Money (That's What I Want)

As they say in investment banking circles, Liverpool Football Club is “in play”. This is not an Americanism for what happens on the pitch, but means that the club, or at least part of it, is up for sale. Unpopular owners Tom Hicks and George Gillett must secure £100m investment by July to reduce their outstanding £237m debt to the Royal Bank of Scotland (RBS). The first serious expression of interest emerged over the weekend from the New York-based Rhone Group, a private equity group specialising in “mergers and acquisitions, leveraged buyouts, recapitalization and partnerships with particular focus on European and transatlantic investments”. By all accounts, the mysterious company has offered £110m for a 40% stake, which would substantially dilute the current owners’ holdings to 30% each.

So what are the chances of this deal happening? That’s the 64 million dollar question. Despite their obvious and urgent need for additional funding, ironically the biggest obstacle to any agreement may still be Messrs Hicks and Gillett, who continue to over-value the club. The Rhone Group’s offer implies a total value of £275m, but the owners are understood to want over £300m, while their initial instructions to managing director Christian Purslow was to give up only 25% for £100m, giving a £400m valuation. An unnamed source commented, “it’s highly unlikely that they’d be interested in an offer at that level”, especially as the offer is to pay off debt with no money going directly to Hicks and Gillett. Of course, they may have no choice, but remember that they have already rejected a much higher offer of £500m from Dubai International Capital (albeit in the far headier times of March 2008), while as recently as late 2007 Hicks placed a quite ridiculous £1 bln valuation on the club, when he offered DIC a 15% stake for £150m.

"Probably not reaching for his wallet"

Back in the real world, you have to ask whether the Rhone Group is a credible bidder. Owned by the exotically named and low profile Robert F. Agostinelli and M. Steven Langman, it is not a major player in the private equity industry and has no track record in football. Would an investment company just looking to make a quick buck be willing to put up with all the aggravation associated with putting money into a football club? It is also curious that details of the bid have leaked out, as serious investors tend to conduct their business in the utmost secrecy and the Rhone Group has hardly courted publicity in the past. Even if this is a genuine bid, there is always the risk that the group could walk away after conducting due diligence, which is exactly what happened when private equity group Apax Partners took a closer look at Woolworth’s books (not exactly the wonder of Woolies).

There are also serious doubts that anyone would be happy to invest £100m+ for a minority stake, thereby lacking overall control. As Purslow told fans group Spirit of Shankly, according to their version of the meeting minutes, “Some (investors) don’t just want a percentage, some want 100 per cent. No investor is going to want to invest £100m and have a smaller stake than the present owners”. Indeed. Why on earth would any investor want to fund the current owners’ growth plans and effectively hand the upside to Hicks and Gillett? Most investors would wish to own the club outright or as a minimum hold a majority (controlling) interest. Actually, given the constant infighting between Hicks and Gillett, why would anyone want to work with them at all? Hicks himself dismissed “management by committee” when rejecting DIC’s offer two years ago.

"Brand values"

Like Stevie G arriving in the penalty area, timing is everything, so it is surprising that any investor would show his hand this early in the game. You would expect most to remain on the sidelines, letting the clock tick down ever closer to RBS’ July deadline, which should further reduce the price they would have to pay, especially if the team fail to qualify for next season’s Champions League. This was worth around £20m to Liverpool last year, but improved TV and sponsorship deals signed by UEFA mean that the size of the prize is even higher next season. As Professor Tom Cannon of Liverpool University said, “qualification for the Champions League remains the crucial factor in enabling the club to maintain income at current levels. Given the current distribution in English football, the £30m, £40m, £50m you get from the Champions League is the key differentiator”. Purslow agreed that this is vitally important, “the loss of Champions League football next season would impact upon income and this has a relevance to investors”.

As well as the monetary cost, non-qualification would further damage what the marketing bods call “the brand”. The failure to reach the Champions League knockout phase and the early exit in the FA Cup at the hands of Championship strugglers Reading have already hurt the club’s reputation at the worst possible time for the owners, i.e. when they are frantically searching for new investment. Tom Cannon again, “It’s the effect on the image. It’s much easier to raise money for a club that is at the top or seems to be going to the top than a club that seems to be going in the other direction”.

"Show me the money"

Any investors would also be acutely aware that they would require very deep pockets. As well as sorting out the debt, they would need to provide sufficient working capital to cover costs and potentially absorb losses. They would also need to find enough money to rebuild an under-performing squad. Star striker Fernando Torres has ratcheted up the pressure by declaring in the Spanish media that Liverpool are “four of five class players” short of a successful side. The veiled threat is that without this investment the best players (Torres, Gerrard, Mascherano, Reina) will be looking for the way out of Anfield. On top of that, they would need at least £400m to build the new stadium, which is the great white hope of the moneymen.

