QuoteGood point Schumi,
Not really. Rovers, Cork and Derry managed to get into huge debt problems without being involved in any property related stuff.Originally Posted by Spudulika
We're not arrogant, we're just better.
Good point Schumi,
THIS
Is more or less spot on.
Also, Leeson is a cretin
But those tactics can only free up cash that the clubs actually have. The scale of the debt in many cases implies that clubs have been spending significantly more than their entire gross income. If that is the case, then I'll say again that I don't see how that can be done without borrowing cash.
You raise a good point in regard to directors loans, and I think that's how a major chunk of the Derry and Cork spending was funded. But of course, my next question is, where did the directors get the funds in the first place? The vast majority of "cash" floating around the Irish economy over the past decade was credit underpinned by supposed property assets. I think it would be a bit naive to believe that the LOI wages bubble is completely unrelated to the general economic bubble.
Anyway, whether you agree with that or not, in fairness to Leeson, the biggest news in LOI debt this season has been Bohs, and there is no question that Bohs' spending has been funded (directly and indirectly) by financial institutions, so I don't think you can dismiss his point entirely.
No they don't.
I spend a grand getting programmes done up. I then don't pay the printers. Result? Up a grand in cash that I don't actually have. Repeat until someone finally calls you on it. Most of the clubs going bust have left a huge trail of creditors as far as I know. I know Athlone last season were in a position where they couldn't buy more scarves until they paid off their supplier what he was owed (which means I'm still missing an Athlone Town scarf from my collection).
Cork's madness was also funded by transfer fees received.
Yes, Bohs have borrowed, but you can't generalise about the league on the basis of one club.
Last edited by pineapple stu; 17/09/2010 at 7:45 AM.
In terms of what kind of debts can be run up we all know how it works - Cork City last year and the bus company, players, revenue etc. A club I worked with ran up a debt of just over 100k, the smallest amount being to a local shop for 38e for birthday/greeting cards, car hire company owed over 2k, property management company just over 500e, hotel (for triallists) nearly 1k, the largest chunk was wages to players. On the side of this you had Directors loans that the new headbangers decided didn't need to be repaid and now face court battles that could/would/will destroy the club. The head in the sand job just baffles me, it shows have far away the majority of football clubs are from being businesses. I remember Shels owing a heap of money to a local greengrocer, who then just wrote it off out of his own goodness.
Are you sure Cork didn't borrow the value of the transfer fees up front? The way their and any other LOI team's finances are, I'd have thought it would be standard practice to take the money immediately rather than waiting for installments. Then they can take the transfer fee when it comes in AND not pay back the bank.
Unless the fees were paid in full at the time of purchase but I don't see why that would happen.
Not sure at all. I speculated at the time that where Arkaga said they invested a million of their own money into the club, the money was actually the transfer fees for Doyle, Long et al. Probably should have been more clear about that in my original post alright. But either way, it'd be at least borrowing against an asset, which is different to just being given a loan because you asked nicely.
Eh, no. You would not be up a grand in cash, you'd be up a grand's worth of programmes and still have the same amount of cash that you started with. If you don't understand the distinction between being up in cash and up in stock, then it's not surprising you've missed my point. While the grand that you "save" by not paying the printers can be used for other purposes (e.g. paying inflated wages to players), that is only the case if you actually have a grand in cash in the first place.
My point is, if that was the only way debt was built up, then it would mean the maximum amount clubs were spending is: their gross income + non-wage related expenses. And I really mean maximum, as that would be if they paid no bills or tax whatsoever, and clearly no club has been that bad (even Cork under Coughlan paid some of their bills and some money to the revenue). I think it's clear that several clubs have been spending significantly more than that, in which case, they must have borrowed cash from somewhere.
But who said anything about banks giving loans just because they were asked nicely? Leeson certainly didn't. Obviously banks generally only lend large sums of money against some kind of asset. As I alluded to before, those "assets" may have been owned by directors rather than clubs in some cases, but that doesn't change anything.
Banks don't/didn't need an asset to loan against, especially AIB and Anglo!
I think it can be generally agreed that banks and the political system, the FAI, greed and lack of any type of medium (I won't mention long) term planning by clubs have caused debts. It would be very interesting to see what would happen if Sky suddenly went belly up a la Setanta. I read a report last week that voiced football clubs (Scotland) complaints about Setanta disappearing. There will never be a case of clubs living within their means so long as some are allowed away with murder, eg Real Madrid, Barcelona, and others get open chequebooks from country owners (AC Milan). Debt will finance a run, but it will preface a fall.
You would be if you sold them
Also, if you owe someone a grand and decide not to pay them, it means you can use that grand elsewhere. I've noted examples of this in practice as well.
So you didn't actually read my last post then?
Again, just to clarify, my point is: not paying debts cannot free up any more cash than you have coming in. Of course selling programmes brings in cash (albeit a miniscule amount), but that is included in the total gross income that I've been talking about all along, isn't it?
I think you overestimate the amount of debt most clubs run up. Aside from the likes of Bohs and Shels, who had properties to sell, and Dublin City, who had one person ploughing money in until he gave up, much of the league's debts were "financed" by not paying suppliers, other clubs (not paying transfer fees - Derry and Drogheda in UCD's experience, for example) and, in particular, the Revenue. So I disagree with you that clubs can only have run up the debts they did with the aid of bank borrowing.
Nedser's point is that you can only use that grand elsewhere if you have that grand to begin with.
If you have no money to begin with, and you 'save' a grand by not paying the printers, you don't 'free up' a grand to use elsewhere. Instead, you still have no money, but now you also have a grand of debt.
I know what his point is, and he's saying that the club therefore must have borrowed the money to start with. But he's wrong, in my opinion. Clubs generate money, so it's very easy to find that grand, not pay someone and use it elsewhere. And that's what's been happening more often than not.
Or, from a balance sheet point of view, if you rack up losses but keep cash at around nil, say, there must be a corresponding credit somewhere. That credit is more commonly creditors rather than bank loans.
Last edited by pineapple stu; 20/09/2010 at 8:39 AM.
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