Bolton Wanderers: The Tales of Chairman Gartside

When Bolton Wanderers’ parent company, Burnden Leisure PLC, released its annual results on New Year’s Eve, the numbers were too stark to be buried. A loss of £50.7m for the twelve months to June 2013 took the club’s total debt to a colossal £163.8m. This figure continues a grim tradition for the club, which was already a record £93m in debt back in 2010 after losing £35.4m in a single year.

These are not the actions of a club with its finances in order. Yet for years, chairman Phil Gartside has insisted that is precisely what the board was determined to achieve.

The Indomitable Generosity of Eddie Davies

The man bankrolling the club is owner Eddie Davies, whose financial support has been a constant theme of Gartside’s tenure. In the latest annual report, Gartside praised Davies’ “indomitable generosity” and “humbling level of support”. This is familiar rhetoric. In 2003, he declared, “We are watching Jay Okocha, Youri Djorkaeff and Ivan Campo courtesy of Eddie Davies.” By 2011, he was telling shareholders they should not “ever underestimate what Eddie Davies does for our club.”

The accounts make that impossible. All but £12.5m of the club’s debt is owed to Davies’ company, Moonshift Investments. Gartside has often highlighted that Davies is a “Boltonian,” not “a Russian or an Arab,” framing the debt as “soft”. The fact that Moonshift is registered in the British Virgin Islands and based in Bermuda receives less attention. The business model has long been simple: Eddie will pay. This dependency was cemented in late 2003, when Gartside urged shareholders to sell their holdings to Davies for pennies, increasing his stake to 94.5%. At the time, Gartside admitted, “I can’t bear to think about where we would be without his support.”

A decade on, that question hangs heavier than ever. One concerned shareholder in 2003 asked, “What happens to the club if something happens to him?” The cautionary tale of Gretna, whose benefactor’s illness led to the club’s collapse, shows the inherent risk in such a model. It is precisely this situation that UEFA’s Financial Fair Play regulations were designed to prevent.

A Return Journey

Gartside has presided over seven consecutive multi-million pound annual losses, totalling £157.7m. When he became chairman in October 1999, the club was in the old First Division with debts around £20m. He oversaw the rise to the top half of the Premier League, but has now also overseen the return journey. As one fan on The-Wanderer website noted, “We are around the same place we were in 1999. The overwhelming difference is our debt.”

The chairman’s stated ambitions have often seemed disconnected from reality. In 2001, he declared an intention “to build BL into a broad-based sports media and leisure company” to protect against football’s financial volatility. The latest annual report confirms this remains a “change of business strategy,” yet the £50.7m loss demonstrates just how little protection has been provided. Canadian comedian Tom Stade once joked about Africa’s multi-trillion dollar debt, musing that if he were Africa, he might have had a word with someone when it got to seven trillion. Bolton’s own debt just keeps climbing.

No More Cheques

The club’s ability to continue as a going concern is now a serious consideration. The board’s own notes to the financial statements admit that under a “reasonable downside scenario,” a “funding requirement” will arise. Crucially, they state this requirement falls just outside the next 12 months, allowing them to avoid the dreaded formal warning. That downside scenario is almost certain, with parachute payments set to halve from £16m to £8m next season.

Worse, the Football League is adopting its own Financial Fair Play rules from next year. This means Gartside can no longer simply say, “Don’t worry, Eddie will pay.” Because Eddie can’t pay.

Davies could, in theory, convert his £151m debt into equity, as Leicester City’s owners recently did. But the debt is technically owed to Moonshift Investments, and it is unclear if a corporate entity would share the same philanthropic view as the man behind it. The club’s own stated “mitigating actions” include the sale of players and, more ominously, the “securitisation of future season-ticket sales.”

After relegation in 1998, with debts of £30m, Gartside said the club was “in danger of slipping out of the leagues” and had “to sell a team to survive.” He claimed they had learned an expensive lesson. With debts now standing at £163.8m, that danger appears far greater.