On the other hand, there are some good reasons to invest in Liverpool. The Rhone Group clearly smell a moneymaking opportunity, as their whole raison d’être is to profit from under-valued assets. In a way, this transparent greed is preferable to the false bonhomie exhibited by Hicks and Gillett in their first stage-managed appearance, which involved false smiles, scarf waving, constant references to the Kop and manfully avoiding using words like “franchise”. The fact is that Liverpool is famous throughout the world and is still one of the leading global football brands, playing in the richest club competition in terms of broadcasting revenue. Even though their revenue increased from £133.9m to £159.1m in their last accounts, they still have plenty of room for growth. They are the fourth placed English club in Deloittes Football Money League 2010 with revenue of £184.8m, which is significantly lower than the other “Big Four” teams (Manchester United £278.5m, Arsenal £224.0m, Chelsea £206.4m).

"The special relationship"

Most of the turnover growth came from broadcasting revenue, which is now actually the main source of income at the club, as a result of the lucrative deals the Premier League has signed with Sky and (to a lesser extent) the BBC. The money received partly depends on the number of games televised and where the club finishes in the Premiership, but is protected by the recent deal signed by Richard Scudamore with its significant increase in the payment for overseas rights. TV income is also dependent on the Champions League and the last accounts reflected Liverpool reaching the quarter-finals, so there is likely to be a reduction this year after their failure to reach the last 16.

There is also plenty of scope to increase commercial revenue. The prospectus issued to potential investors last year targeted growth from £59m to £111m in the next five years, which seems very ambitious, especially when you realise that Liverpool already make more from this income stream than Arsenal and Chelsea and only a little less than Manchester United. Nevertheless, the commercial team has already signed a new shirt sponsorship deal with Standard Chartered Bank, reputedly worth £20m per season for four years from next season, which is much more than the current sponsor Carlsberg pays. However, “probably the best lager in the world” will continue to be one of the club’s main partners, paying £6m per annum for the privilege. They have also secured other deals with Adidas, 188BET and Bank of America.

"Grounds for optimism"

However, the real key that could unlock Liverpool’s revenue possibilities is a new stadium. Anfield is a wonderfully atmospheric old ground, but its capacity is only 45,000, which is much less than Old Trafford (76,000) and The Emirates (60,000). According to Deloittes, Liverpool’s matchday revenue of £42.5m is less than half of Manchester United (£108.8m) and Arsenal (£100.1m), while even Chelsea, whose Stamford Bridge ground is even smaller (42,000), earn more from this category (£74.5m). The bean counters would also be licking their lips at the potential to increase ticket prices, as Liverpool only earn £30 per seat at each game, compared to around £50 at the other clubs. Indeed, the investment prospectus revealed that Hicks and Gillett were considering raising ticket prices by 8% and/or converting 1,000 seats to more profitable corporate boxes.

But it is the long-awaited new 73,000 capacity stadium at Stanley Park that would really transform matchday income. This project is currently on hold, due to financial constraints, but the hope would be that securing the £100m additional investment would improve the club’s creditworthiness, thus persuading the banks to provide the finance to finally begin work on this dream. Of course, whether the stadium would be filled is then partly down to the performance of the team – attendances have been below capacity at Anfield for most of this season.

"I said, we need new players"

Maybe the most positive aspect of the Rhone Group offer is that it might flush out other potential investors. Only last week, a city source claimed, “Liverpool’s owners are not anywhere close to a deal to sell a major stake in the club. There is some way to go yet”. Last year’s accounts drily noted, “The current economic conditions have had a significant impact upon world credit markets and accordingly raising finance in this environment is challenging”. You can say that again. This has been a frustrating search to date for managing director Christian Purslow and there has been speculation that he deliberately leaked details of the Rhone Group’s offer to encourage other potential investors to break cover. Over the past year the press has mentioned many possible buyers, including Saudi princes, Kuwaiti billionaires, Indian industrialists, anonymous Americans and our old friends DIC, but the club have yet to find a wealthy benefactor: either a reputable businessman or even someone on a big ego trip.

