What do the French rugby team, the English soccer team, Southampton Premier League soccer team and the Texas Rangers baseball team have in common? Answer: the GFC, the GR and the NM — or the Global Financial Crisis, the Global Recession and, as a result of the GFC and GR, No Money. Take these three reports from last week which slipped past the noses of sports hounds. The French, who are supposed to be buying the cream of Australian Rugby Union and Rugby League, are bringing in a salary cap for their two professional divisions and starting to cut the number of foreign player imports. That’s a move that won’t necessarily stop Australian and New Zealand League and Union footballers heading there, but it will be enough to slow the drain, and in the end stop it as the salary cap bites in about four years. Then there is the collapse of the listed parent company of former English Premier League, Southampton (the Saints) Southampton Leisure went into administration last Wednesday, broke and owing millions of pounds. It won’t be the last EPL team to do it. Several owe tens of millions of pounds and have falling revenues as the recession slashes sponsorships and the ability of fans to pay huge prices for season or casual seats. And this report yesterday from the US where a “billionaire” Tom Hicks, has defaulted on interest payments for his Hicks Sports Group, which owes the Texas Rangers baseball team which is about to start the 2009 season in the next 10 days. Hicks also owns, with another rich yank, Liverpool Football club in the UK, which not involved in this situation, but has debts of 45 million pounds (or around $A100 million). A win in the EPL and or a win or good finish in European competition will help keep the banks from the doors, hopefully. Bloomberg reported that Hicks holding company for the Texas Rangers baseball team defaulted on $US525 million in loans after missing interest payments:

Hicks Sports Group, which also owns the Dallas Stars hockey team, is involved in negotiations with its lenders over the terms and covenants of the loans, Hicks Sports said in a statement. Describing the situation as a “business dispute,” the team owner decided to withhold last week’s interest payment “as part of its negotiations,” according to the statement.  Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated. The company is not asking for additional money; it is only asking for full access to the interest reserve account and revolving credit line as well as some amendments in the debt covenants.

Last month Forbes estimated Tom Hicks’ net worth at $US1 billion. He’s not silly, he’s just refusing to throw good money after bad by paying the interest on his company!  Hicks is not the only US ice hockey team owner in trouble. The Phoenix Coyotes are losing millions of dollars and owner Jerry Moyes is said to be under pressure to sell. The team could lose upwards of $Us35 million this year, much of it due to falling revenues, because Phoenix is one of the hot spots for subprime mortgages and related foreclosures. In the UK Southampton Leisure Holdings got into financial trouble because of a wage bill that surged by 80%, falling revenue after it fell out of the EPL in 2005 and debt of 27 million pounds (over $A50 million) on which interest payments were missed. And in France the Ligue Nationale de Rugby (LNR) has agreed to new laws for the 2010-2011 season, that will see at least half all team squads made up on French players, with that ratio increasing to 70% the following season. It is also planned that salary caps will be enforced for all clubs in its Top 14 league and the Pro2 division. The shift in policy means France is now falling into line with tougher rules in the UK and Japan because of falling sponsorships and other revenues. The professional clubs in rugby in the northern hemisphere have high costs from contracts and structures that were introduced in the good times. In France, the ban on alcohol advertising on TV is having a major impact on the value of sponsorships: they are still happening from the likes of Heineken, but there’s talk of cutbacks and no extra money as even beer revenues come under pressure. Why? Well, the GFC, and the GR, means NM.

Peter Fray

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Peter Fray
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