Arsenal’s Billionaire Investment aka AU = Gold

By Daniel Cowan
In Arsenal
May 20th, 2012
19 Comments

It has taken 9 years and the best part of £1.1b of Abramovich’s cash but he finally has the Champions League trophy.

When Drogba scored the winning penalty I felt sick but now the bile has settled back down I’m actually quite ambivalent about Chelsea’s triumph.

Sure Chelsea parked the bus but so did Inter and I appreciate that sometimes the best team loses. I know Chelsea were “lucky” to get through against Barca courtesy of a Torres clincher who despite his lack of form since making his British transfer record move is still a quality player. Last season Arsenal may have had a similar route to the final if our last minute chance had fallen to a striker of Torres’ quality instead of Bendtner.

I’m not pleased that Chelsea won the Champions League but I’m far from devastated. They’re still 10 league titles and 4 FA cups away from being more successful than us.

The potential upside of their triumph is that Abramovich may now decide that he no longer wants to pump millions into the club. He has what he came for and he may feel that the team needs to improve far too much in order to challenge for the CL again next year and indeed make the top 4. I don’t think he will continue to spend the way he has been spending. Hopefully this is good news for Arsenal.

A while ago I mentioned the idea of maybe making a move for Drogba in the summer on a free and got a bit of stick for it as I did with my Owen suggestion. After last night maybe that idea doesn’t look so stupid now to some of you.

Chelsea over the years and City recently have proven that you can buy trophies (class is debatable) and United proved that you can compete against one of them but now that there are two money clubs winning trophies to contend with the question is how can Arsenal compete? Arsenal were clearly the better team in the league when compared with Chelsea and were clearly the better team in Europe when compared with City but how do we combine the two?

We can continue trying to do things in our self-sufficient manner and let the victories taste even sweeter when they happen or we can do what many fans believe we should do and sell our soul to a billionaire to try and buy success.

Although I prefer our current model I’d like to suggest a compromise that I believe will keep in with our self-sustaining model and still have billionaire backing.

My idea is for our two richest shareholders, Kroenke and Usmanov, to invest in the club in the form of Principle Only Zero-Coupon Bonds (it would be great if they had a cool acronym like POZCOBS or POZCO Bonds but they don’t so I’ll just call them AFC bonds for the purpose of this post).

Arsenal's two richest shareholders - Worth a combined £14.5b

The AFC bonds would be given to AU/SK in return for them paying off all of our debts with the idea of having a period where the focus can be on investment in the team rather than profit-for-debt. The bonds would be issued with serial maturity which, for example, means the bonds could not be redeemed all at once and the first redemption being at least 5 years from date of issue and then no more than an equal share annually for a rolling period of 25 years after that to stop stockpiling for a big payday.

Although I believe that these bonds should essentially be “Perpetual Stocks” which means they have no maturity and the lender (SK/AU) and the borrower (AFC) would agree between themselves when repayment is made but within the previously agreed rolling 25 year period.

Does this mean we’ll have blank cheques like City or Chelsea? No. It means that the money we currently pay in repayments to our current debts would essentially be frozen for 5 years allowing us to compete in the transfer market with the likes of Utd who still win things despite not being bankrolled either (though it must be said that their commercial revenue far exceeds ours). More importantly it would stop us from having to sell players to cover our losses. Although we publish profits we would actually make sizeable losses without player sales.

Refinancing our debt in this way may only see us £15-20m better off per season debt wise but the freeing-up of cash may allow us to buy ourselves out of poor commercial contracts (or be in a position to renegotiate early), cover losses made on releasing fringe players or at the very least moving them on for next to nothing and all of this could see us improve our balance sheet to the tune of approximately £26m in fringe player wages, £20m in lost kit/commercial revenue and at least £15m in stadium debt so around £60m a year. We could easily afford to use 75% of this on player sales which would give us an annual transfer kitty of £45m and leave £15m in the account to cover the losses we would make without player sales. This of course is before any additional money we would make from winning trophies and selling players we no longer need, now or in the future.

It’s no secret that to maximise the value of those [commercial contracts] you want to have success on the field and be winning trophies. To do that you need to invest now in building a winning team.

Alisher Usmanov

Being able to strengthen the squad like this, transform our wage structure from a Marxist one to a meritocratic one may just enable us to actually win something again.