The reason that Purslow has been clocking up so many air miles is in response to the demands from the club’s bankers RBS for a £100m “equity rise” to alleviate the debt situation. Although it had been known for months that the club had been seeking additional investment, it was only relatively recently in his meeting with Spirit of Shankly that Purslow confirmed, “This is a requirement from our bankers”. He is even more explicit in the contested version of the minutes, “The £100m pay down is compulsory. It has to be done”. There is a school of thought that RBS might take pity on Liverpool, especially as they are largely state-owned, but it is not so long ago that Barclays made a stand over Southampton’s overdraft, ultimately pushing them into administration. The consequences of not securing the necessary investment would be frightening for the club, leading to a fire sale similar to the one which West Ham have just endured.

"Smooth Operator"

The debt is hanging over the club’s future like the Sword of Damocles, leading to a reworking of the club’s anthem “You’ll Never Walk Alone” to the cruel “You’ll Never Get A Loan”. Hicks and Gillett paid around £185m for the club in 2007, but took on further borrowing facilities of £113m for in the club, giving total debt of just under £300m. The last published accounts (up to 31 July 2008) of Kop Football Holdings, Liverpool’s parent company, listed debts of £359.7m up £77.5m from the prior year, with the company also being saddled with a new £58.2m debt to its own holding company, Kop Football (Cayman) Limited, which also happens to be owned by Hicks and Gillett. As at 31 January 2009, the total owed to the banks (RBS and Wachovia) was £313m, though Christian Purslow has confirmed that the debt is now down to £237m, largely as the owners had to pay £60m with their own money last July as part of the refinancing.

Before the credit crunch, loans of this magnitude would have been expected to be repaid over three to four years, but this payment was for only a one-year extension to the loan. Dr. Rogan Taylor, director of the Football Industry Group at Liverpool University, was among many critics of this agreement: “It is little more than an expensive fix – just sticking plaster, making things more difficult for the club to progress in the long run. It is still very short term, year to year, if that”. The problem for Liverpool is that their debt comes from bank loans, which have short repayment dates, as opposed to the long-term bonds issued by Arsenal and Manchester United. Arsenal’s debt is locked in at reasonable interest rates for 20 years, which gives them a lot of breathing space. Liverpool’s anxiety before their mid-2009 refinancing was highlighted in the prospectus issued by Rothschild and Merrill Lynch, which included the possibility of raising £50m via the infamous, hugely expensive PIKs (payment-in-kind loans) used by Manchester United, which would have risen to £100m over five years. Talk about a red alert.

"Blow me - you know the rest"

The last accounts laid bare the impact of the debt and fully exposed the madness of the leveraged buyout, as the relatively healthy profits of £10.2m in the football club were more than wiped out by enormous interest payments of £36.5m, leading to a large loss of £42.6m in Kop Football Holdings – even in a bumper revenue year. As a comparison, before Hicks and Gillett piled debt onto the club, the annual interest payments were never higher than £3.0m. I can hear the commentary now, “And it’s Liverpool playing in the red”. As a further sign of financial incompetence, £18.7m was spent in the period on work (architects’ fees) relating to the proposed new stadium in Stanley Park. This is on top of the £10.3m written-off the year before, which means that nearly £30m has been wasted on a stadium “that is as far away as ever from being started, let alone finished”. Liverpool’s auditors KPMG went public with their concern over the level of debt before last July’s refinancing, when they described the issue as “a material uncertainty which may cast significant doubt on the group’s and parent company’s ability to continue as a going concern”, though the club described this as a fairly standard comment while debt negotiations are underway.

In response, RBS took the unprecedented step of writing to fans to stress that the club is “financially healthy and able to service comfortably its debt obligations from cash flow generated by its playing and commercial activities”. They also took great pains to distinguish between the obligations of the club and the parent company (i.e. owners). This is in line with a firm commitment made by Hicks and Gillett when they bought the club, “The payment of interest on, repayment of or security for any liability due under the (borrowing) facilities will not depend to any significant extent on the business of Liverpool”, but this is patently not the case. In fact, in early 2008, Tom Hicks admitted that the football club was responsible for the interest payments in the parent corporation via a statement from his PR company, Financial Dynamics, “The holding company debt is supported by the assets it acquired and should there ever be any shortfall in cash flow at the club or anywhere else in Kop in any given year, Kop’s ownership, under the terms of the financing package, is prepared to fund whatever is required”. All together now, “Working for the Yankee Dollar”.

