Club Finances - new charge registered against club (Macquaire Bank Limited)

[DJ Barry Hammond]

There's been a fair amount of debate about the state of the clubs finances recently and having had a look at the clubs Companies House registrations there's potentially more fuel for the fire for this debate, suggesting a new topic might be useful.

 

Leicester City Football Club, Companies House Page: https://beta.companieshouse.gov.uk/company/04593477/filing-history
 

What is shown within the filings on Companies House is that a new charge has been registered to Macquarie Bank Limited in August.

 

The documentation doesn't explicitly say how much the loan facility being granted to the club is, but it would appear that in return the bank receive the clubs future Premier League payments.

 

Now this type of agreement and indeed a link up with Macquaire is not unusual for the club it seems.

 

The bank is mentioned in the clubs latest accounts (y/e May 2019) as having provided funding of £45 million, replacing a previous facility worth up to £38 million and a Guardian piece (link below) on the Australian bank in February 2020 suggested the club had entered into at least six separate agreements since then, one of which was related to the Mahrez transfer. 
 

The Guardian, Why Premier League clubs are turning to an Australian bank in big numbers: https://www.theguardian.com/football/2020/feb/11/premier-league-clubs-australian-bank-macquarie-loans-tv-earnings

 

This is further backed up by the clubs previous Companies House filings of charges to Macquaire Bank Limited. 

And of course the idea of taking up front funding for future anticipated receipts (be in transfer fees, TV money or other future income) is not necessarily a bad thing for a club looking to progress, given it means it can invest those proceeds immediately rather than wait for monies to come in over a number of years. 

 

But perhaps its the number and rate of the agreements in quick succession that may be an area of concern for some, alongside the obvious issue that our wage to turnover ratio appears to be ever increasing (83.8% for y/e 2019 compared to 74.9% the year previously) and worryingly high. 

 

To put that figure into context, only one club in the Premier League was reported to have a higher turnover ratio over that period - this being Everton at 85%.

 

Compare that figure to the teams we're trying to usurp within the top six and that figure just goes to show challenge we face as a club in terms of breaking their monopoly.

 

All of Liverpool (58%), Manchester United (53%), Manchester City (59%) and Arsenal (59%) had significantly lower ratios (figures in brackets).

 

Chelsea were the highest of the top six was still only at 64%.

 

But whilst their spending this summer is likely to see this figure increase, with the commercial infrastructure the club has and the security of Champions League football, it would be a surprise to see that number surpass our own. 

 

Remarkably, Spurs have the lowest ratio of all Premier League teams at just 38%!

 

The Sun, STICKY TOFFEES - Premier League wages-to-turnover ratios revealed with Everton on alarming 85 per cent and Man Utd in a healthy position (sorry, don't like linking The Sun, but they're article displayed this issue simply and easily): https://www.thesun.co.uk/sport/football/11630464/man-utd-everton-pl-wages-turnover-ratio/

 

Given all of this information together, this may allude as to why the club has not been as active in the transfer market as many had hoped over the summer. 

 

With doubt over the amount of TV monies and ticketing sales to be received due to COVID, a significant loss reported in the last accounts and of course our eventual fate of falling out of the Champions League places - costing the club an opportunity to receive a further loan based on this future income - perhaps the scope to splash the cash this summer just wasn't there? 

 

What this also tells us that rather than the club sitting on a pile of cash from our high profile sales of the last few seasons - it has decided to drawn down upon those monies immediately and use them to service the contracts of it's playing assets still at the club. 

 

So food for thought - and of course, an area for further discussion...  

 

 

 

 

 

[jonthefox]

I can only liken it to invoice factoring which is very common in business. I don't think there's too much to worry over. 

[MPH]

I think this was mentioned before... I think the loan money for the training ground from that bank was secured against our future prem payments.

[Freeman's Wharfer]

Is this not just a way to free up the Chilwell money now rather than receiving it over the next few years?

 

A few clubs have also done this type of thing with the loan secured to the amount of what parachute payments would be with relegation. So it’s supposedly low risk: either you don’t get relegated and have the revenue by staying in the Premier League to pay the loan or you get relegated and pay it from your parachute payments.

 

When we’re supposedly sticking in €30m bids for Fofana, there’s clearly no issue with having the money. In my opinion it’s more likely down to having targeted players we could get with CL monies who now won’t come and not having done the contingency work. As well as a pretty amateurish off pitch operation not used to purchasing players in the price bracket we’re shopping in (where good contacts with the super agents are just as important as having the money).

 

 

[Ric Flair]

I'd say this is due to selling Chilwell and freeing up the money but a) it has been reported we were receiving £50m up front with further instalments and add ons and b) even if its not up front as most transfers aren't then we simply do the same when we sign players and the £30m we spend on a player is spread over a few years. So this loan is probably a culmination of many things as are the others we are taking out. 

