This from The Times yesterday:
‘On Paper, Manchester City’s debt position looks worse than it is. For accounting reasons, the club has been forced to acknowledge on the balance sheet future rent payable on the City of Manchester Stadium. This “finance lease liability” of £34.9 million technically pushed the club’s net debt up to £96.5 million on the last set of accounts for the year ended May 31, 2004. Without it, City’s debt stands at £62 million.
‘The club’s auditors insisted that the potential rent payments — based on an average attendance assumption of 42,500 over the next 75 years — be included on the balance sheet (rather than a cost on the profit-and-loss account) because the stadium was being counted as an asset.
‘Surveyors have valued the stadium — a gift of the 2002 Commonwealth Games under a revenue-sharing deal with the city council — at £154 million. In the unlikely event of City’s attendances dropping below 34,500 (the average last season was 46,814), no rent is due.
‘The club may have breathing space on directors’ loans of £7.7 million from John Wardle and David Makin but financial institutions are not so patient. There is still £44 milllion of loan notes to service, with interest accruing at about £3 million a year. These are secured against future ticket revenue. The Catch-22: the higher that revenue, the more the club owes the council and the less it has to pay off the debt.’
And with empty seats beginning to appear at the Council House, things could reach a head sooner than we thought.