"Statler and Waldorf"

The financial conditions have obviously impacted the team. Last December, manager Rafael Benitez admitted that Liverpool’s title prospects were undermined this summer, “One of the priorities this year was to reduce the debt”. He admitted that the club was burdened with unrealistic expectations, given that his transfer budget is unlikely to improve without further investment. His ability to spend has been limited to what he raises through player sales. Although Christian Purslow has stated that there was a net spend of £20m last summer, he failed to mention that this figure included new long-term contracts awarded to the most valued players, and Benitez confirmed that his net spend was, in fact, zero. The investment prospectus actually suggests that net transfer spending per annum, including improving player contracts, will be locked at £20m until 2014. By all accounts the reason that Benitez lost out on Gareth Barry was because Manchester City could pay the £12m transfer fee upfront, while Liverpool were only prepared to pay in installments.

So it’s fair to say that Hicks and Gillett are not exactly flavour of the month with Liverpool fans, which is hardly surprising given the string of broken promises. They said that they were different from Manchester United’s hated owners and they would not “do a Glazer” by burdening the club with a mountain of debt, but that is exactly what they have done. They promised to invest in the team and to build a grand new stadium, which was the main reason why former chairman David Moores and chief executive Rick Parry decided to sell. Back in 2007, George Gillett famously said, “the shovel needs to be in the ground in the next 60 days or so”, but when work on the stadium was put on hold due to unfavourable market conditions, he vehemently denied this, “Bullshit, that was not me”, causing concern about his memory – or concept of honesty.

"How To Get Ahead In Advertising"

It is clear that Hicks and Gillett have suffered in the financial downturn. Although still very wealthy, Tom Hicks has lost his billionaire status according to Forbes magazine’s latest rich list and last year suffered the indignity of defaulting on the $525m debt in his Hicks Sports Group holding company, leading to the sale of the Texas Rangers baseball team. George Gillett’s portfolio has also been hit and he has sold his stake in the Montreal Canadiens ice hockey club and scaled back his NASCAR activities. From Dollar signs to danger signs.

Hicks and Gillett have constantly treated the fans with contempt with the accounts revealing that they charged the club nearly £900k to cover “travel, legal, personnel and other expenses” and £1m for “transaction-related expenses”, in other words their costs in buying the club. Proving that the apple doesn’t fall far from the tree, Tom Hicks Jnr. was forced to resign from the board after sending an abusive email to a Liverpool fan. This has resulted in some very public displays of anger from the fans with Spirit of Shankly starting a billboard campaign, “Tom and George. Debt, Lies, Cowboys. Not welcome here”, while there is a coordinated movement to email RBS, warning of a product boycott if the bank provides Hicks and Gillett with an extension to their loans.

"They'll have the shirt off your back"

This is why so many people are hoping that managing director Christian Purslow succeeds in his search for new investors. Fans say that he has not put a foot wrong so far, but short of mooning the Kop, it’s hard to see exactly how he could blot his copybook compared to the club’s owners. One of his qualities is his relentless optimism, but that can also have its drawbacks, such as the missed deadlines he announced for new money (February has been and gone). Even the much praised £20m Standard Chartered sponsorship deal is dependent on the team achieving a number of targets, “a significant element of the deal is performance-related with bonuses to be paid out should they win the Premier League or Champions League”. Getting the ball out, he parroted Rafa Benitez when boasting, “We will be in the Champions League, for sure”. I hope that the fans’ faith is justified, but let’s not forget that his background is the banking industry, which has been exposed as being full of fools and charlatans. Indeed, those with a long memory will recall Purslow’s role in the utterly shambolic and ultimately unsuccessful attempt to float Formula One when he worked for Salomon Smith Barney.

Let’s hope that Purslow can indeed deliver, as Liverpool are one of football’s great institutions. Investment might yet come from the Rhone Group, though some fans might be wary of another American investor. Once bitten, twice shy. What is abundantly clear is that the club needs new money (and a lot of it), otherwise who knows what the consequences might be. They might even have to consider the unthinkable and plan a ground share with local rivals Everton. As Macca might have said, “Yesterday, all my troubles seemed so far away”.

Still Living The Dream

Another day, another football club in the High Court. This time it was Cardiff City, who were facing their third winding-up order on Wednesday over a £1.9m debt to Her Majesty’s Revenue and Customs, a government department that is becoming all too familiar to football fans across the land. Fortunately for the Bluebirds, they have in Peter Ridsdale a chairman who understands debt problems better than most, having presided over the most infamous financial collapse ever seen in British football at Leeds United.

Thanks to his efforts, “living the dream” has entered football folklore as a phrase synonymous with financial imprudence or living beyond ones means, which resulted in Yorkshire’s finest “marching on together” to administration, only burdened by debts of over £100m.

