Big losses and grumbling fans: how Chelsea’s private equity revolution ran into trouble

{"text":[[{"start":9.1,"text":"Under the ownership of free-spending oligarch Roman Abramovich Chelsea Football Club lost about £1mn a week for almost two decades. The losses racked up by the club’s current owners have made the Abramovich era appear restrained by comparison."}],[{"start":25.9,"text":"Chelsea this month reported a £262mn pre-tax loss in 2024-25, a record for a Premier League club, as owners Clearlake Capital and financier Todd Boehly try to wean the club off Abramovich’s millions."}],[{"start":42.9,"text":"When US investment firm Clearlake and financier Boehly bought Chelsea for £2.5bn almost three years ago, the football industry expected a new era of financial rigour at the west London club. "}],[{"start":55.7,"text":"But they have since spent about €1.7bn (£1.5bn) on players, parted ways with four head coaches and have yet to agree on a critical revenue driver: whether to modernise Chelsea’s existing stadium or move elsewhere."}],[{"start":70.45,"text":"With the club at risk of missing out on a place in next season’s lucrative Champions League, football executives are questioning how Chelsea’s owners will make a return on their substantial investment."}],[{"start":null,"text":"

"}],[{"start":79.8,"text":"Chelsea is the first team ever bought by Clearlake, which was better known for investing in the technology and consumer sectors. The Santa Monica-based firm owns more than 60 per cent of the club and its co-founder and managing partner, Behdad Eghbali, has emerged as a key decision maker."}],[{"start":98.9,"text":"Boehly, whose mentors include Guggenheim Partners chief Mark Walter and junk bond pioneer Michael Milken, has tasted success in sports. After backing Walter’s takeover of the Los Angeles Dodgers in 2012, the baseball team went on to win its first World Series title in 32 years."}],[{"start":116,"text":"Their bet on Chelsea was predicated on the belief that elite European football clubs, which trade at a discount to US sports teams despite the sport’s greater global popularity, were undervalued. Shortly after the deal, Clearlake co-founder José E Feliciano talked up the opportunity to grow Chelsea’s revenue to £1bn. "}],[{"start":137.35,"text":"Chelsea’s owners, who withheld £150mn of the purchase price to cover costs related to questionable actions taken under Abramovich, have put in place new private equity-style financing. At the centre of this is a $500mn payment-in-kind note provided by Ares Management to Chelsea’s holding company, 22 Holdco."}],[{"start":null,"text":""}],[{"start":158.2,"text":"The structure of the PIK note means the interest, currently charged at 11.2 per cent, rolls up into the principal amount, which stood at £595.9mn last June and falls due in 2033. A separate entity in the ownership structure is on the hook for loans of another £794mn. "}],[{"start":179.39999999999998,"text":"A person close to the club said that Chelsea’s owners, who committed to invest £1.75bn into the club at the outset, still have £1.3bn on hand."}],[{"start":190.29999999999998,"text":"Chelsea’s revenue growth is driven by the club’s participation in the Champions League, which brought in between €75mn and €80mn this season, according to a person familiar with the matter. To qualify for next season’s competition the team must finish in the top five positions in the Premier League, but with six games to go Chelsea sit in sixth place."}],[{"start":212.39999999999998,"text":"People close to Chelsea said they expect revenues, which rose by 4.8 per cent to £490.9mn in 2024-25, will reach about £700mn in the current financial year, boosted by prize money from winning the inaugural Fifa Club World Cup last summer. They added that the club is now profitable on an operating basis. "}],[{"start":235.74999999999997,"text":"Clearlake and Boehly are also counting on income from player sales after assembling what Uefa described as the most expensive squad in the history of the game."}],[{"start":246.04999999999998,"text":"The club’s owners have spent €1.75bn signing talented young players in the hope that they have greater resale value, which should enable them to eventually reduce their reliance on external financing. Chelsea have partly offset the spending splurge with €921mn of player sales."}],[{"start":null,"text":""}],[{"start":264,"text":"The downside of this approach — which in effect treats players as stocks in a portfolio — is that it has left Chelsea with a relative dearth of top-level experience. Eghbali has acknowledged this, telling an industry conference this week that the club planned to “add more ready made players”."