The investment would be a one time thing but it would allow us complete control over how and when we pay the bonds back and that would mean we could compete for players that will help us compete for titles. We wouldn’t have to rely on FFP coming in and we would still be self-sustaining as our debt would be well-financed and controllable and should FFP ever actually come into play we would not be affected by it.

The beauty of this would be that we would only be paying back the AFC Bonds with increased revenue from winning things which will in turn increase our commercial clout and increase revenues further still. Should we ever have an unsuccessful season we would be able to defer bond redemption should we feel we require the money to invest in the playing squad.

This would fit in with our self-sustaining model as we would be using club generated money to cover all of our bills and advances into the transfer market as well as paying back our bonds.

I’m not a fan of the benefactor model that Chelsea and City have but I also appreciate that our self-sustaining model is currently a handicap and that we cannot completely live in the hope that the footballing governing bodies will make the game fairer despite it being my preferred option. I want Arsenal to win titles not buy them and this idea could allow that to happen. We would not be bankrolling our players and titles with billionaire investment, we would just be taking advantage of our majority shareholders, for want of a better word, love for the club through debt refinancing.

If the role of a board member is to oversee a trophyless period while making personal profits and asking fans to pay inflation-busting ticket price increases then, no, I would not want to be on the board.

If instead it is to try to deliver sustained success, to increase your personal investment in the club, to help develop the commercial position and to ensure the fans have a say in the running of the club then, yes, I think I certainly have something to contribute

Alisher Usmanov

I do not think that Kroenke cares too much for the club but I am certain that Usmanov does and if this model ever actually happened and Usmanov was allowed onto the board I do not see him taking up the option to cash in his bonds whereas I think that Kroenke would. In fact I believe that Kroenke would, over time, trade his shares with Usmanov in return for more bonds.

Kroenke hasn’t made £2.1b by investing his money into sports and leaving it there. Usmanov is a different kettle of fish because he truly cares about the club (or so it would seem from his interviews) and more importantly did not make his money from sports franchises so his investment would not be a purely business decision.

I don’t believe in Usmanov handing money to Wenger or the next manager every summer but I do believe that he can invest in the club in such a way that compliments our self-sustaining model and will allow us to invest heavily in the playing staff when needed without breaking the bank or asking Sugar Daddy for a hand-out.

Chelsea may have their Champions League trophy but Arsenal are the only club to have a gold trophy. Arséne recently said that he wants to see Arsenal back to the levels of the invincibles who incidentally were the ones that won the specially commissioned gold trophy and is it fate or just irony that Alisher Usmanov’s initials are the chemical symbol for gold?

Can Usmanov's "investment" take Arsenal back to the gold-en years?

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About "" - 509 Posts

I am a South London born Gooner now living in Leigh-On-Sea, Essex. I'm a husband, daddy, podcaster, trainer enthusiast and aspiring author. My work is my passion and for that I will always be grateful. Here is where I write my thoughts and views on Arsenal Football Club, the greatest team the world has ever seen.

19 Responses to “Arsenal’s Billionaire Investment aka AU = Gold”

  1. Bruce TongaBull says:

    Certainly Usmanov is th only messiah we are waiting fo.

  2. Phil Wall says:

    Essentially this is not much different to a rights issue to pay off the debt. With either plan there’s one big flaw: Stan doesn’t want to invest more, because there’s nothing in it for him. He already owns the club, it’s likely to increase in value, therefore his investment is worthwhile. Why is he going to put himself out by pumping more money in for no return?
    Usmanov says he wants to put money in, but refuses to do it unless he is either in control or at the very least Kroenke puts in an equivalent amount. So Usmanov also loves money more than he loves Arsenal, otherwise he could just donate any amount he wanted, he’s got literally billions.

    • Daniel Cowan says:

      Thanks for the comments Phil. I don’t think my scenario would ever happen, it was just a suggestion of how to get investment whilst staying true to the self-sustaining model.

      I agree, Kroenke would never go for it and even if Usmanov tried to do it alone he would probably be blocked by the board. I don’t like the idea of having money donated, I think it should be in the form of a loan or a bond and if Stan would play along he could sell his shares to Usmanov slowly to get regular big pay days and also have bonds he could cash in every year for £10-15m. Would be a good money earner for him and he could still probably keep 30-40% of the shares and make a profit.

      I think it is fair that Usmanov asks to be on the board/have some control/Kroenke to put in too. It means that he isn’t just throwing money at the club with no control over strategy. If he did put money in the board could just say “thanks, we’ll pay off the debt but we won’t use the extra money on the playing staff because it doesn’t fall in line with our strategy”.