Cardiff have just about avoided this fate, but have been given a final date of 5 May (three days after the end of the season) to settle their debts with the taxman, even though HMRC’s counsel argued that the club should be wound up immediately, as it was “plainly insolvent”. The second winding-up order in the High Court had been adjourned for 28 days in February after Cardiff paid £1m towards the tax bill, which then stood at £2.7m. Half of the remaining £1.7m was paid on Tuesday, leaving £850,000 outstanding.

However, the HMRC counsel said club the payment was only possible after the club defaulted on its ongoing obligations to pay PAYE and VAT, meaning that the total debt now stands at £1.9m. The Registrar said, “On the face of it this company is not able to pay its debts as they fall due”, but granted an adjournment of 56 days for full settlement and Cardiff are now in a race against time to find the money. The club hopes that the sale of two plots of land around the Cardiff City Stadium for around £1.8m will provide a lifeline, but fans have learnt to be wary of the club’s promises.

"Is his nose getting longer?"

The supporters could have been forgiven for believing that the worst was behind them back in December when the first winding-up petition was dismissed by the High Court and Peter Ridsdale triumphantly commented, “This puts any doubts that anybody had about the future of the club behind us.”

Just in case there were any lingering misgivings, Ridsdale repeated his confident message on 8 January, “We as a club will have paid off the Inland Revenue by the end of January and we will be bringing in new players.” This was after the News of the World had run a story claiming that the club had to settle a £2.7m tax bill or face being wound up. Ridsdale appeared more concerned that the information might have come from documents stolen from club officials, but that did not mean it was untrue.

“Blue Peter” indulged in his own form of wind-up, when he reassured fans that, “We are happy that Cardiff City Football Club’s relationships with its creditors including HMRC are such that we will not have any financial issues that will affect the ability of the club to continue to trade as normal in all aspects of its business.”

The Riddler’s commitment to transparency has enjoyed a somewhat checkered history, epitomised by his tetchy response to a question at a press conference on 28 January on whether the outstanding tax bill would be paid before the second High Court hearing, “You will find out on February 10. Why do I have to tell you? With respect, it’s nothing to do with you, it’s to do with our shareholders.” By implication, it was also nothing to do with the club’s increasingly restless fans. When he was later asked if the club was going into administration, he stormed out, for once in his life claiming that he had “nothing more to say.”

"Happy customers"

Chairman of the South Wales club since October 2006, Ridsdale shows every sign of repeating the mistakes he made at Leeds United by effectively gambling on success on the pitch paying the ever-increasing bills off the pitch. His “strategy” at Elland Road relied on qualification for the Champions League, while he is now (probably literally) banking on promotion to the Premier League. There was a horrible sense of déjà vu when you heard him boasting of the club’s aspirations after last summer’s £5.25m spending spree, “If you look at our levels of investment, I don’t think we can be accused of not being ambitious.”

Nobody has ever charged Ridsdale with under-spending at Cardiff (or anywhere else for that matter), especially when he brought in expensive old pros like Robbie Fowler and Jimmy Floyd Hasselbaink to boost the wage bill, sorry, chances of promotion. Amusingly, Ridsdale has blamed football’s structure, specifically the enormous financial gap between the Championship and Premier League for creating a “temptation to over-spend”, to which Football League Chairman, Lord Mawhinney, simply responded, “clubs have to live within their means”. Even a humble supporter realised this fundamental economic principle, “The club needs to tighten its purse strings. It thinks it’s in the Premier League and it’s not.”

So how do the financials look under Peter Ridsdale’s stewardship? In the last three sets of accounts (2006-8), Cardiff City has reported an operating loss very single year: £5.7m, £5.5m and £8.4m. Most worryingly, the wage bill has increased over this period from £8.1m in 2006 to £13.4m in 2008, which was actually higher than turnover of £12.8m. The salaries are running at £1.2m a month, which helps explain why the club has difficulties in paying irritants like the taxman and why the debt has risen from £27.1m in 2006 to £32.8m in 2008, despite making well over £20m profit in transfers.

"You probably think this blog is about you"

PR Pete was at his best when it came to explaining the debt, “We haven’t borrowed a penny from the bank since I came here. We’ve been self-sufficient and we don’t have a bank overdraft.” This may well be true, but he neglected to mention the other significant debt the club is struggling to service, like the mortgage with PMG, the developers of Cardiff Stadium, or the unsecured redeemable loan stock, which is believed to require a £10m settlement in December or increase in £1m increments until it is repaid.

