Celtic: “Already Bankrupt”?
Phew. When a club is £36m in debt, stoppage time winners against resilient Kazaks might have more than just its manager re-enacting the Olympic 100 metres hurdles final (well, OK, maybe the slowest of the heats) down strips of open Glasgow land. Try as I might, I can’t quite picture chief executive Peter Lawwell leaping about the place after Celtic qualified for the “lucrative” Champions League group stage. But if Celtic’s long-term financial challenges are as stiff as many Rangers fans have been suggesting this week, then Lawwell will have felt like doing so.
After Celtic’s mediocre performance in Kazakhstan, the twin spectres of Champions League exit, and the relatively pitiful financial compensation of the Europa League group stages, loomed large over Celtic Park. Fortunately, it turned out to be a cunning, almost master, plan to add to the Celtic coffers. The prospect of seeing Celtic overcome a two-goal deficit on another “glory night” of European football would, the plan went, put an extra 10,000 on the gate. Such nights are exhilarating, let me assure you from the personal experience of seeing Celtic beat Cologne using that modus operandi, ulp, twenty-one years ago. And if the Kazaks’ pre-match traditional sheep slaughter was banned, they won’t have a clue how to defend…and it won’t matter that Celtic haven’t a clue how to defend either. Especially long throws.
The plan, I think, worked. The novelty value of qualification for the group stages last season brought 51,000 people to Parkhead to see Celtic play Helsingborgs having won the away leg two-nothing. Had Celtic been as competent in Astana last week, I suspect rather more fans would have saved their limited cash for the group stages. As it was, 50,063 showed up. So, take that, champions of Kazakhstan. Bring on Messi, Neymar, Prince-Boateng, Emanuelson, Fischer… Virgil van Dijk and Efe Ambrose are ready for… ah… hang on…
With the current squad, the Europa League will remain the height of Celtic’s post-Christmas European ambitions. That isn’t a criticism of the players at Neil Lennon’s disposal, just an acknowledgement of how important Victor Wanyama, Gary Hooper and, Kevin Wilson were to their success last year. Among the welter of criticisms Celtic received after defeat in Asanta, the board got their share for not spending last year’s Champions League proceeds (£23.67m) plus the Wanyama, Hooper and Wilson transfer fees (£20.5-21m) before the play-off round. A view took hold that the board were “gambling” on Celtic overcoming Shakter before committing any more funds to the market, judging that the recently-depleted squad would still cope with anything the Scottish Premiership could throw at it (except, as Shakter and Inverness Caledonian Thistle demonstrated last week, the football itself).
These brickbats are nothing new. The first notes I took on Celtic’s finances when I started blogging were on a Guardian newspaper article headlined Celtic chief Lawwell denies profits matter more than trophies, written in the aftermath of a particularly unproductive transfer window, in a season where manager Gordon Strachan’s team fell short of clinching four Scottish titles in-a-row. And in 1987, the front page picture of the second issue of fanzine Not the View was of two of Strathclyde’s finest, one spotting some Celtic fans fainting on the terraces, the other replying “Aye, Celtic have signed some players.” By then, the theory was well established of Celtic keeping all their money in a carefully-guarded “biscuit tin” rather than invest it in the squad.
Another theory emerged this summer, which would explain the current Celtic board’s investment care. Or, to be precise, the theory re-emerged, as the financial information upon which it was based has previously been a topic for debate on internet forums – the idea that, prior to last year’s Champions League run, Celtic were £36m in debt and struggling to meet repayment deadlines. The theory has been propagated almost exclusively by Rangers fans fed up with having their financial dirty linen publicly ridiculed almost daily. It had emerged in February 2012, just before Rangers went into administration, as a classic case of “whataboutery,” a popular defence mechanism against criticisms of Rangers’ financial shambles, asking “what about Celtic?” as if doubtful financial dealings were justifiable if “the other lot” doubtfully dealt too.” And it moved from internet forum to mainstream Glasgow media on August Bank Holiday Monday, when “John from Airdrie”, a frustrated but calm enough Rangers fan, was the last caller to Radio Clyde’s phone-in programme Superscoreboard.
