St Gallen football club fights to stay afloat

The immediate future was still uncertain only one week ago during this FC St Gallen match against FC Thun Keystone

Switzerland’s oldest football club, FC St Gallen, has staved off the threat of going bust thanks to a SFr10 million ($10.44 million) injection from business leaders.

But the club is not yet out of the woods as it still needs to find another SFr5 million to pay back debt and prove to the Swiss Football League (SFL) that its business restructuring plan is viable for the future.

FC St Gallen has recently experienced its most traumatic moments in its 131-year history. The club was brought to the brink of collapse with a SFr16 million hole in its accounts thanks to a new stadium turning into an expensive white elephant.

Just a week ago, the final whistle was about to be blown on the club as the city council voted down a proposal to pump public funds into a bailout package. But a consortium of prominent local business leaders was on hand to force a period of extra time.

The club’s problems started with the construction of the 20,000-seat AFG Arena at a cost of SFr340 million and an additional SFr70 million spent on improving transport infrastructure.

Deep pockets

The omens were not looking good as the football team were relegated to the second tier of the league just as the stadium opened in 2008. Poor results from the stadium’s VIP section and business events services soon brought the stadium into the red, dragging down the club’s finances with it.

By August of this year the situation was so dire that an emergency rescue plan had to be launched. But a proposed package funded by the banks, private investors and tax payers hit the rocks last week when the city of St Gallen refused to play ball by rejecting an appeal for SFr2 million and the cantonal authorities opted for a wait-and-see strategy.

This forced business leaders, led by Swiss media mogul Dölf Früh, to dig even deeper into their pockets – which they promptly did by doubling their contribution to SFr10 million. With the banks agreeing to write off some SFr5 million in debts, the crisis has now eased considerably.

“We are now in a position where we can look to the future,” Früh, who was appointed club chairman after personally contributing SFr2.7 million, told a media conference on Friday.

“We believe we have a sustainable solution, but we are also aware that we have not yet reached our goal,” he added. That goal of a debt-free stadium will only be realised when an additional SFr5 million can be found to pay off the remaining bank debt.

No public funds

Canton St Gallen has already been asked to stump up SFr4 million and will outline its position in 10 days’ time. Früh clearly hopes that the authorities will be persuaded to plug the remaining financial gap now that the confusion of the past week has been laid to rest.

The SFL will deliver its verdict on FC St Gallen’s reorganisation measures. The running of the football club and the stadium has now been separated into two different companies.

The SFL had demanded a reorganisation of the club’s business activities and still expects a detailed report on November 15 on how this will work. The SFL could yet banish St Gallen to the lower leagues next season if the club’s new business model fails to stand up to close scrutiny.

“We are pleased that St Gallen have found a solution that separates the sporting and business activities of the club,” SFL head of legal services and licensing Claudius Schäfer told swissinfo.ch.

“This is a promising reconstruction plan, but only time will tell if it can work. We will not abandon our scrutiny of FC St Gallen and the club will still have to comply with our requirements on November 15.”

Football debts

The current plight of FC St Gallen is nothing new, either in Switzerland or in Europe. Grasshoppers Zurich faced a similar situation this time last year and were also bailed out by an 11th-hour cash injection from the private sector.

Grasshoppers are still far from complete financial stability, but at least they avoided the fate of FC Lausanne and FC Servette who in the past few years were thrown out of the higher leagues after going bust.

Despite generating huge incomes, mainly through television and marketing deals, top-flight football in Europe has been increasingly dogged by rising outlays – mostly to pay exorbitant transfer fees and player wages.

In England, clubs such as Portsmouth, Southampton, Leeds and Sheffield Wednesday are just a few to have faced severe financial difficulties. There have even been searching questions raised about huge debts being racked up at big name clubs such as Manchester United, Liverpool, Real Madrid and Barcelona.

Such iconic clubs could always attract a billionaire owner to take over debt and future financing. Humble FC St Gallen, however, must rely on local fans and businesses to keep it afloat and hopefully out of future trouble.

FC St Gallen

Founded in 1879, FC St Gallen is the oldest existing club in Switzerland and one of the oldest in Europe. It is also the Swiss football league’s only top-flight representative from the east of the country.

Despite being around for so long, the club has won the league championship on just two occasions: the 1903-4 and the 1999-2000 seasons. But it has also won the Swiss Cup – in 1969.

Long time sponsor and supporter Dölf Früh has contributed SFr2.7 million to helping the club stay on its feet.

The same amount was invested by real estate entrepreneur Rainer Sigrist, while Ralf Klingler, Edgar Oehler and Norbert Jann put up SFr1.2 million each. The sixth member of the private sector consortium was Hans Sulser, who was willing to put up SFr1 million.