To be fair, Ridsdale did manage to agree a settlement with former owner Sam Hammam’s Langston Corporation that the loan stock was not repayable until 2016. Bearing in mind his profligacy in the summer transfer market, it was a bit surprising to hear Ridsdale sum up the desperate situation so accurately just a few months later, “against a backdrop of the club having to find money to build and fit out the stadium, meet repayments on loans to former directors, make repayments on the debt owed to PMG and make repayments to the Langston Corporation.”

Another significant cost to Cardiff is Ridsdale’s own salary, so riddle me this, how could he have earned £1m in 2007 while Cardiff made a loss of £5m? This is especially pertinent when you consider the comments he made on the publication of his book “United We Fall: Boardroom Truths About the Beautiful Game”, when he bleated, “The only benefit I wanted from this was a chance to tell the truth. I am very keen that nobody thinks I’m lining my pockets.”

Ridsdale was remunerated for “consultancy services” via his company WH Sports, including a £500k bonus for “successfully renegotiating the size and terms of the loan notes and achieving unconditionality on the new stadium project.” Is it just me, or does this mean that he was effectively given a bonus for increasing the club’s debt?

Having “saved the club from administration”, Ridsdale invested his bonus in Cardiff City shares (at a heavily discounted price). The latest accounts showed that Ridsdale’s firm was paid a further £325,000 in 2008, presumably before it went bust owing nearly £374,000 to the taxman. Of course, Ridsdale now employs what is know in the trade as the “Storrie defence”, named after Portsmouth’s own Peter, protesting that he is now only “a salaried employee”.

"Put your hands up for Cardiff"

The great man (Peter the Great?) is still full of confidence, describing the club’s problems as a “hiccup”. He patiently explained that, “We have short-term cash challenges like many football clubs” (and he should know), but this blithely ignores that the short-term problems are being solved with long-term money. What happens next year if you’ve already spent the income from 10,000 season tickets?

That wage bill shows no sign of going away – and nor does the taxman. Supporters Trust board member Keith Morgan articulated the issue, “What I suppose is a worry is that there is no firm plan or actual promised cash to come in to deal with the medium to long-term debts.”

In the interests of balance, we have to acknowledge that Ridsdale has done some good things for Wales’ biggest club, most notably delivering the spanking new Cardiff City stadium, but even this has not been free of problems. Apparently, the club still owes millions to contractors who have carried out work on the stadium, as the budget for fitting out offices and hospitality boxes spiralled out of control.

Even though the club had gone to great expense installing undersoil heating to ensure that games went ahead in the winter, it did not work, leading to the lucrative Christmas match with Leicester City being called off. It would also be interesting to know what the club have assumed for attendances in their business plan (if they have one). Cardiff attract very good crowds for the Championship (around 20,000), highlighting the club’s potential, but this is still well short of the 27,000 capacity.

"Oops, I did it again"

Ridsdale has also produced good money from player sales, but then again he is the consummate salesman with one Wall Street operator during his time at Leeds saying that he “could sell ice to Eskimos”. That being said, it is difficult to understand why he did not insist on a sell-on clause when transferring the extremely talented Aaron Ramsey to Arsenal, though some have argued that the insistence on the money being paid upfront is indicative of the club’s pressing financial needs.

However, a large section of Cardiff’s fans have lost trust in their Chairman, especially after the so-called Golden Ticket fiasco, when Ridsdale promised that all the money from early season ticket renewals would be spent on new players in the January transfer window, effectively asking the fans to put their hands in their pocket to help the club get promoted, “We will be bringing in new players this month, I can guarantee that. I would go so far as to say that come January 31, we will be holding a press conference to parade the players we have brought in during the month.” When there turned out to be no new additions to the squad, Ridsdale said that he was prepared to eat large helpings of “humble pie” (maybe that’s why he’s so, er, robust), but “I don’t believe I’ve lied. I allowed something to go out there that was misleading.”

"Who ate all the humble pies?"

This is how I see it: either a promise was made to season ticket holders that Ridsdale knew that the club had little chance of honouring or he is unaware of the perilous state of the club’s finances. In other words, Ridsdale is either, shall we say, cavalier with the truth or financially incompetent. The wider issue is that not only was the £3m+ from the season ticket sales (10,000 at a minimum price of £299) not used for buying players, but it obviously did not find its way to the taxman either, given the appearance at the High Court.

At the club’s recent Extraordinary General Meeting, Finance Director Alan Flitcroft explained that, “there have been significant costs since we launched the scheme”, giving the strong impression that the club would not have been able to cover those costs without the injection of the season ticket money, which is extremely worrying. The best thing to come out of this sorry affair was Cardiff’s statement, which harrumphed with no apparent sense of irony, “We do not apologise for ensuring that the viability and financial health of the club is the ultimate priority.”