John attempted to expose the “nonsense” of Celtic’s financial well-being, which had underpinned the debate around the club’s European football prospects (which, in itself, underpinned much of the 90-minute phone-in). Daily Record newspaper journalist Hugh Keevins had gone as far as to proclaim Celtic to be among Europe’s best-positioned financially, which might have stopped committed Celtic fans in their proverbial tracks, let alone embittered Rangers fans. And John directly challenged Keevins on the issue: “Where do you get your facts from about Celtic being cash-rich and financially well-off?” Keevins replied, “Celtic’s balance sheet,” to which John retorted: “Did you look at page 57, Hugh? What did it say?” knowing fine well that Keevins had looked at little or nothing more than the Celtic press release accompanying the accounts, with its list of “highlights” and no mention of any “page 57.”
“It says they’re in debt, £36m,” John declared, prompting an “I don’t think so” from the very soul of Keevins’ sneering superiority. Unperturbed by a disrespect he probably anticipated, John continued: “I’ve been trying to get on for the last six weeks to verify this to you. Page 57 and page 60 of Celtic’s last audited accounts. “It states on there, £36m loans from the Co-op and the Co-op have four charges on Parkhead Stadium and Lennoxtown… £19m to be paid back in 2019… the loans go back to 2001 when Martin O’Neill made his signings…” And, after a couple of feeble rejoinders which exposed Keevins’ financial uncertainty, John continued: “I keep hearing they are cash-rich. Nonsense… If you do your proper journalism, go to page 57… deliberately at the back of the accounts. The Board of Celtic have been lying to their fans for years, telling them they have no debt.”
Indeed, John, drawing a disapproving snort from the newspaper veteran with “It’s what they call Starbucks accounting,” argued long enough for Keevins to “go to page 57” (I know because I managed it myself while listening to the programme podcast). But neither Keevins, nor presenter Gerry McCulloch, were interested. Rangers fans have long filed Superscoreboard in the “Rangers-haters” column. Most individuals and organisations that have had the slightest criticisms to make of Rangers over the last four years have appeared in there. That is a lot of individuals and organisations, given how worthy of criticism Rangers’ financial management has been in that time. But the dismissive attitude showed towards John rather backed up these claims. It was not only unfair on John, an articulate contributor whether you agreed with him or not, but also revealed an unwillingness/inability, by Keevins especially, to understand the financial issues being discussed. It was as if this part of the mainstream Scottish media had learned no lessons whatsoever from their ignorant coverage of Rangers financial downfall.
Had they “gone to page 57” of the Celtic PLC Annual Report to 30 June 2012 they would have discovered a reference to: “loans (which) form part of a £21.94m loan facility… repayable in equal quarterly instalments from October 2009 until April 2019… £16.69m is repayable in July 2019. The Group has the option to repay the loans earlier…without penalty. The bank loans are secured over Celtic Park, land adjoining the stadium and at Westhorn and Lennoxtown.” “Page 60”, to which John also referred, added: “The Group and Company has a £33.49m facility with the Co-operative Bank of which £12m is in the form of overdraft and £21.94m in long-term loans. £10.97m (2011: £11.34m) of the loan facility is required to be drawn down for the term of the facility agreement.
“The Group achieves short-term liquidity flexibility through use of a bank overdraft. Of the available bank facilities of £33.94m (2011: £34.69m), of which £21.94m is represented by long-term loans and £12m by overdraft, £22.97m (2011: £23.34m) remains undrawn.” The interpretation of this as a £30m+ debt re-emerged via the weblog of former journalist Bill McMurdo, who opines regularly from near the nutjob wing of Rangers’ support. He wasn’t blogging on Celtic’s finances. But excitable missives began appearing among the blog’s ‘readers’ comments’, under the (presumably) assumed name of Pharez, Zarah and Judah (PZJ), who hoped McMurdo “and others could help dispel the myth that Celtic are financially strong.”
PZJ’s comments demanded close examination, not least because they displayed an allergy to punctuation which rendered them incomprehensible at first glance. But PZJ emphasised two realities; the loans secured against Celtic Park, their Lennoxtown training ground and other land which, it was hinted darkly, had come Celtic’s way via a ‘deal’ with Glasgow City Council that potentially constituted “state aid,” and the afore-mentioned £16.69m. PZJ explained that these loans and securities had been wilfully hidden by Celtic’s group company structure, with £30m-£35m liabilities in Celtic FC Ltd, the company paying, though not actually owning, the players and staff. With these liabilities, and assets below £6m, PZJ noted, under another name on another Rangers forum, that “Celtic Ltd are already bankrupt.” He told McMurdo’s readers that Celtic were less a “financial model of excellence,” than “a financial disaster waiting to happen.” And “in July 2019, they could be homeless and (have) no training ground,” unless they paid back the £16.69m.
