ALK Capital or Farnell/Elkashashy takeover

This Forum is the main messageboard to discuss all things Claret and Blue and beyond
Chester Perry
Posts: 19167
Joined: Thu Jun 02, 2016 11:06 am
Been Liked: 3115 times
Has Liked: 481 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Sat Jan 09, 2021 12:59 am

NewClaret wrote:
Sat Jan 09, 2021 12:22 am
Couple of interesting things I’ve just found on Twitter. Looks like MSD raised £52m from the Guernsey stock exchange (at 9%) and a further £15m (at 7.75%) on 8th October (presumably exactly when ALK will have had to provide proof of funds)?

Maybe the £52m is what’s secured against the club, and the £15m was a personal loan to the ALK guys? Would make part of the Bloomberg story and part of the Athletic story correct.
I posted about this on the MMT thread earlier - the timing of this was more akin to the loans at Southampton and Derby - there were other loans for a £15m at a lower rate taken elsewhere at the same time and also unlimited Payment in Kind loans all due by 2030 - I didn't post it on this thread because I do not believe it is related to the loans to ALK, though they do give a strong indication of the interest rates they will have to charge to make a profit
This user liked this post: scouseclaret

aggi
Posts: 8762
Joined: Thu Jan 21, 2016 11:31 am
Been Liked: 2109 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Sat Jan 09, 2021 1:20 am

Father Jack wrote:
Fri Jan 08, 2021 10:41 pm
The ultimate doomsday
Not that realistic. There's a reason MSD have charges over the assets and that's to stop that kind of scenario. Any firesale would not benefit ALK.

More generally, MSD haven't made that loan expecting to lose the money. They've seen the plans in detail and think there's a pretty good chance it can be serviced.

dsr
Posts: 15132
Joined: Thu Jan 21, 2016 12:47 pm
Been Liked: 4548 times
Has Liked: 2241 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by dsr » Sat Jan 09, 2021 1:32 am

I think perhaps ALK's point is that if all goes well , the value of BFC will increase; if it doesn't go well, they can sell everything that moves and repay the loan having already taken out more than they put in anyway. ALK get all the profit, BFC carry all the risk.
This user liked this post: joey13

claretandy
Posts: 4751
Joined: Thu Jan 21, 2016 12:47 pm
Been Liked: 953 times
Has Liked: 238 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by claretandy » Sat Jan 09, 2021 5:25 am

Father Jack wrote:
Fri Jan 08, 2021 9:36 pm
Saw this posted online - thought it was an interesting angle on things:
Apart from the fact Pace has said that they are here for the long term, 20 years i think he said.

joey13
Posts: 7501
Joined: Thu Jan 21, 2016 12:39 pm
Been Liked: 1767 times
Has Liked: 1230 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by joey13 » Sat Jan 09, 2021 6:49 am

NewClaret wrote:
Sat Jan 09, 2021 12:22 am
Couple of interesting things I’ve just found on Twitter. Looks like MSD raised £52m from the Guernsey stock exchange (at 9%) and a further £15m (at 7.75%) on 8th October (presumably exactly when ALK will have had to provide proof of funds)?

Maybe the £52m is what’s secured against the club, and the £15m was a personal loan to the ALK guys? Would make part of the Bloomberg story and part of the Athletic story correct.
Guernsey stock exchange :lol: :lol:

jtv
Posts: 1015
Joined: Thu Jan 14, 2016 2:59 pm
Been Liked: 297 times
Has Liked: 386 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by jtv » Sat Jan 09, 2021 7:31 am

One thing that intrigues me re MG and JB getting the shares back in case of default, is that if things go belly up, they will be saddled with the Club's debt incurred by ALK. So in effect they will have given up a going concern to end up with a lame duck. I am sure that they are shrewd enough to have realised this, and their acceptance means that they are quite confident that the venture will succeed. Or does it?