Nor do the fans believe all the talk about new money coming into the club, “I am talking to investors, sponsors, people who have access to funding.” They have heard plenty about fairy godmothers baling out the club in the past three years, but the only tangible investment to date has been a paltry £500,000 from Malaysian “property tycoon” (aren’t they all?) Datuk Chan Tien Ghee. As sports agent Jerry Maguire famously said in the movie of the same name, “Show me the money!”

"The fans speak loud and clear" (photo credit: Jon Candy)

When the fans dared to protest against the club’s financial situation, Ridsdale whined, “We are currently seeking external investment. Will a march against the current management or the club assist that?” Ah, so that’s it. Nobody has invested in Cardiff City in the last three years, as they were worried that the fans might one day stage a peaceful demonstration against financial incontinence. Over 2,000 fans, carrying banners and a coffin, called for Ridsdale’s resignation before Cardiff’s match against Middlesbrough. Their mood was probably not helped by reports of a bust-up between Ridsdale and manager Dave Jones after the 3-0 defeat at Preston, when the Chairman charged into the dressing room to make Jones aware of his unhappiness with the performance, drawing on all of his vast experience of man management and football tactics.

Questions were even asked in the house with the Welsh Assembly’s Sports Minister, Alun Ffred Jones, being asked about the club’s financial troubles, “Many fans believe that they were misled by Peter Ridsdale. Do you also share fans’ concerns about the future of Cardiff City, one of Wales’ top football clubs, because of very significant financial challenges faced by the club that have been highlighted in the media?” In a way the Welsh had already given their opinion of Peter Ridsdale in 2007, when he finished bottom of the candidates seeking to be elected as one of six South Wales representatives on the Football Association of Wales council.

"Cat got your tongue?"

In spite of this lack of popularity, Ridsdale is still holding the reins, even though he threatened to leave back in 2007, though in his typical self-serving manner, “I am getting more stick for saving Cardiff City than I did when things went wrong at Leeds. Right now, I feel like walking away.” Note the neat switch between the active and passive voice there.

After seeing off an attempted vote of no confidence at the recent EGM, Ridsdale claimed, “I am chairman, because if I walked away the board’s view is that the football club would be worse off” and “the shareholders have reached the conclusion that the likelihood of this club being in the right financial state is better served with me remaining than running away.” Right. Maybe this view is not quite so remarkable when you consider that most of the shareholders are local businessmen who are heavily involved in property development with little interest in football – and the second largest shareholder with a 10% stake is a certain Peter Ridsdale.

With Publicity Pete, it’s all about him. When he complained that he had been “turned out” of the Leeds United boardroom after he returned to Elland Road with Cardiff in 2006, his card was well and truly marked by Ken Bates of all people, “It’s a pack of lies, but I’m sure he needs the attention.” When he first arrived at Cardiff, he was anxious to downplay his role, “This isn’t about me jumping up and down, screaming from the rooftops, saying, ‘Look at me, I’ve done a great job here’”, but, almost in the same breath, he went on to say, “I’m enjoying what I’m doing here. It gives me a chance to prove to people that I understand how to run a football club.”

"I'm putting on my top hat"

Funnily enough, Ridsdale said much the same thing in his previous role as Barnsley owner and chairman, “I know I have something to prove and the only way I can do that is by focusing on Barnsley and making a success of it.” However, he nearly took his new “theatre of dreams” into liquidation, proving that old habits die hard, when it was reported that Barnsley paid more to agents than any other team in their division in his first year. His successor drily observed that, “the club was running into a financial position that was less than comfortable and it became clear that cash had to be injected”, while noting that “there are areas where we have spent too much.” Quelle surprise.

Of course Ridsdale is best known for his catastrophic reign at Leeds United, which became the poster child for poor financial management in the football world. During his six-year tenure, the club first enjoyed some success, famously reaching the Champions League semi-finals in 2001, before spectacularly imploding as a result of some “courageous” (a.k.a. insane) financial decisions, not least making Ridsdale the highest-paid chairman in the Premier League, when his salary was increased by 60% to £600,000 in 2001.

Before the likes of Chelsea and Manchester City brought in their billionaire benefactors, Leeds had reported the largest ever loss by an English football club: £49.5m in 2003 (after a mere £34m loss the previous year). When Ridsdale jumped ship in 2003, transfer spending had risen to almost £100m and Leeds were £105m in debt. His replacement, Professor John McKenzie, memorably joked, “Leeds lived the dream – and I inherited the nightmare.” Living the lie, more like.