  3. @pancofm says:

    Take a bow my friend. I’m impressed. You made alot of sense there. You wrote from an angle nobody has ever imagined or ventured. Seriously, the Arsenal board have got to read this and maybe invite u over for more consultation. But, the big question is: would the American business icon (Stan Kroenke) listen to idea like this? That my friend, I seriously doubt. But I see Usmanov buying into this. Who knows, it could be what we’ve been waiting for. Kudos mate.

    • Nasri says:

      hahaha

    • Bob Dylan says:

      What’s so funny?

    • Daniel Cowan says:

      I’m glad you liked the post. I don’t think they club would ever consider an idea like this but essentially for Kroenke he could fund bonds by selling some shares to Usmanov and then make money from the bonds over time and as Arsenal improve on the playing side and the club becomes more marketable his shares will rise in stock and he’ll make even more money from that.

      For me it is a win-win-win situation, Kroenke gets his cash because let’s face it that is why he is here, he is a sports investor, he isn’t a football lover, Usmanov gets controlling stake of the club and Arsenal get investment into the team.

      I personally prefer our self-sustaining model but it is not a coincidence that when we were winning stuff their were no benefactors in the league.

  4. Damn_Gallas says:

    It’s a shame that when Usmanov wanted on board, everyone was against him and in fact welcomed Kroenke on board so as to fend off the rich Russian. But what has Kroenke does for us? Nothing at all!!

    I believe it’s time for Usmanov to be given a bigger role In Arsenal. With his financial backing we would be able to buy some big name players. We do not need to to buy crazily as Chelsea or Man City.. We just need a few players and tie down important players to new contracts, and thats all!!

    Welcome Alisher Usmanov!!

    • Daniel Cowan says:

      I don’t think we should welcome him to spend his money. That isn’t the Arsenal way but we could take advantage of his riches by him investing into the club in the form of the type of bonds I mentioned. Then it would be a loan and we would still be technically self-sufficient and not reliant on a sugar daddy.

  5. T. Vaginalis says:

    Nice read, now if only they could somehow read this and take action. How did you come about the AU stuff?

  6. Domhuaille MacMathghamhna says:

    Very well thought out post Daniel, one of the better ones I’ve read as compared to the plethora of AAA and Wenger-out offal excreted daily by plastic fanboys against AFC.
    It is unfortunate that this model would not likely be acceptable to the Board for a number of reasons:

    1)They don’t want Usmanov on the Board at any price.
    2)Kroenke isn’t a collaborative person and doesn’t like partnerships with oilygarchs like Usmanov.
    3)The two billionnaires are mutually exclusive, you get one but not both and that isn’t going to change anytime soon.
    4)The Board buy into Wenger’s philosophy totally and that goes against Usmanov’s ideas but dovetails perfectly with Kroenke’s so that’s going to remain so for awhile I believe.
    5)The EU and Eurozone are headed for a major meltdown within the next 4-6 months and that means some serious financial earthquakes are headed europe’s way, including the world of Football. AFC and Wenger know this (he’s been warning about it for at least a year)so they’ll likely reduce spending and debt as fast as possible and try to increase non-player related revenue streams, including ticket sales. There is little room for manouvering to avoid this crisis and the Board are in no mood to entertain a sea change at this time.

    I hope you can push your suggestions forward with the support of the fans and maybe guys like Dein and Usmanov but how to do that is another kettle of fish!

    • JP says:

      IIRC, if Usmanov gets three more shares he HAS to be allowed on the board. I think we may see some real fireworks then.

    • Daniel Cowan says:

      He is allowed to see the books. Doesn’t guarantee him a spot on the board.

  7. Usman Gooner says:

    What happens if we just killed him?

    • Daniel Cowan says:

      His bonds would just transfer to his heirs & they would benefit from the bond redemption…. and someone would go to prison for murder

  8. owen says:

    I rarely leave comments on blogs but I had to this time. This my friend,is an article and a half. Awesome piece! Get this out to Arsenal’s website as soon as possible. Those simpletons need to read this. Welldone mate.

    • Daniel Cowan says:

      Glad you enjoyed it. I hope you’re following on twitter & become a regular on the blog.

  9. AndyP says:

    Dan, well written and thought out article. I see that PW (aka angryofn5) has also posted earlier on and he also wrote a really good piece on the AFC share issue as well.

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