Jump to content
Sign in to follow this  
hackneyfox

This loan

Recommended Posts

No expert on the matter but looking at the Full Accounts published on 6th March (jargon aside) they've opted to secure a loan but will pay up themselves if needs be. However to operate at the standard that we do we receive investments and loans.

 

image.png.5d46dca6e13ffc9c6fededc8e066ec52.png

 

  • Thanks 1

Share this post


Link to post
Share on other sites
16 hours ago, shade said:

makes sense with interest rates like they are, it’s free money, i myself recently took out a £100 million mortgage for my new house, everyone’s doing it.

Cheapskate.

Share this post


Link to post
Share on other sites
44 minutes ago, Rusko187 said:

No expert on the matter but looking at the Full Accounts published on 6th March (jargon aside) they've opted to secure a loan but will pay up themselves if needs be. However to operate at the standard that we do we receive investments and loans.

 

image.png.5d46dca6e13ffc9c6fededc8e066ec52.png

 

So basically we are a bit broke, and need money from investors and loans to help?

 

Share this post


Link to post
Share on other sites
6 minutes ago, UniFox21 said:

So basically we are a bit broke, and need money from investors and loans to help?

Not really as we are investing lots of money into construction and the playing squad. That reads like the holding company are prepared to secure the debts but that they can't inject money directly due to the stupid FFP regulations. Stuff like this goes to show that they have nothing to do with stopping clubs going bankrupt and only to do with the richest clubs ensuring that they are untouchable.

  • Thanks 2

Share this post


Link to post
Share on other sites
8 minutes ago, mancunianfox said:

Not really as we are investing lots of money into construction and the playing squad. That reads like the holding company are prepared to secure the debts but that they can't inject money directly due to the stupid FFP regulations. Stuff like this goes to show that they have nothing to do with stopping clubs going bankrupt and only to do with the richest clubs ensuring that they are untouchable.

Construction costs don't count towards FFP though

Share this post


Link to post
Share on other sites
2 minutes ago, mancunianfox said:

Not really as we are investing lots of money into construction and the playing squad. That reads like the holding company are prepared to secure the debts but that they can't inject money directly due to the stupid FFP regulations. Stuff like this goes to show that they have nothing to do with stopping clubs going bankrupt and only to do with the richest clubs ensuring that they are untouchable.

Agreed, first paragraph even states this: "The net current liability position has arisen due capital expenditure relating to the construction of the training ground and initial design and feasibility work on the stadium and investment in the playing squad"

 

Owners have looked at short, medium and long term capital needed and with significant investment needed over next 18 months (for training ground and stadium redevelopment) they've secured the loan against future television profits. Should we encounter any issues that mean we cannot repay the loan it pretty much says the owners will cover this and have their assurances that it would not be recalled in the foreseeable future and not less than 12 months from the date of approval.

 

What we've essentially done is allowed the redevelopment of our infrastructure without having a significant impact on our transfer dealings. Otherwise had we not, you could make a case that we run the risk of significant breach of FFP and wouldn't be able to sign anyone.

 

Incidentally I didn't realise we had paid a £3.1m fine for breaches in FFP back in 2013/14.

  • Thanks 1

Share this post


Link to post
Share on other sites
8 minutes ago, LittlethorpeFox said:

Basically the misunderstanding here comes from people seeing the word "debt" as a negative thing. It certainly can be for your personal finances, but in business things are very, very different. 

 

The training Ground is a long term project and if the club were to use cash generated from standard ops (i.e. day to day premier league revenue etc....) we would be at a disadvantage to our competitors, i.e. the other 19 teams in the league not building a stadium. It would be likely that the lack of investment in players (from spending all our organically generated cash on the training ground) could lead to relegation and all the problems that brings.

 

Soo.... you look at the investment being made... a training ground. This should be funded by a debt instrument of a similar life span to the construction project. I.e. long term assets, should be funded by long term debt  (or equity raises, but we are not going down that route clearly).  The long term plan is that interest should be affordable and cash flows from organic activity (less interest) will still allow us to compete.

 

Cash itself in business is only important to facilitate healthy working capital (i.e. paying your staff / suppliers), holding large pools of cash is not a good use of cash, and no business is valued by its cash balance - business is valued on potential earning power! So do not think that if a business has low cash balances it is skint, its probably being, very efficiently run. Again don't judge a businesses finances how you would judge your personal finances.

