Monday, June 1, 2009

Newcastle's relegation woes continue

Week two of relegation purgatory started with of-course Mike Ashley's rather public announcement that he was targeting a quick-sale of the club for £100m. Unfortunately prior to the rather obvious strategic use of the media, banking groups considered to orchestrate the sale, Seymour Pierce and NM Rothschild hadn't informed the owner that his asking price is roughly £10-20m over the best valuation and in the summer of 2009 investment opportunities of faltering sports teams with massive payrolls are not very attractive. That warm piece of information aside the real problem that is looming large for Newcastle is the £40m working-capital facility from Barclays Bank that Newcastle uses to manage operations is under review by the financial institution. While Mike Ashley has requested the facility be extended, Newcastle will need to satisfy some very difficult financial tests to have it extended including having a positive transfer cash flow. All this spells out further problems for the Magpies as not only is a move to retain Alan Shearer as manager delayed but plans for the upcoming campaign are well on the back-burner.

The first step in solving this problem is for the present owner to sit down and listen to a financial management team as they go through a possible acquisition. His announcement of yearning for a "quick sale" and the public knowledge has done little to assist the sale and I presume he is aware hitting the "panic button" will not garner you top price but instead attract more vultures to pick the last traces of flesh. Secondly internal financing is necessary, albeit a difficult one to digest for Mike Ashley, as they go through the crucial third step; selling off unwanted players reduce salary concerns by roughly fifty per-cent. The most challenging decision will be the need for strategic transfer sales in order to raise funds with notable players such as Oba Martins and Sébastien Bassong possibly involved. This final point will depend on the second point and should be avoided if possible.

Once this abbreviated action plan is instituted, the more typical plan, including hiring of Alan Shearer can turn towards more traditional Football related matters.