The dangers of debt

[AA23Northbank]

Very good article by Patrick Barclay of The Times:
http://www.timesonline.co.uk/tol/sport/ ... 139452.ece
Thoughts? Personally I agree with every word he says

[USMartin]

So then its fair to say you believe our Board unnecessarily jeopardized our Arsenal Football Club by creating an even less sustainable debt in pursuit of greater profit by redeveloping Highbury themselves whose sole immediate benefit was to increase the club's share price making several Board members much wealthier individuals - than they already were?

And its fair to say you believe that to pay the cost of that increased debt they undercut everything achieved on the pitch from 1998-20005 indefinitely with no certainty of what the consequences of that decison could be - as much financially as competitively?

[potter]

Pretty much.

[g88ner]

So then its fair to say you believe our Board unnecessarily jeopardized our Arsenal Football Club by creating an even less sustainable debt in pursuit of greater profit by redeveloping Highbury themselves whose sole immediate benefit was to increase the club's share price making several Board members much wealthier individuals - than they already were?

Like a dog with a bone, aren't you Martin

I'm not going to take you on VforVictory style, but can I ask a question...

From your posts, I've gathered that you feel the board decided to re-develop Highbury for selfish, get rich quick, reasons rather than for the good of the club.

Obviously this is something of a cynical view, and perhaps a tad paranoid - although, I can't say I'm comfortable with how many shares our board have sold off in recent seasons, either.

So, my question is this - Do you not think it's possible that the boards decision to re-develop Highbury was perhaps a result of the 'potential' gold mine they thought they'd be tapping into? - obviously, it would seem they either recieved bad advice or it was just a gamble that went wrong due to the downturn in the property market, but surely a possible reason for re-developing Highbury themselves was that they thought the profit margin would be MUCH higher than by simply selling it? and therefore an extra cash cow for the club.

In hindsight, maybe even the board wished they'd simply sold the land instead.

I think it was a mistake, and perhaps they should fall on their swords for such a mistake, instead of getting richer of the back of it, but that's life.

I genuinely feel there is a decent chance that the decision to re-develop Highbury was based on what they thought was 'for the good of the club' at the time and NOT simply the share price.

I know you've debated this at length (now there's an understatement! ) but I'm still a tad unsure why you're so, so convinced they acted for themselves, and definately not for what they considered, wrongly as it turned out, to be for the good of the club.

[potter]

If I may add my two pennyworth. I reckon that the board did what they did with the intention of improving the money supply at the club . however they were well aware that in doing so their personal gain would be in the share price. I also feel that certain board members were not fully convinced and they subsequently have been eased out or have taken advantage and sold out.

[USMartin]

So then its fair to say you believe our Board unnecessarily jeopardized our Arsenal Football Club by creating an even less sustainable debt in pursuit of greater profit by redeveloping Highbury themselves whose sole immediate benefit was to increase the club's share price making several Board members much wealthier individuals - than they already were?

Like a dog with a bone, aren't you Martin

I'm not going to take you on VforVictory style, but can I ask a question...

From your posts, I've gathered that you feel the board decided to re-develop Highbury for selfish, get rich quick, reasons rather than for the good of the club.

Obviously this is something of a cynical view, and perhaps a tad paranoid - although, I can't say I'm comfortable with how many shares our board have sold off in recent seasons, either.

So, my question is this - Do you not think it's possible that the boards decision to re-develop Highbury was perhaps a result of the 'potential' gold mine they thought they'd be tapping into? - obviously, it would seem they either recieved bad advice or it was just a gamble that went wrong due to the downturn in the property market, but surely a possible reason for re-developing Highbury themselves was that they thought the profit margin would be MUCH higher than by simply selling it? and therefore an extra cash cow for the club.

In hindsight, maybe even the board wished they'd simply sold the land instead.

I think it was a mistake, and perhaps they should fall on their swords for such a mistake, instead of getting richer of the back of it, but that's life.

I genuinely feel there is a decent chance that the decision to re-develop Highbury was based on what they thought was 'for the good of the club' at the time and NOT simply the share price.

I know you've debated this at length (now there's an understatement! ) but I'm still a tad unsure why you're so, so convinced they acted for themselves, and definately not for what they considered, wrongly as it turned out, to be for the good of the club.

