Chelsea players are exploring potential escape routes should financial armageddon hit the club following sanctions imposed on Roman Abramovich. Officers have been in contact with lawyers to ask what their options are if, worst-case scenario, salary payments are overdue in the coming months.
A host of Chelsea rivals have been known to turn in circles should the club start to run into serious financial difficulties, which analysts say is possible if takeover attempts stall. Unless Abramovich has been quietly funneling money to the club since the Ukraine crisis erupted, the managers could soon struggle to cover the £28million monthly salary bill. Cash reserves will do little to help as there was just £17million in the club’s parent company at the last round of accounts.
Lawyers confirmed to Telegraph Sport, on condition of confidentiality, that they had heard from affected officers seeking clarification of their players’ employment rights. A legal source said players may have to go unpaid for two months to have a “clear just cause” – with a representative then giving a 15-day notice period to terminate their contract. However, given the aggravating circumstances of Abramovich’s punishment, a court could rule in favor of a player if he were to walk away sooner. There has been a sense of unity between Thomas Tuchel and his squad of players in recent weeks but representatives have told lawyers they need to be aware of the options should the club fall into financial paralysis.
Chelsea’s immediate financial outlook remains shrouded in confusion after 24 hours in which the club were forced to forfeit Abramovich’s financial backing, as well as match revenue and prize money. Getting a bank loan already looks highly problematic, with credit cards linked to the club’s corporate accounts with Barclaycard now subject to temporary restrictions as banks react to sanctions.
Under the current license which allows the club to operate while Abramovich’s assets are frozen, The Telegraph understands that Chelsea would not be able to pay enough security, stewardship and catering to keep all sections of Stamford Bridge open. Chelsea do not believe he would be able to complete the season under the current terms of the license which he hopes will be reviewed in the coming days.
Nike, which has nine years left on its £60m-a-year contract, has yet to say whether it will continue to support the club after Three, the club’s main shirt sponsor, opted to suspend its partnership. There are growing hopes within the club that the American kit brand will back them after Trivago announced on Friday that they would stand by their £10m-a-year deal.
Sources close to the government-Chelsea talks insist ministers would be certain to help expedite any takeover if the prospective buyer is found fit and suitable. There is also a desire to modify the current license to ensure they can continue to fill matches. The Treasury and the Department for Digital, Culture, Media and Sport remain locked in talks with the club.
Counting the cost: what now for the struggling west London club?
By Tom Morgan
Until 9 a.m. on Thursday, Roman Abramovich was in a race against time to sell the club. Now, with their assets frozen, Chelsea are instead scrambling to buy time to keep the club afloat. Telegraph Sport explore where the club go from here:
Chelsea were already a loss-making entity before this – how bad does it get now?
There was just over £17million in cash reserves at parent company Chelsea in the latest round of accounts to the end of last season. This figure is likely to remain at a similar level today, given that it has remained broadly the same in recent years. Unless Abramovich has quietly funneled money to the club since the outbreak of the Ukraine crisis, Chelsea will immediately rely on other sources to cover a month’s salary at the club – which is now estimated at £28million. pound sterling.
With the drawbridge lifted on nearly all other business revenue, executives were quick to phone the government on Tuesday to say the current sanction license could send them bankrupt. The theoretical peak risk the club now faces is largely due to the financial ecosystem Abramovich has created for Chelsea. The loans he has taken since buying the club in 2003 now stand at £1.5billion. He promised to forgive the debt after putting the club up for sale last week, with the proceeds going to ‘all the victims of the war in Ukraine’, but he may feel less inclined to be the good guy now that the government has turned against him. .
The loss of matchday revenue isn’t as deadly as it could have been given the club is already eclipsed by some rivals in potential revenue due to its 2018 decision to put redevelopment on hold of a £1 billion stadium. Instead, it is the club’s overwhelming reliance on Abramovich that now needs to change.
