Roman imnotveryrich
Chelsea Fucked?
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Surely a Chelsea sale will be allowed to go through at a “nominal fee”, as long as they prove Abromovich is making money on the deal - but with the £1.5b debt being picked up by new owners.
I know it’s not the same, but if feels like when the sale to FSG had to go through court without H&G really having any say on the price.
Of course, anyone taking over would then have an unprofitable club, that would need bankrolled to remain competitive and have a mountain of debt over them.
They’ll likely lose a good few players - but actually probably have a decent stream of youngsters to maintain a decent position in the EPL - but possibly not top 6 status.
I know it’s not the same, but if feels like when the sale to FSG had to go through court without H&G really having any say on the price.
Of course, anyone taking over would then have an unprofitable club, that would need bankrolled to remain competitive and have a mountain of debt over them.
They’ll likely lose a good few players - but actually probably have a decent stream of youngsters to maintain a decent position in the EPL - but possibly not top 6 status.
All the 'Ifs', 'buts', spin, revisionism and the 'Do you think they can do this?' aside - Which ever way you look at it, they are fucked. It's great.
But that debt would directly be to Abramovich. Would the new owners be allowed to make payments to a sanctioned oligarch? Not sure how that would work.
I'll believe it when I see. Currently I believe they (with the Govt.'s assistance) will find a way out and it'll be mostly 'as you were' but with new owners. And all this other chatter will have been wishful thinking.
Remember those times when some of us wished for an Oligarch or some Arab to buy the club from G&H ?
Well it’s a good thing we resisted the temptation to sell our souls didn’t we ? Hindsight is a good thing and all but suddenly our yanks don’t seem that bad after all.
Until they line their pockets with the inevitable Salah sale…let’s be thankful
Well it’s a good thing we resisted the temptation to sell our souls didn’t we ? Hindsight is a good thing and all but suddenly our yanks don’t seem that bad after all.
Until they line their pockets with the inevitable Salah sale…let’s be thankful
Not if Chelsea is repatriated back to the government first. In which case the debt will be owed to the government instead of Abramovich.
However, in that scenario, the bad publicity the government would receive for potentially depriving billions from the victims of the Ukraine war, mean its not likely.
Whether you believe Roman or not on the statement, he's played a blinder there.
In that scenario couldn't they put the debt on the club (as it should be) and still give the proceeds of the sale to Ukraine (and not half of it to Russia as Abramovich planned)?
I think it'd be a lot harder for proceeds to be transferred that way, but I could be wrong.
It is difficult because we still have a rule of law that prevents someone just deciding to help themselves to someone else's asset. If we took the proceeds, he'd sue us and win. This is why we've frozen his assets. Then we'll pass some new legislation that supersedes the previous law, along the lines of the hate crime woke legislation which superseded free speech rights, in this case it will make it legal to take someone's assets if they've been naughty, and then when that's all been dotted and the t's crossed, we will unfreeze his assets, hand them to his imperial excellency rishi sunak, and he'll profit from the sale. The bad publicity isn't going to stand in the way of that.
Of course, they will then use the social credit system as an objective measure of who's been naughty and nice, and if your social credit score drops, the laws will be in place for the state to take away your assets. Why is this outcome not obvious to you already?
Can't sue if he's been sanctioned. No court would touch it until his assets were unfrozen.
Seeing a few questions about how a sale of Chelsea might be structured so thought it would be useful to do a Beamrider's guide to how transactions typically work and how you should interpret what you see published by business editors. Strap in, this is a bit technical and as with my accounts thread I’ll break it up. Appreciate this won’t be of interest to everyone but some may find it useful.
Please note I’m using a building block approach here, starting with a transaction in a normal world before adding my take (possibly flawed) on how things work in sanctioned world to show how the sanctions mess up the normal run of things.
Please note I’m using a building block approach here, starting with a transaction in a normal world before adding my take (possibly flawed) on how things work in sanctioned world to show how the sanctions mess up the normal run of things.
BUSINESS VALUATIONS
TLDR - the figures you see in the press are for the value of the business, ignoring the debt, not the value of the shares
Firstly, it’s important to understand the valuation figures you see reported. In an M&A deal, a target business is typically value based on “Enterprise Value”. In short, this means what a buyer would pay for the business if it had no cash and no debt.
