Chelsea facing administration? Dispute threatens Boehly takeover
According to reports in England, including by Sky Sports and The Times, the sale of Chelsea FC from Russian oligarch Roman Abramovich to an investment group led by Todd Boehly has hit a snag and could be in jeopardy.
The reports state that Abramovich has not agreed on the pay structure laid out by the UK government to finalize the sale, meaning the transaction has yet to be approved. The sale of the club has been brought about due to UK government sanctions against Abramovich for his ties to the Russian regime that has invaded Ukraine. Those sanctions require UK government officials to oversee the sale of the club.
The UK government has reportedly mandated that the entire payment from Boehly and his ownership consortium be placed in an escrow fund until the Russian oligarch details how the funds will be distributed to Ukraine wartime charities as per Abramovich's own publicly stated wishes.
But The Times outlines that Abramovich's camp is pushing for the funds to be sent to Camberley International Investments to satisfy the $2 billion (£1.6 billion) of unpaid debt owed by Chelsea's parent company Fordstam Limited. According to the article, Abramovich wishes for this debt to be paid directly as part of the sale process. Only then would those funds be frozen, as per UK sanctions, and delivered to the aforementioned charitable escrow.
The reports state this is a "red line" for the government, as it would no longer be able to control the funds. Government sources quoted by The Times said that "there’s alarm in government about the gap between what Abramovich has said he will do publicly and what he’s willing to commit to legally as part of the sale process."
These developments come as the club is facing hard deadlines to be able to participate in official club competitions for the upcoming 2022-23 season. If a solution is not found, there is the extreme prospect that the club could face administration, according to Sky.
BREAKING:The £4.25bn takeover of Chelsea FC has been thrown into fresh doubt amid “concerns” in Whitehall about assurances being provided by Roman Abramovich. pic.twitter.com/zzBzVwoC0k— Sky Sports News (@SkySportsNews)
Essentially, the government wishes to ensure that no funds from Chelsea's sale are transferred to the Russian oligarch without control over how those funds are distributed.
Chelsea and Roman Abramovich's representatives did not immediately respond to The Sporting News when reached for comment.
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While there is no official government deadline for the sale of Chelsea FC, there are legal and sporting deadlines that must be met which essentially put a ticking clock on the transaction.
In March, the U.K. government sanctioned Roman Abramovich, freezing the operations of Chelsea's parent company Fordstam Limited. With its parent company frozen, the club has been continuing to operate under a special government-issued license contingent on the completion of a sale of the club.
This government license expires on May 31, meaning the club has until the end of the month to either petition for an extension (or a new license) or complete the sale.
If the license expires on May 31 with no sale agreement in place and no new license or extension, the club would cease to operate and Chelsea could face dire financial consequences due to an inability to do business.
Additionally, the Premier League will meet on June 8 to issue its competition licenses for the upcoming season. If Chelsea cannot operate for the foreseeable future, it's possible the club would not be granted a Premier League license for the upcoming season and could be banned from the English top tier.
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According to The Times, there is confusion about the company to which Chelsea apparently owes its debt.
The Times government source called the Camberley International Investments ownership structure “murky and complicated.”
“The ridiculousness of this scenario is that Chelsea are saying to us they don’t know who owns Camberley International and can’t talk to them," the government source is quoted by the Times. "We cannot contact Camberley International to talk about this.
The Times' government source has called the structure "an affiliate or trust fund which is owned by [Roman Abramovich's] children."
Abramovich and Chelsea claim that if Chelsea does not repay the debt owed to Camberley International, it would put Chelsea's holding company (Fordstam Limited) out of business with serious consequences for the club.
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According to the Sky Sports report, it's possible that should the sale fall through or be delayed, Chelsea could be without an operating license for the Premier League meeting on June 8, when it will issue next season's competition licenses.
Sky Sports states that if this occurs, "Chelsea could be excluded from club competitions next season or even face the renewed threat of administration."
It is highly unlikely that the Premier League would see one of its biggest clubs with a global fan base simply drift out of existence, but the threat remains.
While also extremely unlikely, it's possible that the Blues could find themselves facing administration without a special government license, and more importantly without a formal executed sale to a new owner.
Operation costs must be offset by revenues for the business to continue to be sustainable, and the sanctions against Abramovich and the freezing of his assets stipulate that the club cannot generate revenue.
The UK government and the Premier League would come under fire if a club with the history, fanbase, and public profile of Chelsea would be permitted to go under without a solution, but the threat of this possible outcome nonetheless exists.
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26 of June 2022