In this latest draft extract from my forthcoming book ‘Where’s The Money Gone; One Fan’s Football Finance Odyssey’, I talk to Liverpool University’s football finance expert Kieran Maguire about the tangled web of West Bromwich Albion’s ownership.
AG: I’ve pulled together this list showing that WBA have more than 80 investors in China. What do you make of that?
KM: I think it further reinforces the view that there is a total lack of transparency in terms of the ownership of West Bromwich Albion. And I think these findings would be of extreme interest to the EFL because they do have an Owners And Directors Test with regards to the ultimate decision makers for any football club. From looking at this, I think it's impossible to work out who's making those decisions.
AG: Would the EFL have had sight of this complicated ownership structure?
KM: Not necessarily. West Bromwich Albion, when they were acquired by Guochuan Lai were a Premier League club. And in those days, it was a bit more of a light touch regime, in respect of the Owners And Directors Test, and there was an element of self-certification. And there was also an element of good faith from the football authorities. There weren't too many scandals back in 2015-2016. People tended to take things at face value and we have seen a deterioration since then in respect of football ownership and I think that both the Premier League and EFL have have tightened up the rules. But I think you could you could perhaps conclude here that it's a case of ‘stable door and horse bolted’.
AG: If for any reason Albion don't repay this £20million debt with interest, would the people to whom the money is owed, MSD, have a right to claim a shareholding in West Bromwich Albion? They certainly have a charge over the assets of the club, such as The Hawthorns and the training ground…
KM: MSD Holdings are a bank and banks don't want to get involved in running individual businesses in individual industries, so I don't think we'd have to fear an effective takeover from MSD Holdings - that's not what they do.
But it begs the question, why does the club need the £20m given that it has been in receipt of parachute payments this season. Matchday income will be as high as could reasonably be expected given the nature of the season, so there's money coming in. The commercial income as well has not been significantly impacted.
All of those should be positives. The club will have been in a position to realign the wage bill into what you'd expect to spend in a season in the Championship, you'll have shed some players who have come out of contract at the end of 2021-22.
AG: You used a fantastic analogy on the Price Of Football podcast when you interviewed Ali Jones from Action 4 Albion. You said that if you told somebody on the street that you’d taken out a mortgage to buy a house, nobody would bat an eyelid. If, however, you said you’d taken out a mortgage to pay your grocery bill - which appears to be the appropriate analogy here - that would be pretty worrying.
KM: I agree with you entirely. What we normally say in the world of finance is that you take you take out long term loans for long term capital projects. And if you need money on a short term basis, you arrange an overdraft - and that happens in many businesses.
Manchester United have a £140million overdraft facility, which it dipped into on a couple of times during the season because football is very ‘lumpy’ about the amounts of money coming in, but you've got your biggest costs, which is your wage bill, going out [regularly].
If you're only going to be overdrawn for one or two weeks of the year, to pay for your day to day activities, then you're only paying interest for one or two weeks of the year. Whereas what we're seeing here at Albion is the club committing itself to paying £2million a year in interest.
To put that into context, next season, unless the Albion are promoted, they're going to be getting less than £8 million pounds in TV money from the EFL. So a quarter of the TV money is going to pay off a bank. That's £2m which is coming out of your playing budget as well.
So that's why I feel very concerned that it's not a logical way to run a business. And the best that can be said is that it's effectively like playing blackjack and twisting on 19 in the hope that you're going to get promoted.
AG: And as well as the £2m annual interest, at the end of the loan period, they'll also have to pay off the £20million as well, which averages out at £5m a season. So that basically swallows up nearly all of the TV money that the club will receive over the next four years. If you supported Albion what would you think of this financial situation?
KM: I'd be deeply concerned because unless the club gets promoted, it simply is not going to have the ability to compete in the Championship. If you take a look at a normal Championship wage bill, normally the clubs at the bottom end probably pay £10-£11million a year.
I think in the pool that we'd expect the Albion to be fishing, which is the upper half of the division, it’s normally somewhere in the region of £20-£25million. But you've got realisticall £7 million coming in from ticket sales £7-8million coming in from broadcast, £7-8million coming in from commercial – [overall] you've got £20million coming in.
And then you've got to set aside £5million for the loan repayments and you're paying £2million in interest. That's a third of your income gone already.
I go on a lot of podcasts in and quite a few [fans] have a moan at me to say ‘the owner is only putting in £7 million a year or £10 million a year’. But this is the reverse – an owner taking money out. That’s unheard of at Championship level. The only time that's ever happened before I think was when Swansea City were relegated - but at least they had a lot of money to spare at the time because they sold a load the players. I don't know the Albion well enough to say ‘well, actually, you’ve got three players who, if push comes to shove, you could easily sell into the Premier League for £40 million’. If that's not the case, then you wonder, from a cash flow point of view, how the club is going to make ends meet.
The full interview with Kieran can be heard at The Liquidator - the 100% unofficial West Bromwich Albion podcast.