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

[Wasyls Pec Deck]

12 minutes ago, Jonboy1999 said:

I get why people are panicking, but let’s be real. Yes, the overheads are huge for League One, but parachute payments exist for exactly this reason. They’re still far bigger than what any normal League One club earns.  
 

We’ve also got valuable players, a stadium, commercial deals and a huge fanbase — selling a few players would cover a lot of losses. Wage cuts and squad changes happen every time a club drops a division.  

Relegation would hurt badly, but administration isn’t inevitable. People are overreacting.

Do you realise what the operating budget is for League One compared to this level? There is no way we could get close to it. For a start we won’t offload who we need to because we pay them too much. If we go down the best case scenario is that we do a Sunderland and stay down there for a while and set new lows, the worst case is admin, points deductions and League Two.

[Mark 'expert' Lawrenson]

14 minutes ago, Jonboy1999 said:

I get why people are panicking, but let’s be real. Yes, the overheads are huge for League One, but parachute payments exist for exactly this reason. They’re still far bigger than what any normal League One club earns.  
 

We’ve also got valuable players, a stadium, commercial deals and a huge fanbase — selling a few players would cover a lot of losses. Wage cuts and squad changes happen every time a club drops a division.  

Relegation would hurt badly, but administration isn’t inevitable. People are overreacting.

Haven’t we already “spent” the parachute payments and have to pay back a loan with them. Thought I’d read that somewhere 

[Sol thewall Bamba]

Just now, Jonboy1999 said:

Just to be clear — parachute payments do go to the club. Yes, some of that money might be used to service loans the owners put in place, but it’s still the club’s income. It’s not “skipping” Leicester entirely — it’s exactly what keeps a relegated club from collapsing overnight. People are exaggerating how useless parachute payments are.

Are you certain of that? Someone evidenced the contrary on here a couple of weeks ago.

[Guest Jonboy1999]

1 minute ago, Sol thewall Bamba said:

Are you certain of that? Someone evidenced the contrary on here a couple of weeks ago.

Yeah, I’m pretty sure that’s not right. Parachute payments go to the club. Some of it might be used to pay back King Power loans, but it’s still the club’s money — it doesn’t just skip Leicester entirely.

[1969]

The parachute payment for next year goes directly to Macquarie bank as we’ve borrowed it up front from them this year.

[AjcW]

5 minutes ago, Jonboy1999 said:

Yeah, I’m pretty sure that’s not right. Parachute payments go to the club. Some of it might be used to pay back King Power loans, but it’s still the club’s money — it doesn’t just skip Leicester entirely.

Yeah you couldn’t be more wrong, it belongs to MacQuarie and we’ve been spending it this year. Furthermore we have other loans with them secured against expected premier league tv/parachute payments. When they come up (27/28 I think) and we’re not in the prem and not receiving parachute money. We either pay them (huge loan amount/high interest) or they’re secured against assets if no longer collectible against the initial security (tv money/parachute) 

[Guest Jonboy1999]

3 minutes ago, AjcW said:

Yeah you couldn’t be more wrong, it belongs to MacQuarie and we’ve been spending it this year. Furthermore we have other loans with them secured against expected premier league tv/parachute payments. When they come up (27/28 I think) and we’re not in the prem and not receiving parachute money. We either pay them (huge loan amount/high interest) or they’re secured against assets if no longer collectible against the initial security (tv money/parachute) 

Yeah, fair point — some of the parachute money is tied up in loans with Macquarie, and future payments are part of that structure. But it’s still the club’s income and part of how we manage the finances. It doesn’t mean Leicester would instantly collapse if relegated — the loans just change how the money is allocated, not that it disappears entirely.

Edited 14 March by Jonboy1999

[1969]

2 minutes ago, Jonboy1999 said:

Yeah, fair point — some of the parachute money is tied up in loans with Macquarie, and future payments are part of that structure. But it’s still the club’s income and part of how we manage the finances. It doesn’t mean Leicester would instantly collapse if relegated — the loans just change how the money is allocated, not that it disappears entirely.

It might count as turnover in next year accounts but if we’ve already had the money up front and spent it this year what are we paying next years bills with?

[Guest Jonboy1999]

1 minute ago, 1969 said:

It might count as turnover in next year accounts but if we’ve already had the money up front and spent it this year what are we paying next years bills with?

Sure, the upfront money’s spent, but that just means we’d need a proper financial reset — still not the same as the club collapsing.

[Enyoueffsea]

15 minutes ago, 1969 said:

The parachute payment for next year goes directly to Macquarie bank as we’ve borrowed it up front from them this year.

It would never go directly to them. Even if the club had borrowed 100% of the parachute payment, the money will go into the club and then the club is responsible for repaying the loan to the bank.

 

If you take a loan out with Barclays based on your income, your employer doesn’t pay Barclays direct on your behalf.

[1969]

Just now, Jonboy1999 said:

Sure, the upfront money’s spent, but that just means we’d need a proper financial reset — still not the same as the club collapsing.

I’m not saying we will collapse - although I do think if we carry on being run the way we are then administration is likely - I’m just pointing out the facts of the financial position. The problem with the Macquarie loans is that they are evidence that king power either haven’t got cash to put into the club anymore or that they’ve decided not to invest anymore? 

[LinekersLugs]

Almost certain Administrative process 

 

we cannot service the debts 

 

Kingpower cannot pay the debts 

 

and simple terms we are headed to a buy out of some sort 

 

and the biggest positive of all 

 

KPFC fans will be gone !!!  

[Guest Jonboy1999]

3 minutes ago, Enyoueffsea said:

It would never go directly to them. Even if the club had borrowed 100% of the parachute payment, the money will go into the club and then the club is responsible for repaying the loan to the bank.

