Terraloon

You have to take a view as to what is cost effective on a player by player basis. You have to look further than just what a players book value is you have to factor in the cost of the player and that includes wages and nic. Put to one side the contribution the player makes or doesn’t make on the pitch because that’s a whole different debate. Lets say player a) has two years left on his 5 year deal and that player cost £10 million and is on £75k a week or £3.75 million a year. In the current year let’s say you let the player leave on a free. So in the year you save the £3.75 million wages ( plus 13% nic) so circa £4 million savings which spookily enough is the amount that will have to be included come year end in terms of amortisation for the current year and in advance of the last year of his contract ( impairment). Cost neutral this year but does away with £ 4 million squad costs next year. Or say that same players is sold for £2 million( which is only half of the players book value) as opposed to letting him go for nil means in it’s not just a positive for the current year that has to be factored in it’s how the savings going forward can stack up but the sell was less than book value There is something else that’s worth mentioning and that is the directors are duty bound at the end of the accounting year to take a view, an informed one at that, as to the current value of a player against their book value and adjust the numbers accordingly downward( you can’t increase upward) by a mechanism called impairment which adds an extra charge to the accounts but reduces amortisation going forward.

In a way when it comes to using the facility for transfers is clever in that yes there is a charge to LCFc but to partly mistake those costs clubs that buy a player on the never never pay interest so the costs are to a degree offset. So I am broadly neutral on these type of agreements but like you when it comes to the TV / PL monies that is far from a great idea.

Not sure I would agree fully with that. I know quite a few companies ,mostly very small who use factoring for a variety of reasons but often it saves them significant time and resources by not having to chase debt enabling them to concentrate on carrying on doing the day job as it were.

It is as you say going to be brutal. What I believe will be inevitable is that money available for players will need to drop not just by say 10% but more like 75% but in an attempt to mitigate the club will be cutting staff from every department and that will include the commercial team which as a consequence will mean that likely income from hospitality / sponsorship etc will drop like a stone. In addition I suspect that the £2.5 million required as a minimum to maintain Cat 1 academy status will be considered un affordable and so it goes on. A cut here a cut there and that slope gets steeper The average Championship club without Parachute payments has income around £30 million I can’t see how with the costs that LCFc carry that other Championship clubs simply don’t such as two training grounds one of which will be costing I would imagine in excess of £5 million Pa , is affordable, Add to that Business Rates will become more costly over the next couple of years , the increase in the minimum wage and employers nic will hurt massively in areas where there are significant numbers that simply can’t be dispensed with such as stewarding .Well unless you close areas of the ground off that is. What’s the next level of pain up from brutal ?

Following on from the arbitration ruling I am far from sure that any charges made against LCFC will be under the jurisdiction of the PL. I might be 100% wrong but my view is that the club is under the jurisdiction of the EFL and it’s them that would have to charge the club but under the PL rules.

As stated earlier in this thread there isn’t anything that’s been put in the public domain that tells us how much , if anything, of the PL Parachute payments have been drawn down . I have thought long and hard about the possibility that this is just a facility and is there just in case and that really could be the case but the more I try and rationalise all this I come to the conclusion that the extension off the security period extending from Jan 27 to June 27 suggests that either the money due by way of parachute payments up to Jan 27 have or are being drawn down in this season. The PL don’t pay parachute payments in one annual instalment they are paid more regularly ( I believe every couple of months) so simply put LCFC can’t wait for these regular payments a to appear . As you say it’s easier to understand using this facility as a factoring facility but it comes down to this , and yes I though it’s not rocket science, 1) The club are spending far more than it can earn 2) Kicking the can down the road both from a financial and regulatory has reached the point where it can’t be kicked any further and this is a slippery slope that I simply can’t see how the club can navigate

Sorry that’s simply wrong. Interest free loans from owners are still allowed. What has changed is when a club submits its PSR numbers they will include a notional interest number in respect of any loans.

Doesn’t want to might be right, can’t might be another. We can’t know for sure whether or all of the facility has been drawn down but any notes to the 24/25 accounts when published will give us a hint if not a full explanation Irrespective it can’t be viewed as anything else other than concerning

That’s a real possibility but as someone else has pointed out that isn’t certain. What I will add is that irrespective then come the end of next season unless promotion is achieved there won’t be any parachute payments to fund anything

It could be paid back you are right, it might not yet be drawn down again that’s a possibility but there aren’t any staged payments in settlement the sum to settle is paid directly from the PL . These arrangements are nothing like a loan secured against a house

The charge that has now been superseded was till January 27 the latest one moves that January date on till June 27 My guess is that the final payment to PL clubs will be made for 26/7 by the end of June 27 which fits with most clubs accounts year end

It’s not the total payments made that’s counted it’s the two equal shares ( prize money isn’t factored in ) The UK equal share was £29.8 million and the international share was £59.2 million making ££89 million so in 26/7 55% of £89 million is £49.8 million in 26/27 it reduces to £40.05 m One point of note is that the fee that’s going to be charged for all this will reduce the sums that can be drawn by I would guess between 5&10%

Copied from wiki Parachute payments are unique to the English game and currently see clubs relegated from the Premier League receive a percentage of the equally shared element of broadcasting rights each Premier League club receives. This percentage drops progressively over a three-year period – 55% in the first year, 45% in year two and, if the club was in the Premier League for more than one season before relegation, 20% in the third year. (However, if a club is only in the Premier League for one season, it will not receive the 20% share in the third year)

I am pretty sure that as it was only one season in the PL before relegation there isn’t another 20% . The payments are only paid in year one and two

It’s a bit complicated but drawing down money in advance will do nothing to help with PSR/FFP. The income won’t be counted until it’s paid by the PL . What this does is aid cash flow not increase income in 25/6 to the detriment of 26/7

