Post by QPR Report on Dec 4, 2008 6:59:18 GMT
Guardian/Matt Scott -
Backstreet borrowing and a fall-back for clubs
Premier League clubs have been "reminded of their obligations to each other" in a circular letter demanding that transfer debts are honoured in full.
In a microcosm of the mistrust that led to the credit crunch among banks, the memo could spark panic among clubs who suspect each other of being unable to pay up what they owe.
The league said yesterday the letter had been issued to its members in a "proactive stance". The league claims it is being pre-emptive in case "difficult economic times" lead to some pleading poverty and failing to pay their bills.
But some clubs believe the league has been asked to act by one of its members. "It is implicit in the contract and terms of participation in the league that you honour your debts," said one insider. "It looks like there have been complaints."
Several clubs have been relying on niche lenders, backed by private equity or hedge funds, to finance their transfer activity. By paying only a proportion of a transfer fee in cash, the balance has been made up by borrowing from the backstreet lender. Whether lenders will survive the financial crisis is unclear - if they don't, football clubs are in trouble.
But the league is likely to avert a January transfer crunch with central guarantees. If clubs appeal in the case of defaults, the league will ensure debts are honoured by paying up out of the indebted club's central revenues.
www.guardian.co.uk/football/2008/dec/04/digger-premier-league
Backstreet borrowing and a fall-back for clubs
Premier League clubs have been "reminded of their obligations to each other" in a circular letter demanding that transfer debts are honoured in full.
In a microcosm of the mistrust that led to the credit crunch among banks, the memo could spark panic among clubs who suspect each other of being unable to pay up what they owe.
The league said yesterday the letter had been issued to its members in a "proactive stance". The league claims it is being pre-emptive in case "difficult economic times" lead to some pleading poverty and failing to pay their bills.
But some clubs believe the league has been asked to act by one of its members. "It is implicit in the contract and terms of participation in the league that you honour your debts," said one insider. "It looks like there have been complaints."
Several clubs have been relying on niche lenders, backed by private equity or hedge funds, to finance their transfer activity. By paying only a proportion of a transfer fee in cash, the balance has been made up by borrowing from the backstreet lender. Whether lenders will survive the financial crisis is unclear - if they don't, football clubs are in trouble.
But the league is likely to avert a January transfer crunch with central guarantees. If clubs appeal in the case of defaults, the league will ensure debts are honoured by paying up out of the indebted club's central revenues.
www.guardian.co.uk/football/2008/dec/04/digger-premier-league