Father Jack
Posts: 413
Joined: Thu Jan 21, 2016 8:52 pm
Been Liked: 148 times
Has Liked: 23 times
Location: Leyland

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Father Jack » Sat Jan 09, 2021 7:37 am

claretandy wrote:
Sat Jan 09, 2021 5:25 am
Apart from the fact Pace has said that they are here for the long term, 20 years i think he said.
Actions and words can often differ.
And whilst it’s a reassuring message, ultimately as with so much of this ownership, the proof will be in the pudding.

dandeclaret
Posts: 3513
Joined: Thu Jan 21, 2016 11:55 am
Been Liked: 2560 times
Has Liked: 300 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by dandeclaret » Sat Jan 09, 2021 8:54 am

NewClaret wrote:
Fri Jan 08, 2021 8:32 pm
Tbh, don’t know if this story is true, but if it is it reflects very badly on MG/JB - under invest in the team for 2/3 years and then run off with the £55m cash reserves!
If they’d invested £55m in players, then the assets of the business being acquired would still have been the same, and they would have been valued as such in the sale. What the club wouldn’t have would be the stable business that is in place now, with funds in the bank to deal with the somewhat inevitability of relegation in the next few seasons, with costs having risen to their highest point unsustainable even with parachute payments in the short term.

Ah, but you just sell the players then..... like all those relegated clubs with massive earners that nobody thinks is value for money that they couldn’t shift. A prime example being Jack Rodwell at Sunderland, but there are 100’s of other examples out there.

Grumps
Posts: 4145
Joined: Thu Jan 21, 2016 9:15 am
Been Liked: 954 times
Has Liked: 359 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Grumps » Sat Jan 09, 2021 9:12 am

claretandy wrote:
Sat Jan 09, 2021 5:25 am
Apart from the fact Pace has said that they are here for the long term, 20 years i think he said.
I think if you look back, you will see millions of people, businessmen included, who have broken promises.

NewClaret
Posts: 13222
Joined: Tue Dec 31, 2019 9:51 am
Been Liked: 3037 times
Has Liked: 3759 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by NewClaret » Sat Jan 09, 2021 9:19 am

dandeclaret wrote:
Sat Jan 09, 2021 8:54 am
If they’d invested £55m in players, then the assets of the business being acquired would still have been the same, and they would have been valued as such in the sale. What the club wouldn’t have would be the stable business that is in place now, with funds in the bank to deal with the somewhat inevitability of relegation in the next few seasons, with costs having risen to their highest point unsustainable even with parachute payments in the short term.

Ah, but you just sell the players then..... like all those relegated clubs with massive earners that nobody thinks is value for money that they couldn’t shift. A prime example being Jack Rodwell at Sunderland, but there are 100’s of other examples out there.
For clarity, I wasn't suggesting we should’ve spent the entire £55m on players, just some of it. £55m (if true) is a big chunk of change to both invest and ensure sensible savings, particularly since players are not paid entirely upfront and we have limited (zero?) outstanding commitments.

I do agree that you’ve got to recruit well, in saleable assets, or that’s a risk. Sarr at Watford is another more recent example. But player recruitment is an absolutely essential part of running a football club or you’d run out of players eventually! We’d be playing CT’s 502 formation soon enough, given how few players we have.

You have to recruit, it’s just a case of what you’re willing to spend and how ambitious you want to be. I don’t think it’s inevitable we get relegated in a few years, if you recruit sensibly with the right balance of players (i.e. not all ageing pro’s - some saleable assets in there too).

Nonayforever
Posts: 3271
Joined: Fri Jan 22, 2016 8:15 pm
Been Liked: 690 times
Has Liked: 172 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Nonayforever » Sat Jan 09, 2021 9:26 am

claretandy wrote:
Sat Jan 09, 2021 5:25 am
Apart from the fact Pace has said that they are here for the long term, 20 years i think he said.
Pace is saying what people want to hear.