So if we apply this to Chelsea, let’s say that the business is quoted with a value of £2.5bn. However, we know it has huge debt attached to it. The figure of £1.5bn is commonly quoted but if we look just at Chelsea FC itself, the last accounts had £1.1bn. I’m going to use that figure here.
If the enterprise value is £2.5bn, and the debt is £1.1bn (and Chelsea had negligible cash in its last accounts) then the price a buyer would pay for the shares would be £1.4bn, because they will inherit the debt.
TLDR - the figures you see in the press are for the value of the business, ignoring the debt, not the value of the shares
Firstly, it’s important to understand the valuation figures you see reported. In an M&A deal, a target business is typically value based on “Enterprise Value”. In short, this means what a buyer would pay for the business if it had no cash and no debt.
So if we apply this to Chelsea, let’s say that the business is quoted with a value of £2.5bn. However, we know it has huge debt attached to it. The figure of £1.5bn is commonly quoted but if we look just at Chelsea FC itself, the last accounts had £1.1bn. I’m going to use that figure here.
If the enterprise value is £2.5bn, and the debt is £1.1bn (and Chelsea had negligible cash in its last accounts) then the price a buyer would pay for the shares would be £1.4bn, because they will inherit the debt.
TRANSACTION STRUCTURE
TLDR - in a sale of the shares, the debt would likely remain in place in a normal deal where no sanctions are in place
There are two basic ways a purchase would then be structured.
In both of these structures, the buyer pays £1.4bn for the shares in Chelsea FC.
Then they would do one of the following:
The net effect of either structure is the same – the buyer ends up with £1.4bn of shares and a loan of £1.1bn from them to Chelsea.
There is a third possibility, but this is more costly. In the third option, Abramovich first waives the loan to Chelsea so it then has no debt. Then the purchases buys the shares in Chelsea for the full £2.5bn. This is sub-optimal for the buyer as the price they pay for the shares is subject to stamp duty at 0.5%, so they incur an extra £5.5m transaction costs on the deal. Furthermore, if they can leave the debt in place, then it’s easier for them to get money out of the club in future (as loan repayments are more straight forward than dividends, particularly as Chelsea’s written constitution restricts dividends to around £1,500 per annum – this is very specific to them, not a general rule for UK companies).
TLDR - in a sale of the shares, the debt would likely remain in place in a normal deal where no sanctions are in place
There are two basic ways a purchase would then be structured.
In both of these structures, the buyer pays £1.4bn for the shares in Chelsea FC.
Then they would do one of the following:
- They put £1.1bn of new funding into Chelsea FC after they’ve bought it and Chelsea uses that money to repay the £1.1bn debt; or
- They buy the right to receive repayment of the £1.1bn debt from Abramovich
The net effect of either structure is the same – the buyer ends up with £1.4bn of shares and a loan of £1.1bn from them to Chelsea.
There is a third possibility, but this is more costly. In the third option, Abramovich first waives the loan to Chelsea so it then has no debt. Then the purchases buys the shares in Chelsea for the full £2.5bn. This is sub-optimal for the buyer as the price they pay for the shares is subject to stamp duty at 0.5%, so they incur an extra £5.5m transaction costs on the deal. Furthermore, if they can leave the debt in place, then it’s easier for them to get money out of the club in future (as loan repayments are more straight forward than dividends, particularly as Chelsea’s written constitution restricts dividends to around £1,500 per annum – this is very specific to them, not a general rule for UK companies).
IMPACT OF SANCTIONS
TLDR - the UK government would have control of the process and would hang on to the proceeds until either assets are seized, Abramovich waives his rights or sanctions are relaxed
Sale
The UK government has supposedly said that they wouldn’t be totally opposed to a sale, provided no money goes to Abramovich. However, they have frozen his assets, not seized them.
So my take, and I’m speaking as an accountant trying to understand the law here, so I may be wrong, is that if a sale went through, it would still need to be at a fair market value, but the proceeds would have to sit in a government account until either:
From the perspective of creditors of Chelsea, they are then reliant on the new owners to honour their debts, which they will most likely do, so the creditors get paid, albeit they have to wait until the sale process completes.
I’d expect the government would have oversight of the process and would appoint an independent adviser to ensure it is all above board – basically because the sale would require them to issue a licence, they can set the rules themselves.
TLDR - the UK government would have control of the process and would hang on to the proceeds until either assets are seized, Abramovich waives his rights or sanctions are relaxed
Sale
The UK government has supposedly said that they wouldn’t be totally opposed to a sale, provided no money goes to Abramovich. However, they have frozen his assets, not seized them.
