…Orange you glad I didn’t say “Usmanov?”

Turns out Manchester United’s owner is a huge liar. Remember back in January, when ManU made the announcement that they were one of the most “profitable” teams in the history of the English Premier League? Well… they may have left a few numbers out of their calculations: £666 million numbers to be exact.

That’s the total debt that the Glazers have piled onto the club in order to acquire it. I’ll say that again, because I think it might be mildly important. “In order to acquire it.” Not to build the stadium. Not to invest in a youth program. Not to invest in the business at all. That is the money that Malcolm Glazer needed to borrow in order to buy the club.

I met a guy a few years ago. He was the proud new owner of a video rental store. I rented movies from him because he was close and cheap. (Kids: back in the old days, we used to rent movies recorded on magnetic tapes called “VHS Tapes” these “tapes” were rented by stores because we couldn’t download the movies, there was no video on demand, and there was nothing like Netflix) I think I was drunk one night and started chatting with the guy about how he was the only one ever working there and how did he get the money to open a business. A bit gosh, sure, but like I said I was drunk. Anyway, it came out that he had financed the whole business on credit cards.

Now, I’m no business guru and I’m sure that given a proper business model, one could use credit cards to open, run, and build a proper business. But you still have to take a strong look at any business that is so desperate for credit that they have to pay super high interest rates for someone to loan them money. Predictably, the Video Tape guy went out of business a few months later. I guess he’d forgotten that creditors eventually want their money back, or that at the very least you have to make the payments or they will cut you off. These creditors are smart like that sometimes.

If you read that article about Man U, there’s something in there that should send a chill down the spine of any supporter who’s club has been recently acquired through debt or who’s club is under threat of hostile takeover. It turns out that Man U owes £88m per year in interest payments but they are only able to pay £42m. The remainder of that money is being rolled into a high interest hedge fund, into which fans are paying 14% interest. Currently, that hedge fund is bloated to £152m and due to the global credit crunch, even United are unable to re-finance that fund into a lower rate. Maybe if they could make their payments they could get a lower interest rate, who knows.

I’m not saying that United is going to go out of business. I don’t know what’s going to happen to United. I do know that a lot of fans are either hiding their head right now or justifying the huge debts. I’ve even heard United fans say that they could simply “sell Ronaldo” and pay off the debt. Remember that video tape rental guy? Right before he went out of business, he sold all his video tapes. How are you supposed to stay in business if you sell all your assets?

Similarly, without Ronaldo how are you going to win trophies? How are you going to sell jersey’s? Ronaldo earns United money right now, you don’t sell your earnings, you get rid of your debt.

That’s where Arsenal comes into this story. Arsenal rang up something on the order of £300m in debt to build the new stadium. Unlike a hostile takeover, however, this new stadium is widely referred to as a “gold mine” for Arsenal as it has nearly doubled Arsenal’s gate receipts; Arsenal earn £3m per home match now. And there are some 41,000 people on the waiting list to get season tickets — season tickets which are the most expensive in the Premier League.  With these new revenues and such a large and loyal fan base, Arsenal are now also the fourth most profitable team in the world. So, Arsenal, the club, borrowed £300m in order to build an asset that will (hopefully) have a greater future return. That’s just smart business.

Once the Highbury redevelopment projects are completed, the debt on the new stadium will be paid down, and Arsenal will be the most profitable team in the world… hands down, no question about it. Which is why Arsenal have vultures circling Emirates stadium. Usmanov is currently paying double what other owners would be willing to pay for shares in Arsenal. The normal gate to share price is 1.5; Usmanov is paying 3.3 times gate in order to acquire the club. Why would he do that unless he saw a way to recoup that money? I’d say his willingness to pay such a high premium for Arsenal shares is proof that Arsenal’s board are on the right track as far as club finances.

The only problem, from a fan’s perspective, is that these are lean times. The world financial situation has been destabilized by a combination of war, a falling dollar, American lending deregulation, and speculative (foolhardy) lending and building practices. Arsenal is a global enterprise and global financial problems hit them just like all the other global businesses. Add in that the Highbury project is, essentially, a luxury condo project and you could see potential for troubling times ahead.

So, it should come as no surprise that the other day, Wenger and the club finally admitted that the transfer budget over the last few years has been slashed because of that stadium debt. Also, it should come as no surprise that Arsenal are rigidly adhering to their wage structure and thus Flamini’s departure was inevitable.

This is business 101 boys and girls. When times are lean, you keep your most valuable assets intact (Fabregas), and trim unnecessary spending (Flamini, Hleb). Despite their success in building a stadium that nearly doubles their revenue, unforeseen market forces are preventing Arsenal from fully paying that debt down at the moment. So, the board tightens the belt a little and we all have to ride out this downturn by paying more for shirts, seats, programs, television, and probably annual membership dues.

But whatever you do, you don’t panic and bust out the credit card just to put caviar on the table. I hear a lot of fans, long term fans, people I respect, saying that maybe Arsenal should trade in a few years of mid-table mediocrity for a trophy right now. I’ve heard people saying that maybe Arsenal should bring in a sugar daddy to help buy players. But I think that Man U should be a warning to us: in their case a “sugar daddy” came in and “bought” players by simply piling more debt on the team. Now, that same team can’t even make their debt payments and are rolling that debt into a larger debt that’s generating 14% interest. The “richest football club in the world” can’t pay the interest they owe on their debt?  Something is seriously wrong there.