[UHDrive]

We have nigh on a dozen players set to leave over the next 2 years so I'm sure that they have factored in those figures which will decrease the wage percentage rises and instead reduce them.

[DJ Barry Hammond]

1 minute ago, UHDrive said:

We have nigh on a dozen players set to leave over the next 2 years so I'm sure that they have factored in those figures which will decrease the wage percentage rises and instead reduce them.

That assumes the players do leave and the club doesn't negotiate new contracts. And even if those players do leave, chances are they'd need to be replaced in some form.

[Dahnsouff]

Surely this is just early recognition of part of the Chilwell fee? The part which was not upfront at least

[UHDrive]

3 minutes ago, DJ Barry Hammond said:

That assumes the players do leave and the club doesn't negotiate new contracts. And even if those players do leave, chances are they'd need to be replaced in some form.

The likes of Slimani/Silva/Ghezhal/Diabete/James are not being utilized anyway and it is those players that I believe were a mistakes post PL win season. Once they have gone with the likes of Slimani and Silva on 80k per week and James on 45k per week etc then you can considerably add quality to the team with better signings (granted that they don't end up like slim) and still have a net gain.

[Chocolate Teapot]

Time will tell but it feels like we've been affected a lot worse than other clubs - Time will tell i guess.

[Fox in the North]

Got to remember that FFP rules have been relaxed too, we shouldn’t have to worry about compliance too much this year.

[Jackirius]

Bit of talk on it here 

 

[st albans fox]

As a club, we are run superbly under Susan whelen’s stewardship but we are suffering big time without outside investment 

from the owners. We aren’t alone here but there is a perception that this isn’t the case.  King power should probably be paying an additional 15/20m/annum which would bring down that wages/earnings ratio a bit.  And that’s just at fair value without any shenanigans to add extra monies and remain within FFP.   I’m ok with the owners declaring that they wish the club to be self sufficient but surely king power should be paying a fair price for the exposure ??  I realise that some will think this comment to be unacceptable as any criticism of the ownership here is pretty rare but the current situation lays bare the issue.  
 

[Chrysalis]

2 hours ago, DJ Barry Hammond said:

There's been a fair amount of debate about the state of the clubs finances recently and having had a look at the clubs Companies House registrations there's potentially more fuel for the fire for this debate, suggesting a new topic might be useful.

 

<snip>

 

So food for thought - and of course, an area for further discussion...  

 

 

 

 

 

excellent post, not sure why it had no likes.  It is very fact driven and a sensible opinion posted.

Edited 12 September 2020 by Chrysalis
trimmed quote

[Chrysalis]

2 hours ago, jonthefox said:

I can only liken it to invoice factoring which is very common in business. I don't think there's too much to worry over. 

Not in terms of immediate danger, but why would a club do invoice factoring if it had lumps of cash sitting in the bank that some people think we have.  I think the reason the practice may be common practice is we also know its routine for many business to be barely viable, we often see businesses liquidate just because they lose a month worth of revenue or something.  Just because many do it, it doesnt make it of no concern.

 

The magic question is could the club still do its day to day business if the loan facility ever got refused, or would it then be immediate need of cash injection, if the answer is it would still be able to run in its normal matter, then I agree with you.  If not I think its a concern.  As an example I take advantage of 60 day interest free on credit cards, just to delay expenditures by a month on my own balance, but I dont need to do it, I could pay for the same things "now" if I needed to.  So it comes down to the reason the club is doing it, also the wage to turnover ratio is unhealthy no matter how you look at it.

Edited 12 September 2020 by Chrysalis

[Clever Fox]

There's no doubt Covid is having a huge financial effect on the game in  many different ways. Missing out on Euro Championship is proving costly.

Having too many balls in the air at once is always dangerous, your likely to drop one. Maybe we need to just sit tight for a few seasons until we get the finances back into place.

 

Looking at that graph they KP should be chipping in more like 8 to 10 million for the exposure. Similar to Everton and West Ham.

 

Then again they are probably underwriting all of the Loans. 

[StanSP]

 

 

[Jon the Hat]

The charges themselves are not a concern, there is probably one setup each time we sell a player, and potentially each time we buy one as well.  The training ground one is effectively a mortgage.

[Lako42]

KP either need to drop the sponsorship of the shirt and Stadium or pay it's actual value.

[Babylon]

On 12/09/2020 at 15:26, DJ Barry Hammond said:

There's been a fair amount of debate about the state of the clubs finances recently and having had a look at the clubs Companies House registrations there's potentially more fuel for the fire for this debate, suggesting a new topic might be useful.

 

Leicester City Football Club, Companies House Page: https://beta.companieshouse.gov.uk/company/04593477/filing-history
 

What is shown within the filings on Companies House is that a new charge has been registered to Macquarie Bank Limited in August.

 

The documentation doesn't explicitly say how much the loan facility being granted to the club is, but it would appear that in return the bank receive the clubs future Premier League payments.