So my take, and I’m speaking as an accountant trying to understand the law here, so I may be wrong, is that if a sale went through, it would still need to be at a fair market value, but the proceeds would have to sit in a government account until either:
- They lift the sanctions (at which point the money goes to Abramovich)
- They seize his assets (at which point the money becomes crown property but it likely given as aid to Ukraine or similar)
- Abramovich formally forfeits his right to the money (in which case likely similar outcome to point 2).
From the perspective of creditors of Chelsea, they are then reliant on the new owners to honour their debts, which they will most likely do, so the creditors get paid, albeit they have to wait until the sale process completes.
I’d expect the government would have oversight of the process and would appoint an independent adviser to ensure it is all above board – basically because the sale would require them to issue a licence, they can set the rules themselves.
IMPACT OF SANCTIONS
TLDR - similar to sale process, but with risk of lower proceeds that may cause complications for an administrator if they don't have enough cash to cover full repayment of the debt if it is ultimately enforceable
I think an insolvency position would be more difficult.
If Chelsea goes into administration (and I do think that is a very real possibility) then the administrator could be in a bit of a pickle.
Firstly, they would need to conduct a sale process, and in this case it would probably be the assets of Chelsea, rather than the shares in the company, which are sold. The administrator needs to act in the best interests of the creditors and achieve the best price available, but this is now a distressed sale and therefore a lower price is likely.
The first chunk of any sale proceeds received will go towards what are known as “preferred creditors” – basically people with a right to get paid first. In football terms, this broadly means other clubs then tax debts. Usually, a bank will rank first as they will have first claim via their “security” (in layman’s terms, similar to how you have to pay off your mortgage as a first priority when you sell your house). As I’ve mentioned previously, Chelsea didn’t have any bank debt at 31 May 2021 so I don’t think this is relevant.
That then leaves a rump of “unsecured” creditors, which I believe will include Abramovich’s debt, as well as suppliers. The issue the administrator may have is if the money left over isn’t enough to cover all those debts. In that case, they can’t just pay off the suppliers etc. and leave Abramovich to take the hit, they will have to wait until the outcome of the sanctions is finally determined (either they are lifted or his assets are seized). They could make an “interim distribution” (part payment), in which case they’d only pay the suppliers as they can’t pay anything to Abramovich due to the sanctions, but they’ll have to hang on to the rest of the money until final resolution on the sanctions.
By contrast, if there’s more than enough money, they can pay the suppliers in full and then they’ll sit on the rest of the cash until the sanctions are determined before doing whatever they need to do to discharge Abramovich’s debt.
As I say, insolvency and sanctions aren’t top of my list of specialisms, so there may be some flaws in my logic, but that’s how I think it would play out.
TLDR - similar to sale process, but with risk of lower proceeds that may cause complications for an administrator if they don't have enough cash to cover full repayment of the debt if it is ultimately enforceable
I think an insolvency position would be more difficult.
If Chelsea goes into administration (and I do think that is a very real possibility) then the administrator could be in a bit of a pickle.
Firstly, they would need to conduct a sale process, and in this case it would probably be the assets of Chelsea, rather than the shares in the company, which are sold. The administrator needs to act in the best interests of the creditors and achieve the best price available, but this is now a distressed sale and therefore a lower price is likely.
The first chunk of any sale proceeds received will go towards what are known as “preferred creditors” – basically people with a right to get paid first. In football terms, this broadly means other clubs then tax debts. Usually, a bank will rank first as they will have first claim via their “security” (in layman’s terms, similar to how you have to pay off your mortgage as a first priority when you sell your house). As I’ve mentioned previously, Chelsea didn’t have any bank debt at 31 May 2021 so I don’t think this is relevant.
That then leaves a rump of “unsecured” creditors, which I believe will include Abramovich’s debt, as well as suppliers. The issue the administrator may have is if the money left over isn’t enough to cover all those debts. In that case, they can’t just pay off the suppliers etc. and leave Abramovich to take the hit, they will have to wait until the outcome of the sanctions is finally determined (either they are lifted or his assets are seized). They could make an “interim distribution” (part payment), in which case they’d only pay the suppliers as they can’t pay anything to Abramovich due to the sanctions, but they’ll have to hang on to the rest of the money until final resolution on the sanctions.
