, the next two games are away trips, with French side Lille and Middlesbrough in the northeast of England. The trip to France was already booked. Now the question is how they will travel to their next meeting outside of London.
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