 

The finances of our club are very well managed. I am a chartered accountant and have spent a lot of time studying the clubs finances for various reasons. Interested to hear if people are concerned about anything re the clubs finances, and why?

Absolute 100% bang on post, and I highlighted this part as it's my understanding too of how a business should be run. 

Best not to sit on millions of cash but instead invest and use for growth in the business (which is what we appear to be doing).

  • Like 2

Share this post


Link to post
Share on other sites

Nothing to look at here. Our financial shape is very healthy indeed even with the inflated wages, training ground costs and forecasted stadium expansion.

Share this post


Link to post
Share on other sites
13 minutes ago, Rusko187 said:

Absolute 100% bang on post, and I highlighted this part as it's my understanding too of how a business should be run. 

Best not to sit on millions of cash but instead invest and use for growth in the business (which is what we appear to be doing).

Absolutely. when running my own business it took me a long while to understand this as one tends to use the only model we know, ie our own personal finances when setting a benchmark for a new enterprise.  It was only once I realised that whilst cash flow is key, a business cannot grow and thrive without investment, and money sitting in an account for a rainy day is a dead asset that is not working for the business that my business actually started to grow to where I wanted it to be.  There are many huge businesses out there that are actually running on daily overdrafts with multi million pound loans that have assets in the billions. It is this asset value that lets them borrow huge sums at favourable rates.  The only problem arises if profits dip and the interest payments cannot be met (Carillion comes to mind).  This is not likely to be an issue with LCFC as the loans are effectively being guaranteed by King Power as far as I can read into the statement.

  • Like 1
  • Thanks 1

Share this post


Link to post
Share on other sites
1 hour ago, brucey said:

Construction costs don't count towards FFP though

It’s more liquid cash / cash flow required for construction though 

Share this post


Link to post
Share on other sites
2 hours ago, LittlethorpeFox said:

Basically the misunderstanding here comes from people seeing the word "debt" as a negative thing. It certainly can be for your personal finances, but in business things are very, very different. 

 

The training Ground is a long term project and if the club were to use cash generated from standard ops (i.e. day to day premier league revenue etc....) we would be at a disadvantage to our competitors, i.e. the other 19 teams in the league not building a stadium. It would be likely that the lack of investment in players (from spending all our organically generated cash on the training ground) could lead to relegation and all the problems that brings.

 

Soo.... you look at the investment being made... a training ground. This should be funded by a debt instrument of a similar life span to the construction project. I.e. long term assets, should be funded by long term debt  (or equity raises, but we are not going down that route clearly).  The long term plan is that interest should be affordable and cash flows from organic activity (less interest) will still allow us to compete.

 

Cash itself in business is only important to facilitate healthy working capital (i.e. paying your staff / suppliers), holding large pools of cash is not a good use of cash, and no business is valued by its cash balance - business is valued on potential earning power! So do not think that if a business has low cash balances it is skint, its probably being, very efficiently run. Again don't judge a businesses finances how you would judge your personal finances.

 

The finances of our club are very well managed. I am a chartered accountant and have spent a lot of time studying the clubs finances for various reasons. Interested to hear if people are concerned about anything re the clubs finances, and why?

Good post. Thanks.

 

However, having cashed in (in january) our expected revenue for now, surely we CREATED a cash fund....the opposite to what a business might want.

 

Surely the best (and only) use of loans is to biy/build/make something where no money exists to buy/build/create it

 

Edited to add; the only logical purpose I can imagine is that we have artificially boosted our annual turnover by bringing forward the 2019/20 TV money and in doing so, have creatively fiddled the FFP rules 

Edited by Paninistickers

Share this post


Link to post
Share on other sites
34 minutes ago, Paninistickers said:

Good post. Thanks.

 

However, having cashed in (in january) our expected revenue for now, surely we CREATED a cash fund....the opposite to what a business might want.

 

Surely the best (and only) use of loans is to biy/build/make something where no money exists to buy/build/create it

 

Edited to add; the only logical purpose I can imagine is that we have artificially boosted our annual turnover by bringing forward the 2019/20 TV money and in doing so, have creatively fiddled the FFP rules 

Not sure what you mean about cashing in January?