By contrast, if there’s more than enough money, they can pay the suppliers in full and then they’ll sit on the rest of the cash until the sanctions are determined before doing whatever they need to do to discharge Abramovich’s debt.
As I say, insolvency and sanctions aren’t top of my list of specialisms, so there may be some flaws in my logic, but that’s how I think it would play out.
Also worth pointing out that if they do go into administration, the creditors may struggle to get a reputable firm to take it on. Football insolvencies are notoriously toxic and attract a lot of bad PR - a firm I used to work for did the Leeds insolvency back in the day and they regularly had large numbers of fans protesting outside the office whilst it was going on and countless allegations against them afterwards (think SCM at its worst, but in person). It's not a good look for a well-known firm.
Many thanks @Beamrider
They can use the proceeds of crime act to take assets that were acquired in a crime. I'm not a criminal lawyer, but to use that I think they need to charge and convict the person of the crime first, then they they can take the monies if and only if those monies were acquired from those crimes. There is no chance of that happening here. There's no way to take the club by force so the oligarchs will have nothing to sue them for. Hence they're changing the law...
[article]
On 1 March 2022, the UK Government introduced into Parliament the Economic Crime (Transparency and Enforcement) Bill (the "Bill"). The draft legislation contains a number of measures designed to increase transparency and give law enforcement enhanced powers to combat money laundering and sanctions breaches.
A draft Economic Crime Bill was prepared in 2018, and elements of the Bill have been discussed for several years – in particular, the register of overseas entities owning UK property, which was first announced by then-Prime Minister David Cameron in March 2016. The Bill's progression into law had slowed as the Government prioritised other areas of reform, resulting in uncertainty as to what the Bill would include and criticism that the Government was not doing enough to combat financial crime.
However, as a result of the events in Ukraine, the Government has fast-tracked the Bill and has announced that additional measures – including a broader Economic Crime Bill – will be introduced in the coming months.
https://www.whitecase.com/publicati...gislation-tackle-economic-crime-and-sanctions
[/article]
You love to see it, especially if you're a socialist.
The People's Club.
Look guys, they have just frozen his assets. They haven't seized them, (and I don't see why they would, given there is no clear indication that he is directly responsible for anything happening in Ukraine.)
These sanctions are intended to be temporary in nature, to pressure the Oligarchs to tell their buddy Putin to stop fucking around. If the assets were seized permanently, there would be any incentive for them to do so. That being said, there is no question that the Crown will seize Chelsea, or the debt due from Chelsea to Roman.
Abramovich can still deal with his assets, but only with the British Government's permission, and it is likely that permission would only be granted on the basis that he does not directly benefit from such a transaction. At the same time, there is is a strong argument to be made that he should not be allowed to deliberately dissipate, or destroy the value of his assets. The reason for this is that this may hurt potential creditors (if any) as well as reduce the proceeds from a potential (but unlikely) seizure. These are insolvency law principles but they could apply in the present case.
Therefore, a sale could take place under the following conditions:
(1) the sale price is determined by an independent valuer to be the fair market price
(2) the proceeds remain in escrow in the govt's treasury, following payment of certain preferred debts (ie salaries)
(3) the buyer purchases Chelsea, and its parent company, with the 1.5 billion debt on the books. This will affect the sale price that buyers are willing to pay, so effectively, this could be a very cheap (but pointless) acquisition. Alternatively, if the buyer was a complete idiot, he or she would pay the 1.5 billion to the govt as part of the sale price;
(4) Roman could try and write off the debt, but may face objections on the grounds that this hurts potential claimants and creditors of Roman (e.g. if Ukrainian survivors subsequently sue Roman, could they seek a garnishee order from Chelsea?) but on the other hand Roman is filthy rich so this is a fanciful objection.
In present circumstances, Roman is likely to want to wait out the sanctions, knowing that they can't last forever. I don't think he will bother selling.
His only incentive to sell being his love for Chelsea - he would not want to see them crumble into dust while waiting for sanctions to be lifted. On the other hand, it also makes no sense at all for the government to let Chelsea be destroyed. It would be an unpopular and senseless move since it would remove their leverage over Roman Abramovich. So we can expect the sanctions to be very shortly amended or lifted, to allow Chelsea to renew contracts, receive funds etc, with no funds going to Roman, and control being temporarily removed from him.