I would suggest that the initial thinking was that the need was only for the 25/26 monies but now there clearly is a need to get extra cash in now. This isn’t an overdraft this is more about drawing down monies now when they should all be about using cash to pay wages etc in 26/27. If it were an overdraft then post 26/27 there would be a possibility of extending but that can’t happen with this sort of finance

A club that is able to plan as opposed to react( planning doesn’t seem to be the situation LCFc find themselves in) will look at the current year and factor in not just the remaining sum to be amortised but take a view over the current year first in that them leaving will deliver a wage saving but the savings moving on are even more beneficial. Often in year one there aren’t savings but in subsequent years there will be. I don’t think the system in itself encourages clubs to reject fees below amortisation I think most clubs can’t see the wood for the trees and kid themselves that players are worth more than the market says and because the accounting bottom is so important very few clubs are prepared ,which they actually are required to do, reassess the value of a player against the balance of the fee that has to be amortised and impair the value or advance the sum to be amortised if you like .Simply because clubs simply can’t increase current year squad costs even though in the long term it’s often advantageous.

Profit I would suggest isn’t perhaps the right word. You are right that in the “ budget “ the total cost would have been factored in so any savings is a reduction in spend which goes back to my point have the EFL set out a business plan which the club have no choice but to reduce spend? The sum being amortised won’t reduce and will have to be factored in so you are looking at what circa 17-18 weeks @£25k which yes is a saving and of course we don’t know if there is a loan fee but love the player or hate him he is a current international who others seem to rate. It seems that going forward the first choice CBs will probably be Okoli and Nelson who between them this season have started 23 games and the cover will be provided by a old man or a player who really isn’t up to it.

I agree but do you think that his wages are close to being matched by Monaco? I doubt it and that’s to a degree is my point that almost certainly the case that the deal that’s now in place isn’t being driven by LCFC I believe/ fear that in the background there is now a business plan enforced by the EFL and that will entail cutting the wage bill meaning any offer will be taken. The acid test will be who, if indeed there is anyone , bought in because even if he is underperforming then he is a member of the squad. If no one comes in that to me will tell us a lot more

There is absolutely no doubt that his displays are way below what you expect particularly when you consider he is so well thought of at International level. My trouble isn’t so much about him going but why now and not in the previous window. I pointed out yesterday that we have no idea what is going on re 25/26 FFP or more to the point what the likely discussions between the EFL and LCFC re being on course to meet FFP for 25/26 but if he isn’t replaced then I will that be a soft signal that 25/26 is a problem and a bigger one at that in that it’s the EFL whwer the club is now a member and they are far more draconian

There are several points I would make around squad quality and yes there are many examples of players either not playing to their potential or certainly not delivering in accord with the wages they are paid but and here’s the but with the very rare exception as the wage bill reduces the reality is that trying to find a gem on a free transfer or on the sort of average wage paid to championship players will inevitably meal that the quality drops. What make LCFC particularly vulnerable is ( and it’s something I keep banging on about ) is the costs the club incurs simply to run the club 1) Business Rates. The stadium and two training grounds aren’t thousands of £s they are millions of £s. 2) Interest payments. When you in effect borrow future income it comes at a cost , a significant one at that, but worse is the PSR implications of owing so much to KP. 3) As I pointed out in another thread the cost of a Cat 1 academy comes at a massive cost and yes academy costs are discounted when it comes FFP/PSR but the cash to run them still has to be found. If that accreditation is lost then there is little to no point LCFC having an academy because the big boys will simply pick off any youngsters that show potential and the geographical area that the club can recruit from reduces dramatically. 4) If you go back to the three major sites I mention at 1 ) they need to be kept warm, maintained, staffed, insured etc etc. My point is that be prepared for the consequences of reducing the sums available and or spent when it comes to players wages, fees paid, coaches, etc particularly when you note that rarely does a Championship player generate decent transfer income.

Another thing I think may impact is that whilst in the accounts we will only see circa 1% charged by KPI for the loans they have made certainly going forward the rule changes following the Man City arbitration win around interest being appropriate for owners loans at a rate which I would imagine would be way in excess of the sum I mention above bear in mind that in 23/24 KPI reduced the sum they charge down from 6%to 1%

That’s right on the face of it but the question re jurisdiction complicates for me that is if the £105m has been exceeded. Would the EFL charge using the PL rules ? As I said the other day the only numbers that are realistically in the public domain are months out of date so the 24/25 so time will tell but there is so little communication coming out we don’t know what the EFL have said to the club and or what plan is being worked to .If at all !

As I have said previously I think it’s going to be incredibly tight for 24/25 and it all depends just how much the wage bill impacted. The basic costs such as business rates, gas electric etc are way too high for a Championship club. I think the fact that the £105 million allowable loss will drop like a stone in 25/26 so I would think there will be a charge. That is unless promotion is achieved. Cough Cough ! You mention 27/28 and yes potentially the wage bill will have dropped significantly but likely is that income will likewise have dropped to significantly to a point where the costs I mention above alone will be circa 50% of the clubs total income. Another concern would be that to retain Category 1 academy status the club will have to be investing over £2.5 million Pa into the academy. Although it’s tempting there are far more numbers and factors that need to be added in when it comes to assessing how player trading impacts. When you factor in things like signing on fees that are still to be paid, sums from the original fees that need still to be amortised, sell on clauses etc etc then . My guesstimate for 25/26 for instance is that the profit from players sold will be way under £30m yes there will be a marginal saving in terms of global amortisation but the fact that all the staged payments due for players sold has been advanced means that circa 10% of those fees will ultimately disappear in interest and charges

Would those factors have come into play if it had been a PL game against say Arsenal and LCFC were say 19th in the table?