It’s almost like some rich guy bought a football club with his credit card.

Arsenal fans should just hold on, trust Arsene Wenger, and enjoy the beautiful football. Who cares if we don’t win a trophy for 5 years? Being an Arsenal supporter isn’t about winning something today. Being an Arsenal supporter is about being part of something great, something historical, something that will always win out in the end. We don’t need Usmanov, he needs us.  Because without fans who are willing to accept a bleak future for a few shiny baubles in the trophy case today, vultures like Usmanov and Glazer can’t profit.

See you tomorrow.

Arsenal 1-0 Everton: the Good, the Bad, the Ugly

The Good: a 1-0 winner. Arsenal haven’t had a 1-0 win since December 16th when they beat Chelsea at the Grove. Hell, they’ve only had 5, 1-0 wins in all competitions this year! So, to hear the fans proudly get to sing “one-nil-to the Arsenal!” was kind of fun. The defense kept a clean sheet and looked pretty good doing so. Some people will put it down to it being an “end of season game” but Everton was still playing for a UEFA cup spot and I think they wanted at least a point from the match. Other people might point to the fact that Arsenal won because Everton was missing Cahill and Arteta, which would be like if Arsenal were missing Fabregas and Flamini… which they were. So, full credit to the defense for the 1-0 win.

I’d also like to single out Alex Song here; he’s doing a hell of a job deputizing in central defense. He’s playing the role of attacking defender (watch how he’s very aggressive on defense) to a tee and his understanding of how that position works belies his years. But the thing I think I was most impressed with was his forays forward. There was one play where he carried the ball forward, dribbled around the midfield, and then played in a very neat ball. I have to wonder aloud if he’ll be the person to fill Flamini’s shoes? I guess we’ll find out, that will have to be one of the stories of next season won’t it? A 20 year old taking over holding midfielder? That would be a hell of a story.

Jens… At the 70th minute, Wenger subbed out Fabianski and put in Jens Lehmann for his very last appearance for Arsenal. Thanks Jens, you crazy f*cker, I’ll never forget the Champions League run, the unbeaten season, or any of a half dozen crazy antics that you pulled. Hats off to you for all you’ve done. After the match an emotional Jens had this to say

My biggest memory was probably the Real Madrid game at home, when we played 0-0. Then of course the FA Cup Final and then there was the game we became champions at Tottenham. I was together with Sol Campbell we were the only players who felt disappointed in the dressing-room because we didn’t know we were champions by this time. We had conceded a goal just at the end and it finished 2-2. That was a very, very emotional moment for me. But, I said before, there are more memories than only just playing, there is the reception of the supporters. The respectful kindness of the supporters.

Oh hell, you big softie, come here and get a hug.

In the what the hell? Traore was off the hook as left winger. He came on about the same time that Jens did and made an immediate impact on the match. Is this another preview of next season? If that’s the case, Arsene will have Eduardo, Traore, Hleb, Vela, Walcott, Rosicky, Diaby, and Eboue to fill the wing spots. I think buying a winger is right out. Especially if Traore can play like yesterday for a good spell of games. He looked fantastic and was the one who put in the cross that Bendtner lazily headed home. It was a shockingly good display from the left wing. Color me pleasantly surprised.

The Bad: HEY! Why didn’t Cesc play on his birthday? Too damn hungover? Don’t give me that “he’s injured” crap, I got my Fabregas kit out, waited until 8 am to watch the game on tape delay, I wanted to see him play! Damnit. Oh well, happy birthday little buddy, I guess I’ll have to adjust my phrase now and start saying “he’s only 21.”

Theo. It just seems like his teammates don’t look for him. Forget about the fact that he didn’t have a very good game, it wasn’t his best performance. There were several times where Theo would be wide open and his teammates would look for someone else to make the pass to. Maybe he’s not getting himself into the right position to receive the ball, I don’t know. But it looks to me like his teammates are freezing him out and that’s a really worrying sign. I’d hate to lose the kid as I think he’s going to be a real special talent. Hopefully, the off season will get him up to speed and get the team looking for him.

Bendtner had a nice Sunday stroll, sniffed the flowers, sunned himself in the 18 yard box, found a ball and headed it home. Then he needed a nap, the exertion of scoring the goal was too much excitement for him.

The Ugly: Following AC Milan’s triumph over Inter in the Milan derby and subsequent securing of fourth place and thus, Champions League football for next season, Matthieu Flamini fucked off to Milan for a physical and to try some of their famous gelatto. I’ll say good luck for what you delivered in your time at Arsenal but I’ll also say that I hope your replacement gives you a good lump when we meet Milan in the Champions League next season.