OK, let me start at the end - you noticed that. Very observant of you otherise it might have slipped past

I have been raiding these issue FAR longer than I ever imagined I wouild be or ever wanted to as it is, but I will fight fight for Arsenal as long as I can.

As to your question - I think it would be a valid one except that the project's impact had already happened when it sent the share sprice spiking higher in 2005 and 2006 well ahead of the housing crisis and its impact. In other words just how much it made how quickly was secondary to the sheer fact that intoday's market being able to make money without investing it (your own money that is) is good business whenever you do it. That's the nature of today's market back to the 1980's and junk bonds really.

I should carify a couple of things though.

The term Board can be a bit of a misnomer. I don't think the Board as a whole had that much invested to really benefit from this project, or certainly not nearly as much as a couple of particular Board members who have made significant money as you refer to, or are desperate to do so. I think that block of the Board - those particualr major shareholders - pushed this, and in one case had a bloc of Board memebers supporting them, and then likely a couple of others were swayed into joining who did not have as much to gain personally, but were swayed into supporting the project. Referring to the Board as a whole is simply a function of who made the final decision, not necessarly the project's advocates or beneficiaries as that whole.

I should also add that had the lack of investment in the football team had a less dramatic impact or come at the peak of a considerably less speactacularly successful run on the pitch for Arsenal, then far fewer people would be as critical of whatever has happened or why, myself included. You don't achieve what we did from 1998-2005 often in sport and to sacrifice that or just give it up for ANY reason is hardly acceptable given that you may never reach such a level again. Had we been say the Arsenal of the late 70s (No title 3 Cup Finals, 1 European Final and one trophy, no League Titles) I doubt I would feel the frustration or anger I feel about the Board and its decisions or their consequences the past several years

And here's one last though - I have no problem with the Board wanting to make money - none. Just with how they have chosen to make it and how they chose effectively to mislead supporters about this.supporters whose undeniable loyalty to Arsenal through thick and thin and even now deserves better than to taken for granted or even exploited by anyone, let alone those entrusted to be custodians of our magnificent club and its unique and special heritage and the very distinctive way in which that heritage was built and had been maintained.

My anger is as much a product of how and when they did this as what they did. And basically that's how I felt about it as far back as 2005 or before I understood the project more even as far back as 2000 and 2001.

[g88ner]

I actually agree with much of that, Martin... which is a little disappointing

I have another theory as to why the board may have taken the Highbury re-development gamble....

I just wonder what role Wenger played in that decision. At the time, Wenger was turning water into wine on a regular basis and everyone connected to the club was basking in the glory of what was (and sadly no longer is) a golden era for the club.

Did Wenger convince the board to allow him to pusue his youth experiment? after all, this would have been music to the board's ears at the time. They knew they would have to tighten the purse strings a little, yet here was a manager who was convinced he could replicate his success on a shoe-string budget by signing them young and bringing them all through together.

This was unheard of at a top football club - a successful manager who was not asking for MORE money to take us to the next level BUT asking to be allowed to pursue a dream - a dream that would not only be compatible with working on a budget but would, in the opinion of a genius manager, see us continue to compete at the top AND bring success!

This would surely have been very encouraging for the board, and may even have convinced them to re-develop Highbury themselves, safe in the knowledge that the manager they respected so, so much was onboard... if not endorsing the idea!

Sadly, Wenger's experiment didn't work out. Abramovich changed the landscape completely, the young players coming through at Arsenal weren't quite of the level we'd hoped for (apart from Cesc) and the more experienced players have continued to walk away every summer meaning our squad has been getting younger and younger as the years go by....

Basically, the club gambled on Wenger's experiment, and gambled on re-development Highbury instead of investing in the team.... it could have worked, but didn't; as a result, we'll now have to wait for the 'Emirates Effect' to kick in before we can regain our swagger....

[USMartin]

I actually agree with much of that, Martin... which is a little disappointing

I have another theory as to why the board may have taken the Highbury re-development gamble....

I just wonder what role Wenger played in that decision. At the time, Wenger was turning water into wine on a regular basis and everyone connected to the club was basking in the glory of what was (and sadly no longer is) a golden era for the club.

Did Wenger convince the board to allow him to pusue his youth experiment? after all, this would have been music to the board's ears at the time. They knew they would have to tighten the purse strings a little, yet here was a manager who was convinced he could replicate his success on a shoe-string budget by signing them young and bringing them all through together.

