Blatter secures Fifa's survival with huge loan

The deftest of juggles from a veteran schemer allowed Sepp Blatter, Fifa's president, to announce yesterday that football's world governing body was £55m in the black at the end of the accounting period 1999-2002.

"Fifa has proved that it can weather the stormiest circumstances," Blatter said during a two-hour press conference that detailed a remarkable turnaround in his organisation's fortunes.

As recently as May last year, Fifa's finance director, Urs Linzi, now the chief executive, had been predicting a £120m deficit for the period. That was in the wake of the insolvencies which afflicted Fifa's marketing partners, ISL-ISMM and the Kirch Group.

"Aside from the two world wars in the last century, Fifa has just experienced the most difficult years in its history," Blatter said. "We took immediate precautions entirely on our own initiative to counteract the consequences. Now, Fifa is financially more stable than ever."

A Fifa spokesman said yesterday's figures "can be attributed to dynamic crisis management in dealing with the bankruptcy of both partners". Specifically, this has seen cost-cutting within the organisation and the establishment of Fifa's own marketing body, meaning all revenues remain in-house and no third-party commission costs are paid.

The most significant reason for the £55m surplus, however, is that Fifa borrowed 690m Swiss francs (£329m) in a securatisation deal in November 2001. The loan was secured against future earnings from the 2002 and 2006 World Cups. The £329m cash inflow was counted as part of Fifa's £1.291bn income for the 1999-2002 period. Fifa's expenditure in the period was £1.236bn, hence the £55m surplus in yesterday's figures.

A Fifa statement said that the organisation has £72m in equity and £106m in special reserves. Evidently some of this money will help finance the £329m loan. The repayment terms have not been made public.

Blatter said the reserves might be needed to help with the 2010 World Cup, which is set to take place in Africa for the first time. "It is not an easy place and if the world economic situation does not improve then we will have to help the African organisers for this World Cup," he said.

Fifa is expecting revenue to fall to around £970m during the current four-year cycle, which began after last year's World Cup and ends after the 2006 event in Germany. The predicted level is approximately what it would have been in 1999-2002 without the effects of the loan.

It also believes there will be another surplus to report because the 2006 World Cup will be cheaper to organise than last year's event.