Are West Brom In Trouble? Ownership and Mounting Debt

Let’s step into the turbulent world of West Brom, where passionate fans are crying out for change. The historic club, founded in 1878 and one of the football league pioneers in 1888, finds itself at a crossroads, and on the edge of a financial crisis.

For years, West Brom's financial track record was solid, enjoying stability in eight consecutive seasons from 2010 to 2017.

A rollercoaster of promotions and relegations in the Premier League kept the club in the thick of the action, until the arrival of Chinese businessman Guochuan Lai in 2016. And things looked promising, but as mysterious loans with eye-watering interest rates began to surface in the club's accounts, optimism gave way to mounting debts.

In our third episode of 'How Not To Run a Football Club,' we delve into an overview of the mismanagement by new owners, transforming a once-stable institution into a club grappling with an uncertain future and a looming financial crisis.

Click here to watch the full video on our YouTube channel

The Triumphant Years

West Brom are a very successful club within their long history. The baggies have won the league once, back in 1920! They have also won the FA Cup five times in 1888, 1892, 1931, 1954, and 1968 and the League Cup once.

In recent times, West Brom have played in the Premier League for a total of 13 seasons, they have been relegated five times, and promoted to the Premier League four times, this is commonly known as being a yo-yo club a phrase used for a club regularly promoted and relegated. The highest West Brom have ever finished in the Premier League was 8th place in 2012-13 under former boss Steve Clarke.

This was the season when a young promising striker, Romelu Lukaku, helped propel West Brom into European contention with his 17 goals on loan.

The campaign finished with a 5-5 draw with Manchester United, which goes down as one of the most iconic top-flight fixtures, the Baggies crashed Sir Alex Ferguson’s final game in management in the process.

Fast forward to July 2016, West Brom entered their seventh consecutive season in the Premier League and their 139th year in existence. This was also the time owner Jeremy Peace sold his now 88 percent stake in West Brom to Chinese businessman Lai for somewhere in the region of £175m to £200m. With 12% being owned by S4A, a group of around 400 fans.

And fans had a right to be optimistic about the future, with the owner coming out with a statement saying, 

"I have no wish to change the club’s ethos or embark on an unsustainable spending spree, I want to be a good owner and to invest in this club for the long-term.”

This is when it all starts to go downhill for West Brom, The story began to surface in 2017 when West Brom shareholders received consolidated accounts for the first time in three years and noticed a mysterious loan.

Financial Trouble

This particular loan was £3.7m to West Bromwich Albion Holdings, a company then owned by Jeremy Peace. It has been alleged that Peace used the loan to increase his stake in WBA Group, the club’s parent company, from around 66 percent.

But the £3.7m is understood to have never been repaid. WBA Holdings was passed to Lai when he bought the club.

This isn’t the only loan that fans are concerned about. Now this might not be the full information but let’s briefly go through them.

There's the MSD loan, taken out to fill the parachute payment void of not getting back into the Premier league to finance the general business operations of the club”. This was secured on the club’s assets including the stadium.

That totals £20m borrowed and the interest that is accruing on top which is currently charging nearly 15%. They have four years to pay that debt off.

There's the loan to one of Lai's other companies, Wisdom Smart Corporation Limited, during the coronavirus pandemic. That was £5m with a fixed interest sum of £50,000, but that interest has accumulated after Lai missed two self-imposed deadlines and is no closer to being returned.

Then there's the Warmfront Holdings loan. They lent Lai £2m, which he secured against 2.35% of his shares in the event that he wouldn't repay it, they could claim a very small ownership stake in West Bromwich Albion Group.

That £2m loan was agreed to with a 5% monthly interest rate from June 2022. To put that into perspective, the debt will hit £10 million by March 2025 if it is not repaid.

Reviewing West Brom's recent accounts for 2021/22, despite finishing 10th in the Championship after relegation from the Premier League, the club saw a notable increase in pre-tax profit from £0.1m to £5.4m.

This rise was primarily attributed to a £13m boost in profit from player sales, climbing from £4m to £17m, largely thanks to the sale of Matheus Pereira to Al Hilal. While revenue experienced a significant drop of 39% from £107m to £65m, cost-cutting measures successfully reduced expenses by 31% from £111m to £77m.

Albion's 39% revenue drop in 2021/22 was primarily driven by a nearly 50% decrease in broadcasting income from £97m to £52m in the Championship, despite parachute payments. Commercial revenue also took a hit, falling by 13% from £10m to £9m post-relegation.

On a positive note, the return of fans to the stadium post-COVID restrictions resulted in a significant increase in matchday revenue, soaring from £74k to £5.1m.

To offset the decline in revenue, West Brom implemented substantial cuts in staff costs. The wage bill was slashed by 45% from £77m to £42m, and player cos dropped by a third from £25m to £16m. However, other expenses more than doubled from £8m to £18m, primarily due to the higher cost of staging games with fans.

What’s the future?

So what does this mean for the future of West Brom, it's the fans that are being impacted the most. As mentioned, to offset revenue decline and debts, the club had to move players on to help cope, meaning there is little to no real investment from the owner into the on-field team, and that process will likely reignite in future transfer windows. Which in time can only impact the team's general performance on the pitch.

Baggies fans, spearheaded by supporters group Action For Albion, have made regular, controlled protests at the way the club has been run. Which is what i love to see, the fans coming together to protect their club from incompetent  owners

However, despite this, manager Carlos Corberan is keeping West Brom as competitive as possible, he took on a team that were second from bottom in the Championship after 16 games.

He lost his debut match, a 2-0 loss to Sheffield United, but went on to win ten of the next twelve league games. His team remained in contention for the playoffs until the final day, losing 3–2 at Swansea City to finish ninth in the 2022/23 season. And as of making this video, West Brom are again back in contention for those playoff places.

But away from the field of play, the Baggies' current situation is unsustainable—and it's now imperative, more so than ever before, that a new person or company buys the club and West Brom can be rid of this mismanagement.

At least a little light still shines through in dark times, as the owner is looking to sell and will have to accept a serious cut-price offer with West Brom value dramatically reduced.