Last season alone, Abramovich injected around £150m and withdrew around £130m to end the year loaning the club a total of £19.9m. Loans are to be repaid to Camberley International Investments Ltd, a British Virgin Islands entity. “That means there will always be months when Chelsea don’t have money to pay the wage bill,” says Kieran Maguire, lecturer in football finance at the University of Liverpool. “He lends the money to the club and then when the next installment comes in – either from transfers or from the Premier League – the club then uses it to repay Abramovich. The club effectively used him as a loan company on glorified salary. 2020 he loaned out £200m net – those are crazy numbers.” The debt involving Abramovich is not an immediate problem, however. As the loans come from the owner themselves and are interest free, Chelsea can consider themselves effectively debt free.
Is there a short-term solution to prevent the club from falling into administration?
Given the matchday and commercial revenue freeze, Chelsea may have to look to accelerate revenue which was already expected to arrive by the end of the season. This year’s forecast accounts looked relatively optimistic compared to some previous years, given that significant profits were expected on player sales.
Chelsea parent account Fordstam details how 13 players were sold for £103.7million. Installments will be due on these offers at the end of the current season. Maguire, an accountant who previously worked in insolvency, told Telegraph Sport that Chelsea could also explore the possibility of bringing forward their TV payments due from the Premier League and UEFA. “The last thing the Premier League wants is a car accident,” he added. “The same can be said of the government. So what the Premier League could do to help calm the troubled waters is to advance some of that money that was due towards the end of the season now, that which would allow Chelsea to pay the next wage bill.” Another possibility for the managers to secure a bank loan – although this is complicated by the fact that Chelsea are now a frozen asset.
What is the likely conclusion of all this?
The government says it is “open to a sale” and told Abramovich it could come to ministers with a potential buyer and then apply for a new license to allow for a takeover. The Premier League, meanwhile, has said in recent weeks that testing by its administrators and owners should be completed within days. Maguire suggests a takeover could still be possible in April if “everyone is swimming in the same direction”.
“What we’re trying to do here is manage money and save time – that’s what I used to do in the insolvency world. You rob Peter to pay Paul. You try to make money. time to allow the business to continue While Chelsea are not in administration, and I don’t think they will be, the ideal scenario will be a sale at the end of April.”
How much will a possible exodus of sponsors hurt?
Three, one of their main business partners, caused panic at the club by suspending their £40m-a-year contract on Thursday, and Plan International, one of Chelsea’s charity partners, also withdrew their support. Other sponsors including delivery app Zapp and car maker Hyundai said it was reviewing its deals as analysts warned business partners would “be wary of guilt by association”. Conrad Wiacek, head of sports analysis at analytics firm GlobalData, said government sanctions against Abramovich had “cast a shadow” over Chelsea’s many lucrative trade deals. “Although Chelsea have a sporting license to continue operating as a football club, many brands will be wary of guilt by association,” Wiacek said.
However, while Trivago announced on Friday that they would stick to their £10m-a-year deal, the club privately hope Nike, who declined to comment, will stick to their £60m-a-season deal.
Commercial revenue of £153.6m was already down from £170.4m the previous year due to the impact of the pandemic. The club’s main concern with the sponsorship is the potential impact the mass departures would have on the value of any takeover.
Will the staff be laid off?
The pandemic has shown how clubs are starting to fire the lowest paid staff first as they seek to cut costs. There are already huge doubts for workers in club stores, hotels and the parking lot. Pat Nevin, the former Chelsea player, reportedly told BBC5 Live that “staff have already been partially made redundant”.
It seems unthinkable that Chelsea would start sacking players and coaches, but the prospect of the government being asked to sack excess staff under the terms of the license has been raised.
Gregory Ioannidis, a prominent sports lawyer, told Telegraph Sport that Treasury wage support would be a tough sell, however. “We should be thinking about the reaction from the public or other sectors of the economy,” he said. “It can create a hot potato and I don’t think they want it now, especially with the National Insurance increases.”