 

If you take a loan out with Barclays based on your income, your employer doesn’t pay Barclays direct on your behalf.

Exactly — even if the club borrowed the parachute payments upfront, the money still goes into Leicester’s accounts first. The club then pays the loan back. It’s just basic accounting — the money doesn’t skip the club entirely like some people are saying.

[Guest Jonboy1999]

1 minute ago, 1969 said:

I’m not saying we will collapse - although I do think if we carry on being run the way we are then administration is likely - I’m just pointing out the facts of the financial position. The problem with the Macquarie loans is that they are evidence that king power either haven’t got cash to put into the club anymore or that they’ve decided not to invest anymore? 

Exactly — the Macquarie loans show the financial position is tight and the owners aren’t putting in extra cash. But even if relegated, administration wouldn’t be instant. With wage cuts, player sales, and careful cash management, it would probably take 1–3 seasons before it became a real threat. Relegation would hurt badly, but it’s not automatic collapse.

[STEVIE B]

2 hours ago, Bob Weasel Fox said:

I genuinely think we will fold as a club if we go down

I hear this a lot. Surely, other clubs have been in far worse positions than we are & survived (not that l know our financial position, who does ?)

 

[Vestan Pance]

57 minutes ago, Jonboy1999 said:

People need to stop jumping straight to the “administration” talk every time relegation is mentioned. Yes, dropping to League One would obviously be a massive financial hit, but clubs the size of us aren’t automatically on the brink of collapse because of it.

We’ve still got parachute payments, a big fanbase, Premier League infrastructure, and players who would likely be sold if needed to balance things. Plenty of big clubs have gone down to League One and recovered without going into administration.

The bigger issue isn’t just relegation itself – it’s how the ownership and recruitment have been handled over the last few years. That’s what’s put us in this mess. Relegation would hurt badly, but it doesn’t automatically mean the club is about to go bust.

Parachute payments from this point onwards are £0 when you consider next year's payment is already spent courtesy of the Macquarie loan.

[Enyoueffsea]

Surely you could sell the training ground and lease it back long before administration is a possibility?

 

Far from ideal, obviously, but would make little sense to fold the whole club with a £100m+ asset sitting on the books.

 

Likely impact of relegation would be cheap fire sales to get wages off the books. Based on performances this season, I’m not sure you’ll miss them. May set you back a couple of years but every opportunity to get financially stable and reset.

[Wsl]

7 minutes ago, Jonboy1999 said:

Just to be clear — parachute payments do go to the club. Yes, some of that money might be used to service loans the owners put in place, but it’s still the club’s income. It’s not “skipping” Leicester entirely — it’s exactly what keeps a relegated club from collapsing overnight. People are exaggerating how useless parachute payments are.

True, but it may as well skip! In our case they’re charged with payment to Macquarie and that charge covers next year’s parachute payments. So it’s already allocated away to pay that existing debt. It gives us no new money. What will be the issue is what does for most companies - lack of cash flow.

So a real concern will be where is the cash coming from to keep the show on the road? It’s not that parachute payments are useless, but I think we’ve already “spent” ours on servicing existing debts. So unless we’ve got millions that have not been drawn down on a loan facility, where’s the money for the meter?

[1969]

Sell it to who? Seagrave I mean?

Edited 14 March by 1969
Clarification

[Pliskin]

5 minutes ago, Jonboy1999 said:

Exactly — the Macquarie loans show the financial position is tight and the owners aren’t putting in extra cash. But even if relegated, administration wouldn’t be instant. With wage cuts, player sales, and careful cash management, it would probably take 1–3 seasons before it became a real threat. Relegation would hurt badly, but it’s not automatic collapse.

We’ve managed to fritter away £600m in ten years…. Pissing into the wind.

[honeybradger]

1 hour ago, Jonboy1999 said:

People need to stop jumping straight to the “administration” talk every time relegation is mentioned. Yes, dropping to League One would obviously be a massive financial hit, but clubs the size of us aren’t automatically on the brink of collapse because of it.

We’ve still got parachute payments, a big fanbase, Premier League infrastructure, and players who would likely be sold if needed to balance things. Plenty of big clubs have gone down to League One and recovered without going into administration.

The bigger issue isn’t just relegation itself – it’s how the ownership and recruitment have been handled over the last few years. That’s what’s put us in this mess. Relegation would hurt badly, but it doesn’t automatically mean the club is about to go bust.

Parachute payments cover the various loans we have accrued, our playing squad is worth very little.

 

We will likely have to sell the training ground at the very least

[Vestan Pance]

33 minutes ago, Jonboy1999 said:

Just to be clear — parachute payments do go to the club. Yes, some of that money might be used to service loans the owners put in place, but it’s still the club’s income. It’s not “skipping” Leicester entirely — it’s exactly what keeps a relegated club from collapsing overnight. People are exaggerating how useless parachute payments are.

So what what do they borrow the next lot money against to finance next season? These are payday loans, and the next payday is not happening. 

[Pliskin]

1 minute ago, 1969 said:

Sell it to who? 

Well, my house for sale, yet I’ve got people knocking on my door every five minutes offering to buy it! Bonkers!

[1969]

Just now, Pliskin said:

Well, my house for sale, yet I’ve got people knocking on my door every five minutes offering to buy it! Bonkers!

When you’ve sold - do you want to buy a training ground on the cheap? Asking for a friend.

[Guest Jonboy1999]

2 minutes ago, Vestan Pance said:

So what what do they borrow the next lot money against to finance next season? These are payday loans, and the next payday is not happening. 

The key thing is, even if loans are needed, they’re always secured against something the club actually owns — players, the stadium, commercial deals. Relegation would force a reset, but Leicester wouldn’t just go under overnight.  
 

Edited 14 March by Jonboy1999