Mystery investor to bail out Chelsea

An unnamed Middle-Eastern investor is set to become the second biggest shareholder in Chelsea after promising to invest £10m in the club. The deal would strengthen the position of chairman, Ken Bates, who would remain the biggest shareholder with a stake of 29.5 per cent. It would also enable Chelsea to clear a large chunk of their debt, which stands at £90m and remains a concern at the club.

The club's parent company, Chelsea Village, confirmed yesterday in a statement to the Stock Exchange that it was in negotiations with a number of parties to sell a stake in the club, which it is thought could be as much as 15 per cent. It said talks were ongoing "with a view to issuing either all or a substantial proportion of its unissued share capital." City experts say that £10m is the minimum Chelsea would want to raise and it may be that the club would hope to secure double that amount.

Although the identity of any buyer has not been made public, it is believed the deal is tailored either to a wealthy individual who is a fan, or someone who simply wants to buy into a football club.

This would also suit Chelsea and it may be that whoever invests is given a stake in other assets, such as the hotel owned by Chelsea Village.

Observers say that a clue lies in the fact that a buyer who regarded Chelsea as an investment would be better off if he traded in shares on the open market. Chelsea's share price rose yesterday from 18.5p to 20.5p, but an investor would probably be asked to pay between 22p and 30p.

Speculation over the identity of the investor is focusing on the Middle or Far East, with one source claiming there may be a link to Chelsea's shirt sponsors ­ Emirates Airlines.

The deal would represent a major coup for Bates and would help Chelsea balance the books somewhat. Much of their debt is tied up in £75m worth of Eurosterling bonds, which need to be repaid by 2007. However, none of the cash will go towards strengthening manager Claudio Ranieri's playing squad.

The bonds are trading for less at the moment so with the cash Chelsea receive they could clear a major part of their debt. If they are able to offload some of their more expensive players and reduce the wage bill then their financial situation would improve further.

"The crucial thing is that it means it does not in any way subordinate Ken Bates," one City analyst said. "It will help restructure the club, which has just produced a not very desirable set of financial results. They were in quite a precarious situation." He added: "Whoever the investor is, he is not doing it for economic reasons."

Chelsea Village produced a disappointing set of financial results last autumn and there has been speculation for some time that the club wanted to sell a large proportion of their shares to make sure that assets, valued at about £100m, were not swallowed up in debts owed to the banks and various bondholders.