Has Arsenal borrowed too much?
I've obtained a copy of the financial analysis of Arsenal that was made by the investment bank Lazard Brothers in support of Alisher Usmanov's proposal that the club should raise up to £150m in a rights issue.
It's a chunky 35-page document. But its conclusion can be summed up very simply: Arsenal has too much debt to pose a serious challenge to Europe's biggest clubs; or to use the jargon, it is over-leveraged, too thinly capitalised.
This is a verdict that has been rejected by Arsenal's board, which has been advised by NM Rothschild.
The North London club's directors argue that paying down debt would have only a marginal impact on the availability of financial resources.
Of course, as an Arsenal-supporting BBC journalist, I couldn't possible take sides in this dispute between the Uzbekistani plutocrat and Arsenal's directors.
But some of you will be interested in Usmanov's point of view.
Here are a few bullet points from the Lazard document:
1) It believes that Arsenal's earnings before interest, tax, depreciation and amortisation (EBITDA) will fall from between £55m-60m in 2009 to £35-40m in 2010. The most striking contributor to this squeeze that it cites is a 12-14% increase in costs to £179m "as a result of players being compensated for tax changes and a number of step-ups in wages for individual players".
2) It predicts that cash flow will fall by more than that because of some pre-payments on assorted deals that were taken in 2007.
3) It says that Arsenal's fans are already paying 40% more than the average for the big four English clubs for match tickets and 24% more for season tickets - implying there's little scope to increase gate revenues, especially in a recession.
4) It calculates Arsenal's gross average annual spend on new players as £18m, compared with £37m for the big four; and the net annual spend, including sales, as precisely zero, compared with a £20.2m big four average
5) Perhaps most germanely of all, it fears that redevelopment of Arsenal's former Highbury stadium into luxury apartments may not turn out to be profitable - and that refinancing £140m of property-related debt over the next couple of years will be neither cheap or easy.
So Usmanov - the second-biggest shareholder in Arsenal with a 25 per cent stake - suggests that investors stump up a maximum of £150m via a rights issue of new shares.
This would provide additional funds for Arsene Wenger to augment the playing squad, and/or pay off some of the property debt, and/or pay down a substantial portion of the £242m of separate debt incurred to fund the development of the new Emirates stadium.
As I say, Arsenal's board has said no to all this, following detailed scrutiny by bankers from Rothschild - which included those bankers sounding out the most important individual at the club, Arsene Wenger.
The advice to the board from Rothschild was;
a) paying down the Emirates-related debt would save a maximum of £5m a year;
b) there are better ways to rehabilitate the Highbury redevelopment, including a putative cunning plan under negotiation right now - and even if the worst came to the worst, there should be no direct financial contagion to the club, since the providers of the property loans have no recourse to the footballing assets;
c) perhaps most controversially, the chaps from Rothschild don't believe Arsene Wenger is seriously constrained by lack of finance in his ability to develop the playing squad - and, more importantly, they don't believe that he feels fettered (if you see what I mean).
All of which would be described by some as a courageous blocking tackle: turning down equity finance during a sharp recession, and while the worst conditions in living memory for property developers prevail, well that's quite ballsy.