Transfer window spending blizzard not quite what it seemed

When the transfer window closed in typically frenetic fashion on Monday evening, aggregate spending by Premier League clubs is estimated by KPMG to have reached £171.2 million, excluding the £12 million Arsenal have set aside for Andrei Arshavin. That is more than was spent in January 2008, when around £150 million changed hands, and more than the combined spending of the Italian, French, German and Spanish top divisions last month. If nothing else, the bare figures demonstrate that in England pockets are deeper and the stakes consequently higher than elsewhere in Europe, but scratch below the headline numbers and a less reassuring picture emerges. It may look like another orgy of spending by cash-rich clubs, but the reality is very different. With the recession tempering expectations of revenue in future seasons, the outcome of the next television deal still uncertain – the first round of bids for live rights were lodged with the Premier League yesterday – and relative cash-flows tighter than at any time in the last five years, clubs are having to be far more creative in the way they do business. Fittingly for a game increasingly reliant on credit, the transfer window has been marked by the increased use of bespoke loan facilities and debt trades to make deals happen. Loans, meanwhile, are more popular than ever with clubs desperate to share some of the cost of spiralling wages. More by luck than judgment, Tottenham have been the primary beneficiaries of "debt forgiveness", with their net spending closer to £20 million than the total reported figure of £49 million lavished on Jermain Defoe, Robbie Keane, Wilson Palacios, Pascal Chimbonda and Carlo Cudicini. Of these deals only two, Palacios and Chimbonda, required the club commit to the entire fee in cash, albeit in instalments. Cudicini was a free, and in re-signing Keane and Defoe they were able to take advantage of the straitened circumstances of both Liverpool and Portsmouth to lure the players back. In Keane's case Liverpool still owed Tottenham around £11 million of the initial £19 million fee they agreed last summer, meaning his £12 million return to White Hart Lane was completed with less than £1 million in cash travelling in the other direction. Liverpool may have taken a £7 million hit (plus wages) for Keane's six-month stay, but in the wider context of a club already under pressure to service the American owners' £350 million acquisition loan, erasing an £11 million debt repayable this summer may prove helpful. Defoe's return did have a net cost to Tottenham, who notionally paid £15.75 million for a player they sold for £9.2 million last January, but with Portsmouth still owing outstanding fees for Defoe, Younes Kaboul and Pedro Mendes, only £6 million in cash changes hands. While Tottenham have benefited from specific circumstances, the now-commonplace payment of transfer fees in instalments has seen an increase in the use of football-specific loan facilities to keep the wheels turning. These niche products have boomed in the last year, driven by changes in the way that transfer deals are done and the pressure on cash-flows. Where once deals were done on fairly straightforward cash terms, the size of modern transfer fees – there were six worth more than £10 million in January alone – have left even the largest clubs having to pay in tranches. With selling clubs keen to get their hands on all the money up front, a small number of banks, specialist football finance houses and at least one player agency have developed bespoke loan products that helped keep the merry-go-round turning this year. Chris Lee, head of the Professional Sports Team at Barclays, who represent 11 of the 20 Premier League clubs and specialise in football-specific services, says clubs are increasingly asking for this sort of assistance. "The nature of football means we are offering fairly unique solutions that we just don't see in other sectors," he said. "We are increasingly being asked to provide clubs with facilities that allow the selling club to receive the full transfer fee up-front, with the debt effectively being repaid by the buying club. "This is fairly unique in that the proceeds of the loan are enjoyed by the seller, but the repayment of facilities is agreed with the buyer. "It's an arrangement that works particularly well for clubs that are in slightly more challenging situations, and we have seen a real growth in the number of these sorts of deals since the end of last season."With the financial weather not set to improve any time soon and the Premier League about to live through the first recession in its 17-year history, this is a niche of the football business that is only likely to grow.

Source: Telegraph