 

Now this type of agreement and indeed a link up with Macquaire is not unusual for the club it seems.

 

The bank is mentioned in the clubs latest accounts (y/e May 2019) as having provided funding of £45 million, replacing a previous facility worth up to £38 million and a Guardian piece (link below) on the Australian bank in February 2020 suggested the club had entered into at least six separate agreements since then, one of which was related to the Mahrez transfer. 
 

The Guardian, Why Premier League clubs are turning to an Australian bank in big numbers: https://www.theguardian.com/football/2020/feb/11/premier-league-clubs-australian-bank-macquarie-loans-tv-earnings

 

This is further backed up by the clubs previous Companies House filings of charges to Macquaire Bank Limited. 

And of course the idea of taking up front funding for future anticipated receipts (be in transfer fees, TV money or other future income) is not necessarily a bad thing for a club looking to progress, given it means it can invest those proceeds immediately rather than wait for monies to come in over a number of years. 

 

But perhaps its the number and rate of the agreements in quick succession that may be an area of concern for some, alongside the obvious issue that our wage to turnover ratio appears to be ever increasing (83.8% for y/e 2019 compared to 74.9% the year previously) and worryingly high. 

 

To put that figure into context, only one club in the Premier League was reported to have a higher turnover ratio over that period - this being Everton at 85%.

 

Compare that figure to the teams we're trying to usurp within the top six and that figure just goes to show challenge we face as a club in terms of breaking their monopoly.

 

All of Liverpool (58%), Manchester United (53%), Manchester City (59%) and Arsenal (59%) had significantly lower ratios (figures in brackets).

 

Chelsea were the highest of the top six was still only at 64%.

 

But whilst their spending this summer is likely to see this figure increase, with the commercial infrastructure the club has and the security of Champions League football, it would be a surprise to see that number surpass our own. 

 

Remarkably, Spurs have the lowest ratio of all Premier League teams at just 38%!

 

The Sun, STICKY TOFFEES - Premier League wages-to-turnover ratios revealed with Everton on alarming 85 per cent and Man Utd in a healthy position (sorry, don't like linking The Sun, but they're article displayed this issue simply and easily): https://www.thesun.co.uk/sport/football/11630464/man-utd-everton-pl-wages-turnover-ratio/

 

Given all of this information together, this may allude as to why the club has not been as active in the transfer market as many had hoped over the summer. 

 

With doubt over the amount of TV monies and ticketing sales to be received due to COVID, a significant loss reported in the last accounts and of course our eventual fate of falling out of the Champions League places - costing the club an opportunity to receive a further loan based on this future income - perhaps the scope to splash the cash this summer just wasn't there? 

 

What this also tells us that rather than the club sitting on a pile of cash from our high profile sales of the last few seasons - it has decided to drawn down upon those monies immediately and use them to service the contracts of it's playing assets still at the club. 

 

So food for thought - and of course, an area for further discussion...  

 

 

 

 

 

Without a lot of delving it’s hard to know which of the charges are still relevant. For example they set one up for the funding of the training ground, but that was then superseded by the loan from Kingpower.

[Babylon]

25 minutes ago, Lako42 said:

KP either need to drop the sponsorship of the shirt and Stadium or pay it's actual value.

They don’t need to do anything. They could pay nothing, they own the club.

 

If it’s needed then they know the avenue is there.

[Les-TA-Jon]

3 hours ago, StanSP said:

 

 

Lifting some more detail from that Tweet, goes to show what an incredible job we are doing by trying to become a top 10/8/6 side. And shows what a massive overachievement last season was, considering the resources of our competitors. 

 

Also shows how the LCFC business model has changed in recent years. In the early days the owners pumped tons of money in for clearing debt, buying the stadium and players. But not anymore. 

 

 

 

 

 

[sacreblueits442]

2 hours ago, Lako42 said:

KP either need to drop the sponsorship of the shirt and Stadium or pay it's actual value.

...likely the asking prices is I suspect, what they are paying, is what they consider to be it's worth!!!

  Any inflation of the sponsor ship fee would be taking us down the route of Manchester City, looking to circumnavigate FFP.

  It was agreed we were borrowing against future revenue from league positions for the training ground and stadium expansion.The relaxation of FFP does help in this instance but that ratio is far too high and will be reduced in time when we are no longer investing in infrastructure.

 Rodgers spoke about "clarity" in his briefings and our present financials might have been what he was alluding to. Knowing how much money is available to meet the need to bring in the players that he wants, or going for alternative options.

[Costock_Fox]

On 12/09/2020 at 16:00, DJ Barry Hammond said:

That assumes the players do leave and the club doesn't negotiate new contracts. And even if those players do leave, chances are they'd need to be replaced in some form.

Replacements for Silva, Slimani, Ghezzal, Diabate and James? 

[Out Foxed]

has there been any figures regarding the parimatch sponsorship