 

You can't artificially boost annual transfer by using it as a guarantee against a loan. The revenue for 2019/20 remains as a 2019/20 revenue amount, when the cash is received for it (by way of direct payment from EPL or indirectly through the loan) is irrelevant. That decision will have been based on bringing the cash flow forward to fund player transfers, and not FFP rules.  Our biggest issue regarding FFP is wage bill restrictions not revenue. Wages they can only grow by certain amounts year on year.

Edited by LittlethorpeFox

Share this post


Link to post
Share on other sites
41 minutes ago, LittlethorpeFox said:

Not sure what you mean about cashing in January?

 

You can't artificially boost annual transfer by using it as a guarantee against a loan. The revenue for 2019/20 remains as a 2019/20 revenue amount, when the cash is received for it (by way of direct payment from EPL or indirectly through the loan) is irrelevant. That decision will have been based on bringing the cash flow forward to fund player transfers, and not FFP rules.  Our biggest issue regarding FFP is wage bill restrictions not revenue. Wages they can only grow by certain amounts year on year.

We took the loan out against this summer's money in January of this year. So we've already had last season  the TV money for this season. 

 

Our 2019/20 payment from the PL goes straight to the Macquarie Bank - not to us.

 

As I understand it (I don't understand a lot about business finance) the recent documents show that the bank have lodged a charge against us - meaning they get first dibs (or second dibs, if there are other charges prior) on any future sale (or liquidation) of the club until the loan is paid back in full.

 

I'll happily be corrected/uodated. But I'm, frankly, baffled at why we needed the Mahrez money and subsequently the 2019/20 TV money so urgently

Share this post


Link to post
Share on other sites
8 hours ago, mancunianfox said:

Not really as we are investing lots of money into construction and the playing squad. That reads like the holding company are prepared to secure the debts but that they can't inject money directly due to the stupid FFP regulations. Stuff like this goes to show that they have nothing to do with stopping clubs going bankrupt and only to do with the richest clubs ensuring that they are untouchable.

This needs to be corrected again.

 

FFP restricts spending vs income.

 

Neither cash injection or a loan counts as income so as such they both the same in regards to FFP.

 

So the loan wont be for FFP reasons, its most likely for cash flow reasons.  The club doesnt have enough cash for its current obligations.

 

If loans bypassed FFP then FFP itself would be useless, as clubs could just borrow, borrow, borrow some more and go bankrupt without breaching FFP.

 

If there is any difference of treatment it would also be the other way round, as for for club survivability, cash injections from owners are obviously safer than external loans.  In the championship vichai changed a big chunk of debt to equity for that very reason to get passed on the FFP regulations.

Edited by Chrysalis

Share this post


Link to post
Share on other sites

Basically we have to stay up next season and the season after that, as a bare minimum. Getting on TV more and cup runs will help but aren't essential.

Share this post


Link to post
Share on other sites
20 hours ago, LittlethorpeFox said:

Basically the misunderstanding here comes from people seeing the word "debt" as a negative thing. It certainly can be for your personal finances, but in business things are very, very different. 

 

The training Ground is a long term project and if the club were to use cash generated from standard ops (i.e. day to day premier league revenue etc....) we would be at a disadvantage to our competitors, i.e. the other 19 teams in the league not building a stadium. It would be likely that the lack of investment in players (from spending all our organically generated cash on the training ground) could lead to relegation and all the problems that brings.

 

Soo.... you look at the investment being made... a training ground. This should be funded by a debt instrument of a similar life span to the construction project. I.e. long term assets, should be funded by long term debt  (or equity raises, but we are not going down that route clearly).  The long term plan is that interest should be affordable and cash flows from organic activity (less interest) will still allow us to compete.

 

Cash itself in business is only important to facilitate healthy working capital (i.e. paying your staff / suppliers), holding large pools of cash is not a good use of cash, and no business is valued by its cash balance - business is valued on potential earning power! So do not think that if a business has low cash balances it is skint, its probably being, very efficiently run. Again don't judge a businesses finances how you would judge your personal finances.

 

The finances of our club are very well managed. I am a chartered accountant and have spent a lot of time studying the clubs finances for various reasons. Interested to hear if people are concerned about anything re the clubs finances, and why?

giphy.gif

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

×
×
  • Create New...