"Show me the money!"Liverpool's six month bid to get a £110m investment from Rhône has apparently collapsed. And Rafael Benitez, Liverpool's manager, is not happy.
"If we don't have new investors it will be difficult to go one step further," the Liverpool manager said yesterday, disclosing that the collapse of the Rhône offer, when a deadline imposed by the fund management company expired at midnight on Monday, had shattered the optimism he had started to feel in recent months about the club's financial future. "For six months I was really optimistic, especially about this group, because they were one of the groups who were there," said the Spaniard, who is understood to have met with Rhône. "But they are not there now. The Rhône Group is not there."
While his unhappiness is understandable, what is the deeper reason for it?
Benitez's comments raise further questions about whether he will be around at Anfield to experience a new financial era. There certainly will be a new one of some description from July, by which time RBS will want to see £100m of the debt heaped upon the club by Hicks and Gillett paid back. Rhône's investment would have gone straight to the bank and RBS is unlikely to allow prevarications from Hicks and Gillett beyond July, by which time the current debts must be refinanced.
Hicks' and Gillett's ability to meet interest payments under the current arrangements will be tested to the extreme if Benitez fails to deliver them the £20m bonanza of Champions League football next season...
As I showed in my previous post, Soccernomics demonstrated why "money = table position" in the EPL. The ability to win is fueled by money that enables the teams to afford the best players. As an example, a loss of £20m represents the combined salaries of Fernando Torres, Steven Gerrard, and part of Dirk Kyut's salary. To put it another way, Liverpool's 32 players average £2.5m per year for a total payroll of £80m. Losing the Champions League income would represent a 25% drop in income for an already financially strapped team.
Going back to the underlying regression data in Soccernomics, we find that Liverpool spent about 2.68 times the league average on wages between 1998 and 2007. If they were maintaining similar expenditures this season, they can reasonably be expected to drop to 2.01 next season. Clubs that dropped this low in expenditures had an average finish of 9th in the Premier League. This may not be the case for Liverpool if they choose to go into further debt next season or finance part of it through a transfer fee for one of their key players, but such debt-fueled expenditures will be harder to swallow without Rhône's money.
The Red's performance this year clearly demonstrates that salary expenditure is no sure way to great table position. It is purely an enabler - a condition of entry to succeeding in the hyper-competitive world of Premier League soccer.
As a fan of the MLS, I am wondering if a similar relationship exists in that league. A salary cap keeps team payroll disparities down, so there is greater parity in expenditures. The use of the designated player rule has introduced higher levels of spending in some clubs. I wonder if there is a growing disparity in club expenditures, and if so does any growing disparity contribute to a difference in team performance? In later posts I will try to answer such questions.
No comments:
Post a Comment