"You don't know what you're doing"

Ridsdale decided to “go for it”, embarking on a grand acquisition strategy using innovative finance models, i.e. other people’s money. First, he utilised a sale-and-leaseback arrangement, which allowed Leeds to spread the cost of buying a player over the length of his contract, the drawback being that the interest rate was higher than the banks would charge and they had to pay for insurance on top of that. As their ambitions grew, they tweaked this arrangement, so that only half the original cost was paid off in stages, leaving the remaining 50% as a lump sum payment at the end.

This again increased costs, although it did defer the Day of Judgment. Finally, they raised £60m, the largest ever loan for an English football club, via a 25-year securitisation loan, which was essentially secured on the fans’ loyalty, i.e. money from their season tickets. Many clubs used similar devices, but there was one major difference with Leeds’ “cunning plan”, which was that they spent the funds on the squad, while others made long-term investments in a new stadium or stands.

This really was money to burn, but the club was not concerned, because they had a Plan B, namely to sell their assets (players) to wipe out the debt if it all went pear-shaped. However, there are many flaws in this logic. Like the housing market, transfer prices can go down as well as up and it turned out that Leeds had bought most of their players at the peak. Also, if a player is not doing his stuff on the pitch, his value is likely to fall. Furthermore, if a club is making distress sales, it will almost certainly have to do so at a discount. This was evidenced by the 2003 accounts, which reported a £24m loss for sales of players considerably below their valuations in the books, including defender Jonathan Woodgate, who Ridsdale had said “would never be sold”.

"Hey, big spender!"

Other examples of financial mismanagement were revealed by the accounts, including millions paid in compensation to former managers David O’Leary and Terry Venables and even salaries to players who had long since left the club. The club paid £70,000 in a single year for private jets, while Ridsdale’s successor publicised an invoice for the upkeep of goldfish in his office as an icon of the club’s over-indulgence.

Even after this damning indictment ("The Damned United”, if you will), Ridsdale incredibly told the BBC’s Money Programme that with the benefit of hindsight he would still not do things differently, “Mistakes were made, but I don’t think there’s a single thing I could change.”

While Yorkshire’s version of Edith Piaf is belting out his version of “Non, Je Ne Regrette Rien”, he is more than happy to point the finger at others for his failings, placing the blame for some of Leeds’ greatest extravagances with the manager David O’Leary, though his allegations were clearly contradicted by documents published in the Daily Mail, while O’Leary himself called Ridsdale “deranged” and “two-faced”.

He also put the boot into the players, “At the end of the day, the strategy went wrong because we stopped performing on the field.” If that wasn’t enough, he needlessly added, “I would have no problem with players speaking to the press if I believed that they were intellectually capable of doing so.” So says the Brain of Britain.

"I'm in the dark as much as anyone"

On Planet Ridsdale he still thinks that he would have saved Leeds from relegation to England’s third tier, “I actually believe that had I been allowed to stay around, I don’t believe that Leeds would be in the situation they are now.” No, they might be sleeping with the fishes along with Chester City.

Demonstrating an almost total lack of understanding, in both senses of the word, he also said, “It’s only 12 months since Leeds were in the play-off final and yet people talk today of decisions that were made four or five years ago that are causing their plight.” Well, yes. Even when Ridsdale appeared to be making an apology, it was heavily qualified, as when he told BBC Radio 4, “I regret a number of things we did. I think I said ‘yes’ too often to the manager. We bought too many quality players.”

All this from a man football agents fondly referred to as “Father Christmas”. In an attempt to break the world record for the number of strikers at a club, Ridsdale splashed out £22m on the “Two Robbies”: the overweight Fowler and the wasteful Keane. He also broke the British transfer record when he paid £18m for Rio Ferdinand, but the worst example of his generosity was when he paid £7m for the very ordinary midfielder Seth Johnson and then added insult to injury by paying him £37,000 a week, which was approximately £32,000 more than he had been earning and was £24,000 higher than his agent had been looking for.

"It's a fair cop"

Peter Ridsdale comes across an arrogant man, who genuinely seems to believe that he is a victim of circumstance, bringing to mind the old saying, “there is none so blind as he who will not see.” His best quality is a thickness of skin that would be envied by a rhinoceros, as we can see in the unintentional comedy video made about his time at Leeds, “My Leeds United”, where he gives us the classic line, “My job is to make sure this club is in safe hands.” For the sake of Cardiff City, I sincerely hope that lightning does not strike twice. Let’s hope that the fans “Won’t Get Fooled Again”.