Roman Abramovich wanted to write off the £1.5b Chelsea “debt” that he basically owed to himself (by way of Chelsea’s parent company, Fordstam), but that elegant solution is apparently not valid anymore thanks to the UK Government freezing all his assets. And it doesn’t sound like they’re about to make an exception for it, because I guess that would be too easy. And they’re not allowing him to move it off Fordstam’s books either (to, say, pay off Jersey-based Camberley Investments), since that’s considered a “benefit” and doing business with a sanctioned entity.
So it’s a bit of a silly situation and one that does remain a problem for the club and our prospective new owners, though probably not such a huge problem as headlines throughout Tuesday made it out to be. Presumably, we’ll figure it out by Friday, which is when the Boehly “exclusivity” period is set to end (though that can always be extended as well).
Jersey-based Camberley are outside of UK government remit. Company is believed to be Abramovich controlled. That means Fordstam couldn’t make them a payment now if so. If that was the plan, UK gov. would block the sale.— Ben Jacobs (@JacobsBen) May 3, 2022
But in the meantime, we do have some promising news, with CBS reporting that the Premier League have already “soft vetted” the Boehly group and “effectively if not formally already passed” them through their Owners’ and Directors’ Test — though there will be formal 7-day assessment period at some point as well, for optics’ sake.
CBS also obtained further confirmation that the government aren’t actively approving (or not approving) any of the bidders, and that they are “happy with the Boehly group” — they just want to keep playing the sanctions game and ensure that Abramovich doesn’t benefit before authorizing the sale by amending the club’s operational licence (which is still set to expire on May 31 as things currently stand).
As far as the £1.5b goes, the “logical” solution that everyone seems to be “warming to” is to convert it into equity (which again would require a government exception) — which is incidentally what Abramovich did to move the debt from Chelsea’s books to Fordstam’s in the first place. (Instead of Chelsea owing Abramovich, Fordstam had the same value of shares in Cheslea, financed through a loan from Abramovich.)
The problem however then becomes that someone has to take on that debt (or finance it). Would that be the new owners? The government? Some other (non-Abramovich) entity? It sounds like the £1.5b has been essentially baked into the price already anyway (£1b up front + £1.5b debt + £1b stadium + x-amount for squad = £3.5b+), so perhaps this is just bookkeeping exercise.
Boehly group, or any new owner, won’t be comfortable taking on a debt unless there is clarity as to how, when (or if) they can pay it back. That’s why the debt-to-equity approach is simpler.— Ben Jacobs (@JacobsBen) May 3, 2022
The question of the rest of the charitable part of the deal (the £1b up front) also remains, since it’s unclear who takes control of that and how it will be distributed, and so on. But again, those are all surely minor details in the end, especially from the buyer’s perspective. Once the Boehly consortium deposits the agreed upon funds and they get the keys to the Bridge in return, it’s not exactly our concern anymore what the government will or won’t do with said funds, or how they handle all the frozen accounts, and so on and so forth.
Of course, no one wants to get fleeced or get played, and there’s unfortunately a lot of opportunism and politicking going on here, which makes an already complicated and quick (for its type) transaction even more complex. Let’s hope the money men can figure this out before the politicians [FUN] it up (even more).