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A discussion on Bolton's debt (part two)

Welcome to the second half of our lengthy discussion about Bolton Wanderers' debt. A few weeks ago I was emailed by Ollie Wright of the Derby County Blog. Ollie was, to say the least, surprised by the article I wrote in response to Bolton's massive £136.5 million debt.

Alex Livesey

Part one can be found here.

OW: I'm not sure that I agree with you that running up monumental debts is a matter of footballing life. Surely when you think about the money that comes into the Premier League, there is a different way to proceed and I'd argue thatWest Bromwich Albion are a good example for mid-sized clubs to follow.

They have yo-yoed, taking the lumps of relegation along the way, but in January, they were able to announce a profit of £9m for the year to June 2011, leaving the club only £2m in debt. Staggeringly, at the time of writing, they are fifth in the Premier League, ahead of Tottenham Hotspur, Arsenal, Liverpool and the doomed, vain, financially recklessQueens Park Rangers, who are bottom. When QPR go down, they will not come back for a long time. West Brom could go down and bounce back far more comfortably.

When Derby endured their nightmarish Premier League season in 2007/8, turnover was £48.5m. Ever since, turnover has fallen season on season. At June 2011, with no more parachute payments, Derby turned over £18.1m. The wagebill has been slashed from its 2007 level of over £26m (which was nothing like enough to compete in the Premier League anyway) to £11.6m - and will be lower again when the club announce figures to June 2012.

Despite this cost-cutting, which has been extremely difficult for Nigel Clough to manage, Derby are still £25.5m in debt at the last reckoning, with our American owners GSE putting in loans to meet annual losses. As GSE are not local people, many fans remain suspicious about their motives for owning Derby County. Their insistence on wage restraint has, however, kept the club going as a viable concern.

Another factor you should consider is the impeding implementation of Financial Fair Play, which will place Championship clubs under transfer embargo if they lose money hand over fist. This means that even if Eddie Davies is happy to continue to underwrite huge losses, the Football League will not allow this to happen without taking action.

Sanctions won't be applied until 2014/5 and clubs relegated from the Premier League are exempt in their first season, so this won't instantly affect Bolton; however, as you rightly say, everybody connected to the club would breathe a huge sigh of relief if you got promoted again - and fast.

When Derby came down, the manager at the time, Paul Jewell, made much of his determination to get us promoted again straight away. The job was beyond him. Dougie Freedman did a fabulous job at Crystal Palace, but is he able to walk into a very different situation at the Reebok and make an instant success of things?

The implications if he can't are difficult. It's still early days, but if Bolton don't go up this season, the club will have to embark on a major cost-cutting mission. With interest on the debt reportedly running at £5m a year, I find it hard to see how they would continue to function without any income from the Premier League.

MY: I agree in that it's completely unsustainable. I didn't mean that such massive debts were a simple fact of footballing life, more that it was the idea of debt on the whole. Football clubs, especially in England, rarely profit.

Dougie has a big, big job ahead of him but the impact his methods have made is already very measurable. Since taking over at the Reebok, the defense has allowed literally half as many goals as they had in both the managerial reign of Owen Coyle and the short caretaker term when Jimmy Phillips and Sammy Lee were in charge. His challenge now is to get the strikers to actually finish. Bolton have no trouble getting shots on frame (there have been at least eight shots on target in each of Freedman's games in charge) but so many are right at the goalkeeper and thus utterly useless.

The cost cutting has already begun and has taken a large chunk out of expenditures at the Reebok. We have young players apart from Kevin Davies, Zat Knight, and Stephen Ricketts and their contracts are, by all reports, very on par with what the Championship should have. Players took pay cuts this season and the manager has not had any funds to spend on bringing new blood in. Bolton are making do but will have to find a way to succeed with these limits .