This was unheard of at a top football club - a successful manager who was not asking for MORE money to take us to the next level BUT asking to be allowed to pursue a dream - a dream that would not only be compatible with working on a budget but would, in the opinion of a genius manager, see us continue to compete at the top AND bring success!

This would surely have been very encouraging for the board, and may even have convinced them to re-develop Highbury themselves, safe in the knowledge that the manager they respected so, so much was onboard... if not endorsing the idea!

Sadly, Wenger's experiment didn't work out. Abramovich changed the landscape completely, the young players coming through at Arsenal weren't quite of the level we'd hoped for (apart from Cesc) and the more experienced players have continued to walk away every summer meaning our squad has been getting younger and younger as the years go by....

Basically, the club gambled on Wenger's experiment, and gambled on re-development Highbury instead of investing in the team.... it could have worked, but didn't; as a result, we'll now have to wait for the 'Emirates Effect' to kick in before we can regain our swagger....

That all sounds a bit...well...hard to believe in all honesty - no disrepect intended mind you. After all you are not the first and sadly may not be the last to suggest that. I think it is out of a desire as I said to v for victory to avoid blaming the Board that goes far deeper than the issues themselves and to individual belief systems. I think so many people have placed so much faith and trust in our Board over time that to question the Board is to in effect question everything they believe and have grown believing and that is understandably difficult to do.

I suspect that had I grown as close to Arsenal on North London or just in England learning the same way you did about the club and its unique ways and traditions I might be very much the same in my thinking and my reluctance to accept some hard truths that question it. Indeed the objectivity that not living breathing and eating Arsenal its history culture and tradition so much as a youth here in America affords me may be the sole benefit of becoming a Gooner over here.

I would say this - since some suggest Mr. Wenger did much the same at Monaco earlier in his managerial career - though I have no recorded reports to ascertain that- maybe THAT was why he was hired. Maybe the Board knew they wanted someone ready and willing to put a money-saving system in place (and make no mistake - look at some of the young players other clubs in England and on the comtinent have brought in over this period - this WAS a a money-saving system). I mean if the reports about the manager at Monaco are true the Board had to be aware of them.

But that's about as far as I can see the theory you suggest. I just don't buy any argument suggests the Board genuinely wanted and even advoxcated more investment in the team once the re-development project began because if that were the case it would have happened by now under Mr. Wenger or his replacement because if they genuinely did not support reducing investment in the team Mr. Wenger could not have lasted as long as he has without delivering SOME trophies given the achievements of 1998-2005

I just feel and no offence is intended here that you see the problem as you suggested straight away but are reluctant to actually confront those who truly created it, and as I say I do sympathize with that discomfort but urge you to look past it. After all even if you were correct the same people I blame and you seem to want to avoid blaming are the only people who can correct the problem no matter what it is and only when they feel the pressure form supporters to do so can and will that happen.

[Exiled-Gooner]

http://www.businessweek.com/ap/financia ... 3RO200.htm

Chief executive Ivan Gazidis said the profit was less important than the reduction in debt.

"It's important to note that this isn't our primary objective," Gazidis said. "The reason we run a responsible, profitable and self-sustaining business is so that we can deliver success to the club and invest in the club and ultimately deliver success on the pitch, something that our fans can be proud of

It seems by this statement that debt reduction comes above on-field success even thou 5yrs of debt was paid off in 1 hit?

[I Hate Hleb]

Anyone know when the next set of figures are due? I assume that because the six monthly figures covered the period up to November, it should be in soon.

[RNTGOONER]

my biggest fear in this that we get bought with leveraged debt after being prudent, and then we will just have been mugs, sacrifice success for nothing at all

[USMartin]

http://www.businessweek.com/ap/financia ... 3RO200.htm

Chief executive Ivan Gazidis said the profit was less important than the reduction in debt.

"It's important to note that this isn't our primary objective," Gazidis said. "The reason we run a responsible, profitable and self-sustaining business is so that we can deliver success to the club and invest in the club and ultimately deliver success on the pitch, something that our fans can be proud of

It seems by this statement that debt reduction comes above on-field success even thou 5yrs of debt was paid off in 1 hit?

