Implications of relegation to league 1 (Mods can we condense all league 1 threads into one)

[Qwerty]

3 hours ago, Claudio Fannieri said:

Have you seen the recent accounts, the last 3 years published accounts we lost £200m, this season we ‘moved’ the staff christmas payment back to the 31st December. 
 

We are on our knees financially and another significant reduction in revenue will be catastrophic for the club. 
 

There will be widespread job losses at the club. Really good people who represent the club with integrity and pride, losing their jobs in what is already a challenging and difficult financial and economic climate. 
 

The rules are we can spend 60% of our revenue on playing squad, we already have the most inflated wage bill in the championship. Plus when you consider amortisation etc we are well and truly goosed. 
 

There will have to be a fire sale to raise any kind of funds which will mean the better saleable assets going for a lot less than market value and if we want rid of some of the higher earning dross then we will probably end up taking a sizeable hit to get them off the books. 
 

The future and very existence of the club is looking very very bleak if we are relegated, make no mistake. 

My understanding is that teams in league 1 can spend 60% of their money on players, but that the money doesn’t have to be generated by club turnover.  It can come from the owner, unlike with PSR.  That’s how Wrexham got to the championship.  Rich owners pumped their own money in, which is permitted in league 1.  So Top (or whoever he sells to) can put his own cash in if he wants to.  I think that’s correct anyway. 

[Qwerty]

11 minutes ago, Qwerty said:

My understanding is that teams in league 1 can spend 60% of their money on players, but that the money doesn’t have to be generated by club turnover.  It can come from the owner, unlike with PSR.  That’s how Wrexham got to the championship.  Rich owners pumped their own money in, which is permitted in league 1.  So Top (or whoever he sells to) can put his own cash in if he wants to.  I think that’s correct anyway. 

Quoting myself - I’ve been reading about league 1 rules.  Essentially owners can put in as much of their own money as they like, unlike with PSR, where the resources of a club are meant to be generated by the club.  But only 60% of that “equity injection” can be spent on players, and presumably the rest can be spent on back room staff, facilities etc.  I believe it may be 75% for newly relegated teams.  

I’d have thought that we’d be a more attractive prospect for a rich potential owner than many other league 1 teams.  Big stadium, fancy training ground, large fan base, recent top flight history.   
 

It’s all relative.  As a club that won the PL and FA cup in the last 10 years, we’re now an absolute shambles.  But compared to long-standing league 1 teams, I think we’d represent a good opportunity for a rich new owner. 

[Pliskin]

38 minutes ago, when_you're_smiling said:

I might be wrong but I imagine it’s negligible and I don’t think it matters in Daka’s case. He won’t be sold anyway as he’s one of those out of contract. So he’ll disappear into the ether and we won’t have to pay the wages anymore. The likes of Skipp and those on longer contracts would, you’d like to think, have wage decrease written in for all relegations. Not just for the Prem. 

 

The numbers are greater partly because of inflation. It was a £14m loss when we went down to League One last time and, again, there’s more income this time around.

I see. 
 

They are yes, but, at the moment the income is definitely surpassed by the outgoings, is we’re losing £40m a year just on daily running, then there’s bound to be much greater losses. And it’s not guarantee that we love everyone on we need too! 

[Claudio Fannieri]

One thing is for sure the commercial department had better have a cunning plan for next season because if we do get relegated you can wave goodbye to any remaining tourist fans/daytrippers. 
 

You are going to have to rely on the good old legacy fans, you know the ones you have been treating with distain these last few seasons with lame kits, obscure front of shirt sponsorships, the farce with season tickets/mobile ticketing and slowly eroding any visible reference to the club prior to King Power. 
 

💩 is about to get real for the club, the revenue streams that have become relied upon and taken for granted will now run dry,. 
 

The club has to get creative and really focus on securing sponsors and partners that resonate with the legacy fanbase, kits that excite the fans and pricing that encourages fans to come to the ground and back the club. External lucrative deals with far east betting and crypto companies won’t want a bar of league one or bottom end championship. 
 

When Susan Whelan left the club I reached out to offer support to the club as a business transformation and commercial consultant, with a view to sharing a number of innovative initiatives and proposals to help the club move forward as a sustainable business and to reconnect with its fanbase. As yet my offer is yet to be acknowledged or replied to by the club which is really frustrating. 

[davieG]

17 hours ago, Jonboy1999 said:

People are exaggerating how useless parachute payments are.

