Last updated : 18 April 2004 By Editor

From The Independent

Manchester City made an announcement this week, but it was not the mooted one about a Russian oligarch taking over the people's club. No, it was a new kit, sponsored by Thomas Cook for £2m per season - decent money, but a mere pocketful of holiday spends in the ocean of the club's debts, which could sink City if they cannot clamber free from relegation.

This season's frantic survival scrap constitutes some fall from the revivalist mood of May 2002, when City won promotion to the Premier League, Kevin Keegan's charisma intact, under the then chairman, David Bernstein, who was widely respected by City fans for steering the club back from the Second Division, where they had trudged as recently as the 1998-99 season.

After the blue moon years of mess, underachievement and bleak farce, City were back, and handed an opportunity unique in football as the extravagant, £110m, 48,000-seat City of Manchester Stadium, built entirely with public money - £77m from the Lottery, £33m from Manchester's council tax payers - was given to City on astonishingly favourable terms.

City pay no rent up to the old Maine Road capacity of 32,500, then pay the council half the ticket receipts up to 48,000, after deducting their match day costs. The club spent just £20m fitting out corporate boxes, the shop and other moneymakers. Yet out of this windfall, City have somehow managed to fashion another crisis, this one much deeper, financially, than any before.

The last accounts, to May 2003, show City's debts and liabilities totalling £104m, and since then, the club have taken out a further £13.7m loan. They lost £15.4m, following £14m the previous year. The wage bill was £35m, which has increased, sources say, to over £40m, after Keegan signed expensive names including Steve McManaman, Trevor Sinclair, Claudio Reyna and David James, for a total of £7.7m, while offloading promotion soldiers Kevin Horlock, Steve Howey, and the talismanic Shaun Goater, for far less.

Yet the spending has produced only relegation blues, the club denying officially there is a crisis while appealing publicly, plaintively, for a saviour.

Alistair Mackintosh, City's managing director, has flown to China and Las Vegas looking for commercial opportunities, and Russia, where he met officials from FC Moscow, a club bankrolled by a mining oligarch, Vladimir Potanin. City say they have not talked to Potanin, who denied he was interested, or Ralif Safin, an oil magnate, but the club, and their 29 per cent shareholders, John Wardle and David Makin, the owners of the retail chain J-D Sports, who have millions outstanding in loans, could hardly have broadcast more plainly their plea for new money.

"Anyone interested in investing can come and see me any time," Wardle, the chairman, told the Manchester Evening News. "If the various Russians who are reputed to be interested want to come to talk or just watch a match, they are more than welcome." Issuing invitations like that loses the club some of the dignity they worked hard to reclaim. Bernstein was portrayed as prudent, but in fact he supported Keegan's spending, budgeting to lose £14m in 2002-03 to reach the Premiership, then a further £21.5m on players. Bernstein rolled much of City's debt into the first loan secured on match day and season ticket receipts at the new ground: £30.3m, for 24 years at 7.27 per cent interest - £2.18m - per year.

However, if Nicolas Anelka has been a success, albeit a sulky one, and Sylvain Distin has been decent if inconsistent, that summer's other signings are still virtually unknown even to City fans: Mikkel Bischoff, Tyrone Loran and Karim Kerkar. Vicente Vuoso, a 20-year-old signed for £3.5m from the Argentinian club Independiente, joined Anelka, Jon Macken, Goater, Paulo Wanchope and Darren Huckerby in Keegan's strike force, did not play a game, then was packed off on loan to Santos Laguna in Mexico.

Bernstein is said to have grown uneasy about Keegan's spending, and believed that City, handed the stadium windfall, should be steady, canny in a buyers' transfer market. Instead, they spent, spent, spent.

Bernstein fell out with Wardle ultimately over the signing of Robbie Fowler from Leeds, to whom City were initially going to pay £6m plus £1m on appearances. Bernstein upset Keegan by negotiating that down, eventually, to £3m up front, £3m on appearances, which now itself looks excessive. But against that background Bernstein resigned in March 2003 when the board was divided about his proposed promotion of Mackintosh over another director, Chris Bird, who is close to Wardle and Makin. Bird resigned too, and Mackintosh was made managing director anyway.

Bernstein summed it up then by saying there was "a divergence of views on fundamental issues, particularly concerning finance and management structure."

With Bernstein went the main restraining influence on Keegan. The manager, zealous, tetchy, insistent - and, to men of a certain age, a dazzling icon from his playing days in the Seventies - was difficult to turn down, especially with the fear in the minds of Wardle and Makin that Keegan might walk out if he felt frustrated. So, last August, came the second mortgage, £13.7m for 15 years at floating interest for three years, then 7.57 per cent - £1.04m - a year, whittling away at the extra income from the stadium. The expensive signings, several of them over 30, compare unfavourably with the departed stalwarts.

While Keegan and Wardle talked of launching City into Europe, instead they face Southampton today at real risk of going down, saddled with debts and a wage bill that does not look survivable in the First Division.

Anelka looks certain to be sold at the end of the season, but City still owe around £7m to Paris St-Germain, five of the seven instalments in which they agreed to pay for him. Shaun Wright-Philips, who has played spiritedly this season, looks about the only other saleable player but, as the one youth graduate who has been played regularly by Keegan, his departure would be unpopular, reminiscent of the sale of Garry Flitcroft in 1996, a surrender which prefaced City's slide to the Second Division.

City's official comments that the finances are under control do not square with Wardle's open invitation to the world's wealthy. In the last accounts, City's liabilities exceeded their assets by £10.4m, calculated by valuing the squad at £38.8m, which looks very high for Keegan's collection. Some Premiership clubs have reduced their valuations because of the collapsed transfer market, and with City having announced a a loss of £13m for the six months to November 2003, their next accounts, due to be calculated at the end of May, are likely to reveal a loss above £20m and a still larger deficit.

"I don't want a Russian taking over my club," said Paul Stanley, partner in the accountants Begbies Traynor who does the dark, lonely work of analysing City's finances for the fanzine King Of The Kippax. "We're supposed to be the club for the people and fans of Manchester. Lottery customers and council tax payers gave us our stadium, but we've blown it, mortgaged the future to buy immediate success."

The justification for giving the stadium to City - a commercial company owned by Wardle, Makin and a few other large shareholders including BSkyB - was that the Commonwealth Games were a boon to Manchester, and City's occupation would propel regeneration in the battered east of the city, where the few facilities the community had, such as the swimming pool in deprived Gorton, were being closed down by the council.

City's community work is carrying on apace, but liabilities of £100m, a relegation nailbiter and a frantic search for a lifejacket were, as Keegan himself might have put it, never in the brochure.