In short, Chelsea will be fine. No one will get fucked.
Except Everton.
These sanctions are intended to be temporary in nature, to pressure the Oligarchs to tell their buddy Putin to stop fucking around. If the assets were seized permanently, there would be any incentive for them to do so. That being said, there is no question that the Crown will seize Chelsea, or the debt due from Chelsea to Roman.
Abramovich can still deal with his assets, but only with the British Government's permission, and it is likely that permission would only be granted on the basis that he does not directly benefit from such a transaction. At the same time, there is is a strong argument to be made that he should not be allowed to deliberately dissipate, or destroy the value of his assets. The reason for this is that this may hurt potential creditors (if any) as well as reduce the proceeds from a potential (but unlikely) seizure. These are insolvency law principles but they could apply in the present case.
Therefore, a sale could take place under the following conditions:
(1) the sale price is determined by an independent valuer to be the fair market price
(2) the proceeds remain in escrow in the govt's treasury, following payment of certain preferred debts (ie salaries)
(3) the buyer purchases Chelsea, and its parent company, with the 1.5 billion debt on the books. This will affect the sale price that buyers are willing to pay, so effectively, this could be a very cheap (but pointless) acquisition. Alternatively, if the buyer was a complete idiot, he or she would pay the 1.5 billion to the govt as part of the sale price;
(4) Roman could try and write off the debt, but may face objections on the grounds that this hurts potential claimants and creditors of Roman (e.g. if Ukrainian survivors subsequently sue Roman, could they seek a garnishee order from Chelsea?) but on the other hand Roman is filthy rich so this is a fanciful objection.
In present circumstances, Roman is likely to want to wait out the sanctions, knowing that they can't last forever. I don't think he will bother selling.
His only incentive to sell being his love for Chelsea - he would not want to see them crumble into dust while waiting for sanctions to be lifted. On the other hand, it also makes no sense at all for the government to let Chelsea be destroyed. It would be an unpopular and senseless move since it would remove their leverage over Roman Abramovich. So we can expect the sanctions to be very shortly amended or lifted, to allow Chelsea to renew contracts, receive funds etc, with no funds going to Roman, and control being temporarily removed from him.
In short, Chelsea will be fine. No one will get fucked.
Except Everton.
So the Governments has to prove the Oligarchs committed a crime?
For the government to freeze their assets, this is civil law (or administrative law), where the government just need to take a reasonable decision. The oligarch can judicially review the decision to impose sanctions, which unless I'm their lawyer they will lose because the government didn't act unreasonable or illegally in making the decision to freeze the asset.
Once the asset is frozen, the government obviously wants to get their hands on it because they're tory scum. So usually you use the time you have whilst the money is locked up to let the police investigate. This is now criminal law, and you have to prove a crime was committed beyond reasonable doubt. In cases of terrorism, you can prove the imam was financing an isis cell and then use the proceeds of crime act to keep the money (to pay legal costs, and give out what's left to the victims / tory donors). In the case of mafia gangsters, you can prove the money was extorted or stolen from people, or is revenues from selling weapons and drugs. Then again you can use the proceeds of crime act to take the money. In this case, there is no way to prove anything of the sort. Even if you had witnesses, they'd commit suicide long before the trial.
What the plan is here is to avoid criminal law altogether. The government want to pass the bill that gives them the right to take the monies under circumstances set out in the bill (which they are presently writing and making tyrannical changes too). Then the oligarch is back to having to sue the government via judicial review, which they'll lose.
The oligarch will still be a billionaire. The issue is the poor working class bastards who did nothing wrong will now be subject to this bill, and have no means of protecting their assets apart from judicial review. Doesn't effect me, I'll wipe the floor with the government in the high court. But everyone else is fucked.
The whole reason the oligarchs launder their money here is because the law which protects the working class bastard also protects them. Now that poor bastard is going to clap along like a seal as those laws distinigrate into ash, so they can get them there mean evil billionaire oligarchs, so they can tweet "ha ha got you #istandwithukraine" to them as they are on their yatch getting sucked off by a supermodel, the feels of the working class bastard as they send the tweet is what counts. All about the feels. Woke fools.
Apart from the lower end workers scratching a living from the club I don't mind seeing them crash and burn. They've only been relevant since the Russian millions circa 2003. So the manager, coaches, players and the classless fans can go to fuck.
I have to say, this is pretty much where I'm at.
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