I suspect you are exaggerating how useful they are when they're meant for helping a team in the Championship not League 1

[Pita]

10 hours ago, Qwerty said:

Quoting myself - I’ve been reading about league 1 rules.  Essentially owners can put in as much of their own money as they like, unlike with PSR, where the resources of a club are meant to be generated by the club.  But only 60% of that “equity injection” can be spent on players, and presumably the rest can be spent on back room staff, facilities etc.  I believe it may be 75% for newly relegated teams.  

I’d have thought that we’d be a more attractive prospect for a rich potential owner than many other league 1 teams.  Big stadium, fancy training ground, large fan base, recent top flight history.   
 

It’s all relative.  As a club that won the PL and FA cup in the last 10 years, we’re now an absolute shambles.  But compared to long-standing league 1 teams, I think we’d represent a good opportunity for a rich new owner. 

Trouble is we have a willy puller who owned the club. Top and Ruskin think they are doing a good job 

[leicesterseddon]

We’d definitely need to have a fire sale of anyone on decent wages. Do any of the current squad have relegation clauses?

 

As others have pointed out, reduced player wages alone probably wouldn’t cut it and we’d need to fire other club staff too.

 

Probably need to look at reducing costs at the training ground (e.g. maintaining fewer pitches) and I imagine maybe selling Belvoir

Drive. 
 

To be honest though nearly all of this will have to happen anyway, even if we stay in the Championship. 

[marketharboroughfox]

22 hours ago, davieG said:

I suspect you are exaggerating how useful they are when they're meant for helping a team in the Championship not League 1

The money's already been spent in any case.

[AjcW]

For clarity we have 14 outstanding charges with Macquarie

 

Ranging between 2021 and January 2026.

 

The oldest is a mortgage of some sort, a lot of redacted detail in that one.

 

The latest was next seasons parachute payment.

 

All viewable here LEICESTER CITY FOOTBALL CLUB LIMITED charges - Find and update company information - GOV.UK

Edited 16 March by AjcW

[AKCJ]

It's one thing to be going cap in hand to Macquarie when we've got parachute payments coming but what happens when that stops? If we're in League 1 when they start asking for their money back then it'll be asset stripping time. Best believe it'll happen too.

 

We'll end up back at Belvoir Drive with a Cat 3 academy with the likes of Monga, Evans, Page etc all having been sold for peanuts to Big 6 clubs and we won't own the stadium (which will be called something like The Pukka Pie Stadium).

 

We'll be back to the days of signing Gabor Bori, Josh Low and Darren Kenton.

[filbertway]

8 minutes ago, AKCJ said:

It's one thing to be going cap in hand to Macquarie when we've got parachute payments coming but what happens when that stops? If we're in League 1 when they start asking for their money back then it'll be asset stripping time. Best believe it'll happen too.

 

We'll end up back at Belvoir Drive with a Cat 3 academy with the likes of Monga, Evans, Page etc all having been sold for peanuts to Big 6 clubs and we won't own the stadium (which will be called something like The Pukka Pie Stadium).

 

We'll be back to the days of signing Gabor Bori, Josh Low and Darren Kenton.

All the loans/credit lines are against our income aren't they?

 

So the money will just be paid directly to them from clubs/premier league rather than going to us. Either that or we renegotiate, but I'm not sure we're in a position to do that given that we have very little income guaranteed and probably none that actually allows us to break even.

 

[AjcW]

Of the 14 charges, naturally a lot is redacted, but here's a run down.

 

- 1 is a mortgage, given when it was taken out I assume it's on the stadium and was meant for the expansion. That's now 5 years old, and given we haven't just invested it and paid it back when we realised there would be no expansion, i'd assume we've spent that on day to day finances. My only hope or all hopes with that is that we've not spent it, it's in a holding account and it could be used to service some of the other debt that we wont be able to repay in the expected way (TV loans)

 

- 1 debenture, which is a security of all our debts with Macquarie against our assets (that was in 2024)

 

- 4 secured against TV money/Expected TV money/Parachute payments (the BAD)

 

- 8 player transfers (these are mostly fine tbh as they'll all pay out unless one of the buying teams goes pop)

[AjcW]

6 minutes ago, filbertway said:

All the loans/credit lines are against our income aren't they?

 

So the money will just be paid directly to them from clubs/premier league rather than going to us. Either that or we renegotiate, but I'm not sure we're in a position to do that given that we have very little income guaranteed and probably none that actually allows us to break even.

