The financial crunch at Liverpool

Fascinating look at the financial handcuffs that Liverpool boss Rafael Benitez has to work with.

The Independent was able to get a hold of a prospectus published in March by investment banks Rothschild and Merrill Lynch to attract potential investors in the club. The prospectus lays out the financial framework with the next five years.

Basically Liverpool’s net annual transfer budget is locked at £20m until 2014, and that figure includes wage increases accruing from contract renewals. So basically Rafa needs to continue to sell before he can buy.
From the newspaper report:

The section of the Rothschild/Merrill Lynch document relating to “player transfer payments” states:

“Management believes that the normalized long-run level of new net player capital expenditure is £20m.” The accompanying data suggests “long run” means the next five years. This figure “will grow together with increases in media broadcasting revenues,” the bankers promise. Though revenues from British broadcasters are expected to drop, overseas rights should grow before 2014.

This summer Liverpool used most of the £20m to extend the contracts on some of its players. As a result, they had to sell Xabi Alonso to Real Madrid for £30m in order to affords the purchases of Glen Johnson and Alberto Aquilani.

With more contracts of key players being up for renewal this summer, Liverpool will have trouble resisting the advances of Real Madrid this summer for Javier Mascherano if they want to add new players to the squad.

Earlier this week Arsenal Chief executive Ivan Gazidis made some interesting comments about Arsenal’s transfer policy. Gazidis said:

“We believe transfer spending is the last resort. That’s a sensible view to have. Re-signing existing players is a far more efficient system. What Arsene will not do is spend money on players that do not add something of real value.”

With Liverpool and Arsenal being limited financially in the transfer market for the next several years, and Chelsea banned from signing new players, a window has opened up for other teams within the Premier League to use their financial powers to jump into their Champions League positions.