Celtic fans on various forums have drawn predictably placed different emphases on the figures. Some have distinguished between PZJ’s claim that “Celtic supporters are under the illusion that this is a £35m facility” with the Co-op and the reference in the accounts to the “£33.49m facility with the Co-op.” Others contrasted PZJ’s claim that the overdraft facility had been “drawn down” with the accounts statement that “£22.97m remains undrawn.” One supporter even suggested that PZJ’s theorising was “infuriatingly simple to debunk,” without quite getting around to do so themselves. The general consensus was that Celtic were at the very least up-to-date with any repayment schedules, with outstanding monies down to fractionally under £11m – so, not the “debt-free” Celtic heralded by a line of “Champions League wipes out bank debt” headlines six months ago.
“Given the fact there are no penalties associated with early repayment, I’d have thought the club would be wise to repay the outstanding loan as soon as possible,” added a sound of sanity. That “these loans were taken out by a separate Celtic company so they don’t show up on the accounts” isn’t a source of any ethical or financial concern, it would seem. Superficial similarities have been noted between Celtic’s financial situation and Rangers’ pre-liquidation perils. Accusations that Celtic’s debts has been “hidden” have been rebuffed with “they’re in the accounts,” Rangers fans’ mantra when their club was accused of “hiding” their Employee Benefit Trust scheme from relevant authorities.
The well-written Rangers-centric blog Football Tax Havens (FTH) gave both witting and unwitting credence to the theory of Celtic’s “hidden” debts. A December 2012 article catchily-entitled Celtic FC’s £9m hidden debt, paying 6% in perpetuity focused on “the debt element of the Convertible Cumulative Preference Shares” (CCPS). These were issued to, among others, majority shareholder Dermot Desmond, generally seen as Celtic’s major financial lifeline via a series of “soft loans,” the validity of which has been frequently questioned by Celtic critics. The anonymous FTH highlighted the annual “dividend” of £544,000 paid out to these shareholders, 6% of “the fair value” of the “debt element” of the CCPSs, “which is considered to be £9.08m.”
The author cross-references pages 50, 62 and 63 of Celtic’s 2012 Annual Report, noting that while page 1 cited “Year-end bank debt” of £2.77m,” the relevant debt details were “in the back” – echoing a point made by John on Superscoreboard – an example of FTH’s considerable cynicism towards the accountancy profession. “Directors, especially accountants, cannot be trusted to expose the full debt position up front,” DTH noted, noting darkly that “Celtic’s board is full of Chief Financial Officers and accountants.” Yet while exposing this “hidden” debt, FTH appeared to overlook the larger “hidden” debts on pages 57 and 60, which one assumes (s)he must have at least skim-read between pages 50 and 62. Perhaps FTH was happy to let others make that discovery.
The Co-operative bank’s current financial crisis has been likened to that of Lloyds Banking Group, who effectively ran Rangers’ finances from 2008/09 in search of loan repayments. Now that the Co-op is “scrambling to raise £1.5bn of new capital to prop up its finances,” (Sunday Times, 25 August) will they be into Celtic for their money, as LBG infamously were for Rangers (fatally for Rangers, as it transpired)? PZJ is convinced: “The Co-op bank restructured (Celtic’s) spiralling debt in 2009 and gave them a ten-year stay of execution, something which is being reviewed as we speak. They gave them ten years to sort their finances out, something they have not been able to do.” Celtic were, of course, two-down to Shakter Karagandy when PZJ wrote this. How significant that chronology is remains to be seen.
In all honesty, all these interpretations of figures resemble American comedian Lou Costello finding ways to make 13 x 7 = 28. Actions such as wiping £100 off the price of an adult season ticket are not those of a club “unable to sort their finances out.” Likewise charging season-ticket holders £28 per Champions League group game. And accusations linger that the re-emergence (regurgitation?) of the “Celtic debt” story is Rangers fans’ attempt to “deflect from their own cash problems.” One Celtic forum contributor noted: “We have been servicing these loans since 2001. Rangers fans probably just discovered them and got very excited,” although this contributor used rather more evocative language than “got very excited.”
However, Celtic clearly have medium-term financial obligations towards which current Champions League riches will make an important contribution, and without which there would be genuine financial concerns. Celtic fans, especially those virulently critical of Rangers fans’ head-in-the-sand attitude to warnings of their financial demise, should remember this when suggesting how these riches should be spent. And temptations to dismiss claims on the basis of their origin must be resisted. Rangers fans made, and still make, that mistake. Celtic fans must not repeat it.
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