 

The problem is one of the four Macquarie payments  above were secured against expected 27/28 Prem money or 26/27 parachute money. 

 

If we're in League One next season, we wont get 26/27 parachute money. And it would also become impossible for us to be in the Premier League in 27/28

 

So they now become payable via assets, or like you say a renegotiation (but you'd argue a renegotiation against what)

 

Likely the transfers of BEK, Fatawu and anyone else we can get a few quid for would go straight to Macquarie to service the expected 26/27 parachute money of around 30-40m quid.

[davieG]

26 minutes ago, AKCJ said:

We'll be back to the days of signing Gabor Bori, Josh Low and Darren Kenton.

So a big improvement then 

[Babylon]

10 minutes ago, AjcW said:

The problem is one of the four Macquarie payments  above were secured against expected 27/28 Prem money or 26/27 parachute money. 

 

If we're in League One next season, we wont get 26/27 parachute money. And it would also become impossible for us to be in the Premier League in 27/28

 

So they now become payable via assets, or like you say a renegotiation (but you'd argue a renegotiation against what)

 

Likely the transfers of BEK, Fatawu and anyone else we can get a few quid for would go straight to Macquarie to service the expected 26/27 parachute money of around 30-40m quid.

We will get whatever parachute payments we are due, no matter what league we are in. Getting relegated doesn't stop them. 

 

[HankMarvin]

10 minutes ago, AjcW said:

If we're in League One next season, we wont get 26/27 parachute money

It appears Luton still got there second instalment

[Babylon]

1 minute ago, Babylon said:

We will get whatever parachute payments we are due, no matter what league we are in. Getting relegated doesn't stop them. 

 

Neither do we know how much money was spent / taken. We only know what it was secured against. 

[john ridley]

6 minutes ago, HankMarvin said:

It appears Luton still got there second instalment

I thought  we still got the 2 yrs money even if relegated again ?

[AKCJ]

5 minutes ago, Babylon said:

We will get whatever parachute payments we are due, no matter what league we are in. Getting relegated doesn't stop them. 

 

Is that correct? I thought that they were reduced in League 1.

[suffolk fox]

2 minutes ago, AKCJ said:

Is that correct? I thought that they were reduced in League 1.

No, you still get the parachute payments regardless of what league you are.  They are reduced each year over a 3 year rolling period.  Problem is KP and

Dudkin have probably already spent the money or its going straight to that dodgy Macquarie Bank.

[filthyfox]

Next season...  we condense

-Top

[AjcW]

14 minutes ago, Babylon said:

We will get whatever parachute payments we are due, no matter what league we are in. Getting relegated doesn't stop them. 

 

Apologies was going a year ahead. 

 

Got one years grace from the sharks then.

 

They will have run out of future things to secure against though so that will lead to cash flow problems.

[Babylon]

7 minutes ago, suffolk fox said:

No, you still get the parachute payments regardless of what league you are.  They are reduced each year over a 3 year rolling period.  Problem is KP and

Dudkin have probably already spent the money or its going straight to that dodgy Macquarie Bank.

We don't know what's been spent, we only know what our borrowing was secured against. 

 

For example, whilst we secured a loan against TV rights previously, it stated in the accounts that £9m was owned against the TV rights facility. So at that point a £9m loan was secured against an £80m incoming. 

 

I think people need to distinguish between what we actually borrowed and owe, and what it was secured against. 

 

If you borrow £20k to buy car and secure it against your house, you don't owe the value of your house. The details are far more intricate that just security = X and thus we must also have borrowed X. 

 

Edited 16 March by Babylon

[suffolk fox]

Just now, Babylon said:

We don't know what's been spent, we only know what our borrowing was secured against. 

 

For example, whilst we secured a loan against TV rights previously, it stated in the accounts that £9m was owned against the TV rights facility. So at that point a £9m loan was secured against an £80m incoming. 

 

Question was about parachute payments.  As I stated, we probably have already spent the money, weather that be on loams, tv rights, Macquarie etc, however,

you still get the parachute payments on a 3 year rolling period reduced each year.  I do agree though, money has already been earmarked or spent.

[CL Fox]

2 minutes ago, Babylon said:

We don't know what's been spent, we only know what our borrowing was secured against. 

 

For example, whilst we secured a loan against TV rights previously, it stated in the accounts that £9m was owned against the TV rights facility. So at that point a £9m loan was secured against an £80m incoming. 

 

Still defending them 🤣