IF ANYONE thought that football could not get any more crazy, then Ivan Gazidis, chief executive of Arsenal, the north London team, has bad news.

Some clubs do not seem to have noticed a recession. Real Madrid has spent the best part of £150m on two players, Cristiano Ronaldo and Kaka. Others, such as Manchester’s two sides, are linked daily with players likely to cost tens of millions.

At Arsenal, where Gazidis took charge in January after helping to run Major League Soccer (MLS) in the US for 14 years, the club does not have the luxury of being able to lavish such sums. The chief executive warns, however, that while transfer fees have reached stellar levels, player wages are also likely to leap.

“There’s probably potential for upward movement in player salaries at the very highest end,” he said. “Transfer fees don’t seem to correlate with player salaries. The amount of compensation being paid in transfer fees seems high compared with player salaries, suggesting there’s room for growth for those world superstars.”

Arsenal has tended to shun mega-deals, concentrating on developing young talent it can later sell, often at a massive profit. In part, this has been brought about by necessity. A move to a new stadium three years ago left it with about £350m of debt and while few doubt the business advantages of switching to a facility with 50% more seats, many supporters think the club is hamstrung by its refusal to compete with the likes of Manchester United for top talent.

Gazidis, who was born in South Africa and grew up in England, has to walk this increasingly delicate tightrope, pleasing banks and fans.

Debt has become a big talking point in the sport. Liverpool is facing a refinancing and the Glazer family took much abuse from Manchester United fans for loading the club with debt to finance their 2005 takeover.

Gazidis is wary of branding debt a negative, and is part of a European working party looking into it. “Debt in itself is not bad. There’s some merit in looking at ways you can ensure clubs are not spending beyond their means and not creating financial instability, not only for themselves, but others around them.”

While it has borrowed to build a new stadium, Arsenal’s board insists there are funds for transfers, but challenged on how much money is in the kitty, Gazidis said: “There’s a natural tendency to want to characterise these things in black and white. The truth is, there’s a large area of grey. We neither have no money nor unlimited money. We have a budget that’s set by the amount of net revenues generated.

“We don’t take money out of the club. It could be argued that the club could generate more revenue and that’s something we will spend more time looking at. It’s key that our business model is sustainable.”

How Arsenal grows its turnover is not yet clear. However, the question of whether the club should raise fresh equity is central to a simmering row between two disparate sets of shareholders.

Arsenal’s existing strategy is represented by long-term director and shareholder Danny Fiszman and fellow board member Stan Kroenke, the American sports magnate who recently emerged as the biggest investor with a 28% stake.

Urging Arsenal to raise money is the club’s next largest shareholder, Red & White Holdings, an investment vehicle headed by the Uzbeki multi-millionaire Alisher Usmanov. It wants a rights issue to refinance the debt and free up cash to spend on players, a subject to be debated at an Arsenal board meeting this week.

Gazidis is coy on the subject: “We are open-minded about considering a capital-raising exercise but have to look at that responsibly with a view to its long-term consequences.” He declines to elaborate but what is likely to guide the board’s thinking is whether a capital raising (said to be more than £85m) would really serve the club. About £240m of the club’s borrowing is long-term debt taken on to finance the new stadium, and the benefits of early repayment are open to debate.

The remainder, about £120m, was taken on to pay for redevelopment of Arsenal’s previous home, converted into flats, and is due to be repaid by next April. Gazidis said the club is in talks with its banks about delaying the repayment date until the property market recovers and the bulk of the 650 flats can be sold.

Aside from repaying debt, the alternative is to use the money to buy players but the board is said to be wary of lavishing big sums on players who might not be any better than those already at the club.

That caution is shared by the Arsenal Supporters’ Trust, representing small shareholders. A trust spokesman said: “We are against a rights issue if it means a dilution in small shareholders’ holdings or money being frittered away chasing after Real Madrid’s transfer policy. However, we would urge Gazidis and all the major shareholders to work together and study this issue carefully. A capital injection that was ownership-neutral and enabled the current debt to be paid down would be of great benefit and enable the manager to have greater strength in the transfer market.”

Asked whether the club would consider offering Red & White board representation – as a 25% shareholder it is conspicuous by its absence from the nerve centre – Gazidis strains for a diplomatic response.

“That is a question the board has been prepared to consider.” But it had not reached a conclusion about its future composition, he added.

Gazidis also has to deal with the fallout from the collapse of Setanta, broadcaster of Arsenal TV. Although that remains on air, the club must work out a long-term resolution. It might be the off-season but it promises to be a busy summer for Gazidis.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive