City’s Etihad sponsorship deal is also a mortgage backed security

etihad stadium.jpg
The Asian tour saw Arsene Wenger upbraid Man City for their obvious ploy to circumvent financial fair play rules by signing an inflated £400m sponsorship deal part of which changes Eastlands to Etihad Stadium.
City can now put this amount in the revenue column and claim they are living within their means. Meanwhile the largess from this naming arrangement makes for business as usual. The club can go its merry way skewing the transfer market by paying exorbitant fees for the players it wants.
Wenger who’s been a staunch proponent of financial reform has openly questioned the deal and says such sponsorship deals have to be at market value. City’s naming rights deal is the first big test in UEFA’s drive to ensure a uniform playing field.
In this particular case the chairman of Etihad Airways, Sheikh Hamed bin Zayed al-Nahyan is the half brother of Sheikh Mansour bin Zayed al-Nahyan. UEFA’s financial reforms stipulate that such family connections could trigger the “related party” smell test that examines such financial arrangements to see if there is undue influence between parties.
However all this could prove difficult in ascertaining a mark to market value on this complex sponsorship deal because it already resembles a mortgage backed security.
There is real estate and commercial development involved as the adjoining areas of the stadium are to be developed as Etihad campus envisioned as a world capital of sport and include “a sixth form college, sports science centre and a headquarters for national sports’ governing bodies.” City wants to develop other sports as well like basketball, rugby, taekwando, badminton, and netball.
The expansion has already been greenlighted by Manchester’s executive council in conjunction with New East Manchester and the club. City’s deal with Etihad will provide the council with £18-20m of funds needed to kickstart this massive project.
It is clear that UEFA will run afoul of public sentiment and more pertinently City can claim the deal cannot be examined through the prism of a simpler stadium and shirt sponsorship with all its secondary accruements which could yield substantial long term economic benefits to the community at large far beyond the 10 year contract. All they have to show are charts of projected job opportunities and valuations of the sports city infrastructure to create a picture of a commensurate market value.
Wenger and Karl Henry’s concerns are well understood but really there is no way that UEFA can establish a fair market value on this deal. They can make vague conflict of interest noises and frown disapprovingly but this arrangement cannot be revoked. In some ways this is a limitation of the financial fair play rules as big clubs with their superior revenue generating sources will always find a way around them. It’s the smaller clubs that face the full measure of these financial reforms which really does not make for a level playing field.

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