If I'm honest I think that's what they'd like us to believe but necessarily true. I think the Board has just as the continually referred to the cost of the new stadioum and avoided mentioning the additional cost of re-developing Highbury throughout thir project, they believe supporters will be more understanding of debt reduction than simply making money and saving it.

Go back - it was the Board itself through Mr. Hill-Wood that has raised the spectre of ending up like Leeds. The fact is they have skillfully manipulated this entire process - carefully avoiding discussing issues they might not want to discuss and even cutting off discussion altogether through frankly scare tactics.

Don't get me wrong debt reduction is important - absolutely it is. But I think the Board is now hiding behind such notions to avoid real questions about what its doing and why. After all our total debt would have been much more easily reduced at this point had we simply sold Highbury - especially given the fact that it would have benn much samller and there would have been additional funds on hand to actually pay it off then without having to reach into the club manager's pocket for the means to do so.

But focusing on debt redeuction silences many - some who would simply rather believe that than anything else, and others who scared by what happened at Leeds in particular would not question that sort of thinking - whether that';s what they're really concerned with or not.

[USMartin]

my biggest fear in this that we get bought with leveraged debt after being prudent, and then we will just have been mugs, sacrifice success for nothing at all

Absolutely - we are not yet equipped with enough revenue streams unlike ManU to avoid real disaster if this were to happen, and for it to happen after all we did sacrifice as you right ly note would be the bitterest pill to swallow yet by far.

This precisely why we need to exert some pressure on the Board. I read somewhere that Mr. Fiszman reportedly likes to say soemthing to the effect that he built the Emirates with his two bare hands. Well, if he wants Gooners to appreciate his work that way, he'd do well to set what he can right and fast, and doing anything remotely like you fear should be simply out of the question, and he should make honest assurances to that affect.

[g88ner]

I just feel and no offence is intended here that you see the problem as you suggested straight away but are reluctant to actually confront those who truly created it, and as I say I do sympathize with that discomfort but urge you to look past it. After all even if you were correct the same people I blame and you seem to want to avoid blaming are the only people who can correct the problem no matter what it is and only when they feel the pressure form supporters to do so can and will that happen.

No offence taken, but I have to say you are dead wrong about my stance towards the board. I hold little affection for them and have no reason to want to avoid blaming them - none whatsoever, I assure you!

I believe, in recent years, our board haven't been proactive enough, and instead have been reactive... or, in some ways, even comatose!

I don't think they adequately backed Graham or Wenger financially, and from what Gazidis said recently, the board failed to put an infrastructre in place to maximise the potential of the football club as a business. And quite unbelievably, our club went without direction - that is, without a CEO - for an entire year before Gazidis was finally drafted in! how ridiculous is that?

I think the decision to re-develop Highbury oursleves, and deny the club a quick cash injection from developers, was a huge mistake. That money could have been used to sustain a competitive Arsenal team instead of saddling us with yet another debt and no cash injection until the flats were built and sold - only now are we starting to see profits coming in from the flats, but in some ways the horse has already bolted and the Arsenal 'success train' has ground to a halt.

My confidence in Danny Fiszman is minimal. Can you trust the motives of a man who is selling shares at the rate he is?? I'm not so sure. As for Hill-Wood, he's basically sold the shares he inherited and, as such, has sold the family names association with Arsenal down the river. Give it a few years, and the Hill-Woods will be nothing but history. As for the others (Chips Keswick, Lord Harris, and previously the Carrs & Lady Nina) I get the feeling they were almost silent partners for much of it, so I have no opinion on them really.

The sooner Kroenke, or whoever, buys the club, the better. I'm delighted with Gazidis so far, and he seems to be the proactive sort of chap we need steering the ship. I'm confident about the future, as once the 'Emirates Effect' kicks in, I think we'll be in a great position.

I think the board did a wonderful job in building the stadium - within budget and on time! - but Danny clearly now wants out, and the future is without him.

But, as I said earlier, I disagree with you that the board went the re-developing route for selfish reasons. I do believe they thought they were acting in the best interests of the club and, even though you dismiss the idea, I think it's quite plausible that Wenger's confidence in his 'vision' was another reason the board felt they could afford to take the gamble - after all, with Wenger turning water into wine and wanting to pursue a finacially prudent course anyway, the timing couldn't have been better.... for Wenger or the board!

[MegaGooner]

I just hope I don't meet you two in a pub together.....