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Financial meltdown could hit EPL hard
by Paul Kennedy, September 30th, 2008 7AM
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[ENGLAND] Just two days after Hull City's stunning 2-1 victory over Arsenal, the Tigers' chairman, Paul Duffen, issued a warning about the state of the English Premier League. And it wasn't about the race for the 2009 championship.

Duffen says heavily leveraged clubs could face collapse if the banking crisis gets worse. The debts of EPL clubs approach $4.5 million. Manchester United leads the list at $1.2 billion.

"We have had to be careful," he said. "We're not as rich as Croesus as some of our competitors are, but in some ways we're maybe one of the wealthiest clubs as we don't have any debt. A lot of the clubs have themselves highly geared and in these uncertain banking times I think there could be a few casualties in the Premier League later in the season sadly."

British banks have been hard hit by the financial crisis. Northern Rock, HBOS (Bank of Scotland) Bradford & Bingley have all been nationalized or taken over.

One club that could be in trouble is Portsmouth. Its Russian owner, Alexandre Gaydamak, is rumored to be seeking to sell the club because of its mounting debts -- in particular installment payments on transfer deals concluded by its dealmaking supremo Harry Redknapp. Pompey has debts exceeding $100 million and is projected to lose another $40 million this season.

The marketing success of EPL clubs was one of the reasons behind the league's success, but they face a $15 million decline in shirt sponsorship revenue -- the first decline in its 16-year history.

Jersey sponsors have been in the news recently for all the wrong reasons.

Northern Rock was Newcastle United's sponsor. West Ham's sponsor, tour operator XL, went under.

AIG, the sponsor of Manchester United, was bailed out by the U.S. government.

Wigan sponsor JJB Sports is in danger of going bankrupt because of declining sales.

The gulf between big and small clubs across Europe could increase.

"I don't think Man United would have much trouble finding a new sponsor, likewise Chelsea, Arsenal and a handful of other top clubs," Gary Leih, chairman and chief executive of advertising's Ogilvy Group UK, told Reuters, "but if you're a team struggling in one of the lower leagues, sponsorship is going to be harder to come by. What I think we will see here is sponsorship by local brands. Brands coming together with a local football team can generate enormous amounts of goodwill."

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