Arsenal have successfully drummed it into our heads by now that there isn’t any money for transfers. It’s now looking like £25m… minus any contract renegotiations. With Wenger focused on trying to save Hleb and Gilberto that means one signing, max this summer. This isn’t ugly to me, but I fear that some of the bandwagon Arsenal fans might turn up the heat on Wenger and Arsenal and that might get ugly. I heard some Everton supporter saying that people are calling for Wenger to get fired. That’s a load of Tottenham, that is. I don’t know a single real Arsenal supporter calling for the termination of the greatest manager that Arsenal have had in the modern era. So, let’s put this ugly rumor to bed: Arsene Wenger has a job for life at Arsenal. He has been instrumental not just in football terms (winning 7 major trophies) but in terms of doing what the board need in order to make Arsenal a club that can not just survive but compete against billionaires. Wenger isn’t going anywhere, folks. This crap about him wearing out his welcome is either Tottenham propaganda or spread by people who LITERALLY have Spurs for brains.

So, if you’re one of those people, please stop for Christ’s sake.

See you tomorrow.

"We are not Chelsea"

Yesterday, Arsene Wenger reminded everyone of the character, history, and intent of Arsenal Football Club. His simple,clear, concise statement was “We are not Chelsea.” It’s a simple statement and yet answers several fairly complex questions. What is the purpose of the club? Why can’t Arsenal just give Flamini what he wants? And, what should fans expect from the offseason?

I remember feeling very disappointed with the club a few years ago. It seemed like every player that Arsenal were linked to went to Chelsea — and for double the price that Arsenal were offering. Shaun Wright-Phillips, Essien, etc etc. all signed big money deals with Chelsea. What was worse about it is that Chelsea was winning titles too. Instinctively, I wanted Arsenal to match Chelsea tit-for-tat in the transfer market; capture a big name and get back to winning titles.

But we are not Chelsea.

In order to attract those players Chelsea had to offer huge transfer fees and pay extraordinary salaries. All of that liberal spending led to the revelation in December that Abramovich has written off a stunning £270m in debts. That was in addition to the £440m he is estimated to have spent acquiring the club. What’s a billion pounds to Roman? 1/10 of his fortune, that’s what.

I understand what Abramovich is trying to do: he wants to make Chelsea into a footballing world superpower. He figures that if he spends enough money now, he’ll be able to build the brand up and sell enough tee-shirts and other swag to make up for it all in the long run. Maybe that will work, maybe not, I’m not privy to the Chelsea books so I can’t say for certain. But Wenger brings up a great point; “what if he dies?” Forget dying, what happens if he just loses interest or if he starts to see that his investment could never possibly pay off?

This is important because all of these huge salaries that Chelsea are paying are being leveraged through debt instruments (bonds) against the club. The Chelsea board assures the fans that Roman is trusted never to ask for those bonds to be paid. But if something happens, and lets say that he honors his “promise” and doesn’t collect those bonds, there’s still these enormous salaries being paid which the club — even with all their recent success — cannot afford to pay.  If they could, they would be piling hundreds of millions of pounds into bonds every year.

You can see how the situation could get out of control real quick: players sold (hopefully their worth what you paid for them!) the team slowly gets worse and worse, until one day you’re staring at relegation. From “top four” to bottom four in just a few years. That’s the scary prospect.

But we are not Chelsea.

Arsenal have a lot of debt from building the new stadium, Wenger puts it at £360m. This debt is currently the limiting factor on transfers, pay scales, and all the rest. Flamini was reportedly offered £144,000/wk in wages by AC Milan.  If those reports are to be believed, Wenger couldn’t pay Flamini £7.5m/yr if he wanted to because as soon as he did, he’d have half the team asking for more money and that would mean piling more debt on. So, until that debt gets paid down the wage structure must stay pat or as Le Boss says: “It is not that you cannot respect the wage structure, we cannot afford not to do it.”

There’s a light at the end of the tunnel. First, the new stadium is generating massive revenues. There are nearly twice as many people attending Arsenal matches than there were at Highbury. Even though the bigger stadium was a long-term investment it’s starting to pay off now: imagine what that payout will be in 10 years? Second, the old stadium is getting ready to help pay off a huge amount of that debt. I’m unclear on how this works but there’s something like £200m set to be released from the Highbury project and that will go straight to debt obligations. And third, Arsenal have Arsene Wenger.

You’re the reason for the first, keep up the good work and stay the course. Now is not the time to jump ship. The Highbury thing is just something that has to happen. I guess you could help, if you can buy a condo. But really, the club is in charge of that. And to the third, I trust Wenger to find the right players to make the team competitive. His ability there is unparalleled; just look at Bacary Sagna. There is no person I trust that end of the business to than Arsene Wenger.

So, in this off season, as I have said time and again, don’t expect any big signings.  If there was a local place that took propositions I would bet that Arsenal buys just one player.  And further bet that that person is someone obscure: another defender.  That’s it, anything else that Wenger does will be to keep the players he has.  With all this debt, it just doesn’t make good business sense to go out and buy some expensive player, just to appease a few cranky fans.

And in the end, that’s just it; Arsenal FC is being run like a business. Revenues generated are used to pay debts and then build the club. The Chelsea model is not being run like a business. It’s being run like the bank account of some dumb rich kid.

We are not Chelsea… thank God.