}],[{"start":279.75,"text":"Chelsea have frequently signed players on contracts of seven years or longer, beyond the standard five years, allowing the club to amortise player acquisition costs over a longer period and stay within financial regulations. "}],[{"start":292.9,"text":"A director at another English club was sceptical of the approach. “It can’t be healthy for a player to be sitting on a seven-year contract. One, he gets lazy because he has a salary no matter what. Or he [gets] trapped on his salary. The market moves a lot in seven years,” he said."}],[{"start":308.79999999999995,"text":"There have been some notable successes, such as star forward Cole Palmer, and some big failures. For example, in 2023 Chelsea signed Mykhailo Mudryk on an eight-and-a-half-year deal for a reported upfront fee of £62mn. The Ukrainian winger, who denies wrongdoing, has been serving a suspension since December 2024 after testing positive for a banned substance. "}],[{"start":333.24999999999994,"text":"Chris Brady, director of research at Sportsology Group, said Chelsea’s “novel” transfer approach is “risky if you don’t manage it properly”. "}],[{"start":342.09999999999997,"text":"A person close to Chelsea said player contracts are heavily incentivised with variable components contingent on performance, and that it is riskier to lose players at the end of shorter contracts without receiving a fee."}],[{"start":354.95,"text":"The person said the club’s heavy losses have been partly down to legacy issues from the Abramovich era, including legal costs and player impairments."}],[{"start":null,"text":""}],[{"start":364.5,"text":"There have been signs of discontent in the dressing room at how the club is being run. In a recent interview with the Athletic, Chelsea defender Marc Cucurella took the unusual step of openly criticising the owners’ decision to part ways with Enzo Maresca, its fourth head coach since the takeover. "}],[{"start":383.9,"text":"“If you asked me, I would not have made this decision,” Cucurella said. “The instability around the club comes from this.”"}],[{"start":391.2,"text":"Fans are not optimistic. Just over half of the 4,000 respondents to a recent survey by the Chelsea Supporters’ Trust said they were “very unconfident” that the club is “being run in a way that will deliver sustained on-pitch success”."}],[{"start":404.59999999999997,"text":"While Abramovich’s reign was often chaotic, Chelsea won 17 major trophies, including five Premier League titles and two Champions League trophies, in that time. The only silverware of the Clearlake era so far is the Club World Cup."}],[{"start":419.34999999999997,"text":"In a letter to the owners this week the CST bemoaned the “relentless upheaval” at the club. “This has been presented as part of a long-term plan. Yet four years on, there is still no sufficiently clear or convincing explanation of how that plan delivers sustained success while preserving a recognisable Chelsea identity,” it added."}],[{"start":438.9,"text":"Eghbali sought to assure fans this week that the owners are focused on building a winning team. “The message is: we’re committed,” he said."}],[{"start":null,"text":""}],[{"start":446.29999999999995,"text":"The turbulence of the Clearlake-Boehly era has played out in the boardroom as well as on the pitch. The FT previously reported that Boehly and Clearlake were keen to buy each other out. A person close to Chelsea said the shareholders have a professional and productive relationship focused on getting the best for the club."}],[{"start":465.4,"text":"At the root of Boehly’s frustration was the question of how to get Chelsea playing in a bigger stadium — a critical decision for the club’s financial prospects."}],[{"start":474.25,"text":"Chelsea generated £86.7mn of match-day revenue last year from Stamford Bridge, its 40,000-capacity stadium. By comparison Manchester United generated £160mn from Old Trafford, which has a capacity of 74,000."}],[{"start":null,"text":""}],[{"start":490.7,"text":"The owners are yet to agree on whether to redevelop Stamford Bridge or build a new stadium. Chelsea’s home ground is situated on a small site, hemmed in by railway lines and a cemetery, in densely populated west London. Redeveloping it would be a complex project that would probably require the team to temporarily relocate."}],[{"start":510.84999999999997,"text":"Chelsea has explored a plan to permanently move about a mile up the road to a new development at Earl’s Court. But the prospects appear to have diminished after two councils approved plans at the site that included homes, offices and leisure facilities, without a stadium. All options are still under consideration, said a person close to the club."}],[{"start":531.05,"text":"Football finance analyst Kieran Maguire said: “The longer they leave the decision, the more they’re going to fall behind the clubs with which they wish to compete.”"}],[{"start":547.65,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776489035_2843.mp3"}