How were Chelsea allowed to spend so much in the January transfer window?

Fernande’s move to Chelsea’s history came close in the early hours of Wednesday morning, when they confirmed an English record deal for Argentina’s World Cup winner Enzo Fernandez.

And, after an unprecedented winter window in which they signed seven senior players for over £280million, there is one question that dominates the sport.

How can Chelsea start such a spending spree while following UEFA’s Financial Fair Play (FFP) guidelines?

The answer, as you might expect, is complicated.

Athletes explained below.

How do Chelsea plan to make it work?

Chelsea supporters have been given a crash course in amortization over the past month, as Todd Boehly and Clearlake have pushed the boundaries of what is possible with player contract extensions.

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By signing Mykhailo Mudryk to a contract that runs until July 2031, for example, they made the €70million (£62m) initial transfer fee to be spread over eight years on the books rather than the usual four or five, thus reducing your lot annual cost on accounts.

Fernandez, Badiashile, Madueke and summer signing Wesley Fofana are on similarly long deals. This amortization trick – which can end up in the retirement of players on these high-volume contracts fails the expectations on the pitch – is one of the conditions that Boehly and Clearlake have used in order to increase their opportunity to raise the level of financing in front. the most elite clubs will spend on three or four summer windows, but not only one.

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Another comes from the other half of how football clubs report transfers in their accounts. Transfer fees for bought players can be amortized on the expiry of their contracts, but transfer fees for sold players are signed immediately in a lump sum (minus the amortized price remaining on the books ).

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These different accounting practices can make it surprisingly easy for clubs to significantly offset or even fully balance many high-profile signings with as little as a reasonable sale in their annual results – particularly of a player or artists who sell have been fully amortized or university graduates, who represent pure profit in the books.

Mudryk joined Chelsea in the January window (Image: Getty Images)

Mudryk joined Chelsea in the January window (Image: Getty Images)

Does this work?

An important example from Chelsea’s recent history: for the financial year ending June 2022, despite signing Romelu Lukaku in a disastrous £97.5m deal from Inter Milan, the club made a huge profit from the sale of players – estimated by the analyst Swiss Ramble football fund. to be £160m – due to the departures of Tammy Abraham to Roma, Kurt Zouma to West Ham, Fikayo Tomori to AC Milan and Marc Guehi to Crystal Palace, among others.

Chelsea’s general financial results for the 2021-22 season have not yet been made public. The club has until March 31 to file their accounts with Companies House. But in recent years the huge profits from player sales have been enough to put the club in the black altogether, despite matchday and commercial revenue consistently lagging behind their Premier League rivals – most recently in 2019-20 , when £143m profit from the player. The sale contributed to a pre-tax overall profit of £36m.

What is the current state of play of Chelsea?

Swiss Ramble estimates that Chelsea’s pre-tax profit for 2021-22 will be £19m. Between those two years in black was a massive £156m loss in 2020-21 in part as a result of the mammoth summer 2020 spending spree that brought Kai Havertz, Timo Werner, Ben Chilwell, Hakim Ziyech and Edouard Mendy to Stamford Bridge .

Traditional FFP only allows clubs to lose up to €30m (£26.3m) over a three-year monitoring period, although many accommodations have been made in recognition of the impact of COVID on club revenues.

Back in September UEFA listed Chelsea as one of the 18 clubs that “are technically able to fulfill the request for a break – mainly thanks to the application of the emergency measures COVID-19 and / or because they benefit from the the result of a historic holiday too,” adding that further financial information has been requested and that the relevant parties “will be closely monitored in the coming period”.

UEFA also reminded Chelsea that specific COVID accommodations no longer apply, but FFP is changing in ways that make Boehly and Clearlake’s current spending possible. From 2023-24 the allowable loss limit is doubled from €30m to €60m, which will include the 2022-23 season as the third year of the monitoring period. Clubs judged to be in good financial health will also be given a further €30m in allowable losses over a three-year monitoring period, meaning Chelsea could be allowed to lose as much as €90m over three years – double the old limit.

Before the deadline, when Chelsea finally agreed a British record deal for Fernandez, the Swiss Ramble calculated a €96m loss for Chelsea over the three years until 2022-23, slightly more than the €90m allowable loss limit. He also estimates the club’s membership fee is 92 percent of revenue and profit from player sales; UEFA has ruled that all clubs must bring this ratio down to 90 per cent for 2023-24, then 80 per cent in 2024-25 and 70 per cent in 2025-26.

Chelsea finally secured a deal for Fernandez in the early hours of Wednesday (Image: Getty Images)

Chelsea finally secured a deal for Fernandez in the early hours of Wednesday (Image: Getty Images)

Should Chelsea have any concerns?

Recent history suggests that Chelsea have little to fear even from being found in breach of FFP. UEFA’s new penalties, announced in September, are a list of fines – of which only a small portion has to be paid immediately with a rest period that is subject to future compliance.

You could argue that’s the equivalent of a speeding ticket for an ambitious team determined to invest big.

Boehly has publicly insisted on several occasions that Chelsea have FFP in mind, but it is clear that he and Clearlake are pushing to the limits as much as possible to try to build a team capable of regularly competing for domestic trophies. the largest and European, perhaps you notice that the financial and regulatory conditions in the coming years may not be very good for this type of investment.

Can this level of spending continue?

UEFA has already moved to close the amortization loophole for future transfer windows; Even if a player were to sign a seven or eight year contract from next summer, their transfer fee would be spread over no more than five years in any FFP calculation.

The proposed club fee control law will also put pressure on Chelsea and their rivals to be more disciplined when offering lucrative salaries to players and coaches.

Then there is also the £60m in annual commercial income that Chelsea will lose from next season, as a result of the end of the £40m-a-year deal with the three main shirt sponsors and the early termination of the £20m-a-year deal with the sleeve sponsor Whalefin. Neither has been replaced yet, the football sponsor market is less than inviting now, and the clock is running out before the process of producing the next season’s kit must begin.

More importantly, Chelsea are currently facing the very real prospect of playing the 2023-24 season without Champions League football, and possibly without European participation of any kind. That wasn’t really Boehly-Clearlake’s initial trade plan, and it will have a significant impact on the team’s transfer goals over the next two windows.

Todd Boehly completes Chelsea takeover in June 2022 (Image: Getty Images)

Todd Boehly completes Chelsea takeover in June 2022 (Image: Getty Images)

This is where it is important to note the defined profile of the player that Chelsea is targeting in this January window: players aged 23 or under who have, to varying degrees, popular ability and could turn into important components of the next great team at Stamford Bridge or grow their recycling value in the coming years.

If enough of them prove to be positive assets on or off the pitch, nine-figure transfer splurges won’t be needed in future windows.

In any case, no one should expect this level of transportation spending to continue indefinitely. Boehly is not an oligarch and Clearlake Capital is not a sovereign wealth fund. The money invested is drawn from private equity, and with it the hope of a positive return in the end – either in the form of annual profits or, more likely, a significant increase in the value of Chelsea that can be realized if the club is sold also on .

(Image: Getty Images)


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