Debts could see top clubs excluded

UEFA CHAMPIONS LEAGUE:CHELSEA, LIVERPOOL and Manchester United could face exclusion from the Champions League - on the grounds that they hold excessive debt - under plans to be drawn up by Uefa next week.

The European game's governing body have set up a working group that will meet in Geneva on Monday to discuss how to extend their licensing system and restrict the level of debt a club is permitted to operate with. Currently the financial stipulations in Uefa's system are limited to bans on clubs who have outstanding debts on transfer payments. It also states that staff should be paid on time.

But the proposals being drawn up by Uefa general secretary David Taylor and president Michel Platini would see the system delve far deeper into the financial workings of clubs.

"The ultimate sanction is not to be in our competitions," Taylor said yesterday. He explained that debts fixed against assets, for stadium building, are considered more acceptable than those run up in the acquisition of playing staff or for takeovers. He explicitly confirmed this means clubs such as last season's Champions League finalists, Manchester United and Chelsea, and one of the semi-finalists, Liverpool, unless they are able significantly to reduce debts.

"It won't happen this year, it won't happen next year, but, yes, that could happen in years to come," he said, speaking at the Leaders in Football conference, which, ironically, was being held at Stamford Bridge.

"Some of us believe it shouldn't be an absolutely free market and we are in favour of controlled regulation. An increasing number of people in football believe we have to do more. There are some excellent examples of those who support the system, and Arsène Wenger is one of the strongest supporters of the need to do more."

It's not surprising the Arsenal manager, who has labelled the trend for clubs to borrow extensively for strengthening as "financial doping", should come out in favour of the proposals. But the clubs Taylor was referring to reacted cautiously, all demanding they be consulted extensively before the new licensing conditions come in to force.

"There's been a number of proposals, mostly emanating from Uefa but also from elsewhere, looking at clubs and the amount of debt they have," said Chelsea chairman Bruce Buck. "It's really hard to react to those in a vacuum until you see the very specifics of what the proposals are.

"We are willing to sit down with Uefa and talk about not just debt, but lots of other things. Companies in this world borrow money: that is a fact of life. I don't think there is anything wrong as a general proposition in football clubs borrowing money.

"But it has to be in the context of their revenue stream and the rest of their capitalisation."

Although, according to analysis by Deloitte, Chelsea have net debts of €785 million, a figure derived from their most recent accounts to June 30th, 2007, Buck refers to the €730 million that owner Roman Abramovich has placed in interest-free loans as "softer than soft debt. It's as good as equity".

But Manchester United can make no such claims about their complicated structure of borrowings, amounting to €765 million according to Deloitte.

Although their most punitive debt - preference shares running at double-digit interest rates with hedge funds - is secured against equity belonging to the club's owner, the Glazer family, Uefa's rules would be aimed at reducing the entire debt burden.

United refused directly to comment, but their position on the threat of Uefa licensing measures was made clear by chief executive David Gill a few months ago.

"The issue with debt is whether you can service it," he said. "It is not about what it is. As far as we are concerned, there is no issue."

But Taylor countered: "It is not up to you if you want to compete in our competitions."

Uefa will seek the assistance of the European Union to sharpen the teeth of the licensing system. They believe they have received encouraging noises from Brussels, to take a lead in football's "self-regulation".

If Europe's politicians go a step further and permit Uefa the "legal certainty" they crave, clubs will have no recourse to the courts to challenge such rules on debt.

The issue has come into sharp focus this week, with the English FA chairman, Lord Triesman, stating "financial transparency lies in an unmarked grave".

But Rick Parry, Liverpool chief executive, said: "You can't deal in sound-bites. It's one thing to raise all the issues, it's another to find all the answers."

Guardian Service