Ellis Short's decision to write off Sunderland AFC debt is '˜huge boost for the club financially' says sports finance expert
Ellis Short's decision to cover Sunderland AFC's debts will hand the Black Cats a massive advantage next season, says a leading sports finance expert.
The club announced last week that the American billionaire had agreed to cleared all its debts in order to pave the way for a sale to a consortium headed by businessman Stewart Donard.
Short, who has already capitalised more than £100million worth of debt during his time at the club, has written off the rest owed to him, believed to be around £70 million.
He has also taken on the debt owned to bankers Security Benefit Corporation, believed to be a similar amount.
The sale is still dependent on Football League approval, but Short’s offer means that although the club will still take a substantial wage bill into next season’s League One campaign, it will do so with no outstanding debt and with another two years of Premier League parachute payments to come.
The club this week released its accounts for the financial year to July 31, 2017, and they make clear the financial impact of relegation from the Premier League.
The 2016-17 season was the first year of a massive new deal between the Premier League, Sky and BT Sport. Sunderland finished bottom of the Premier League but still pocketed £95.6million from television and other media rights, up from £71.5million in the 2015-16 season.
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Sheffield Hallam University’s Dr Daniel Plumley is an expert on sports marketing. He said Short’s agreement to write off the club’s debts would make a huge difference in the third tier.
“Loss of TV money meant a reduction in revenue of around £60million, based on the fact Sunderland earned £95million from TV money in these accounts,” he said.
“They will have had around £40million in parachute payments this year, so revenue reduction of £55-60million in the next accounts.
“Net debt in the accounts is around £125million, so writing that off is a huge boost for the club financially. The writing off of the debt from the owner is massive in the context of reduced revenues following relegation and makes the financial picture significantly better.
“Sunderland will also get another parachute payment next year of around £30million, so will be way ahead of the rest in League 1 in revenue terms.”