Has anyone looked at ALK's scouting apps. They are no better than juvenile, ok for amateur level at best.

I wish i could be a fly on the wall in SD's office this transfer window. It is going to get heated if AP try's to foist some unproven youngster on SD.

NewClaret
Posts: 13222
Joined: Tue Dec 31, 2019 9:51 am
Been Liked: 3037 times
Has Liked: 3759 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by NewClaret » Sat Jan 09, 2021 9:36 am

Chester Perry wrote:
Sat Jan 09, 2021 12:59 am
I posted about this on the MMT thread earlier - the timing of this was more akin to the loans at Southampton and Derby - there were other loans for a £15m at a lower rate taken elsewhere at the same time and also unlimited Payment in Kind loans all due by 2030 - I didn't post it on this thread because I do not believe it is related to the loans to ALK, though they do give a strong indication of the interest rates they will have to charge to make a profit
Sorry hadn’t seen they’d already been posted, CP, just thought the numbers were not far off what was being reported yesterday in relation to our deal.

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 10:05 am

scouseclaret wrote:
Sat Jan 09, 2021 12:38 am
However you look at this,Paul, it’s difficult to understand how the club is in a better place now than it was a week or so ago. Whatever the details are, it is a fact that the previous owners are being paid from a combination of cash belonging to the Club (and therefore a direct extraction of value from the Club) and money borrowed at extremely high interest rates which represent a significant drain on future cash flows. Very little new equity - reportedly only about 10% of the total enterprise value - is being injected into the Club.
Is that a fact, or is it speculation based on the quotes of unnamed sources in the Athletic article?

If it's a fact you should be able to prove it.

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 10:24 am

One for the accountants - I have been trying to figure out the balance sheet of the acquiring special purpose company (Velocity Sports I think which is in turn owned by ALK). From the various snippets of info I reckon it must look something like this:

Assets:
Investment in BFC (approx 84% of £200m) £170m

Liabilities and capital:
Loan / loan notes due to MSD £60m
Loan from BFC (surplus cash taken out) £32m
Deferred consideration creditor due to MG/JB £68m
Share capital £10m

Notes:
1) Whether the loan is then pushed down to BFC itself is somewhat academic, as BFC is the only source of income to service the loan.
2) Cash taken out of £32m is the balancing figure to get to the quoted £102m paid to date after deducting the £60m loan (£52m, £67m and £80m (dollars?) have also been mentioned) and assumed approx £10m share capital.

Any improvements / corrections welcome.

Danieljwaterhouse
Posts: 1009
Joined: Fri Jan 22, 2016 8:55 pm
Been Liked: 308 times
Has Liked: 350 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Danieljwaterhouse » Sat Jan 09, 2021 10:24 am

Tall Paul wrote:
Sat Jan 09, 2021 10:05 am
Is that a fact, or is it speculation based on the quotes of unnamed sources in the Athletic article?

If it's a fact you should be able to prove it.
He’s not able to, he’s likely got Radiohead on loop and searching conspiracy theories in the ‘deep’ web.

I stopped reading when he mentioned a totally illegal practice...

KRBFC
Posts: 18018
Joined: Thu Jan 21, 2016 10:18 am
Been Liked: 3784 times
Has Liked: 1071 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by KRBFC » Sat Jan 09, 2021 10:28 am

So we are now just Wonga FC? pay day loaning our way to hopeful success?

Pace and the other people involved publicly don’t have the money required to sanction transfers, so who is? More loans?

Also with transfer fees paid over the length of contract, we could be setting ourselves up with some serious future payments. Who has the money to bail us out? because ALK don’t seem to have anything

Are ALK paying the loan off with their own money? Seems like they don’t have the money required. So the club is essentially buying itself

NewClaret
Posts: 13222
Joined: Tue Dec 31, 2019 9:51 am
Been Liked: 3037 times
Has Liked: 3759 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by NewClaret » Sat Jan 09, 2021 10:38 am

jtv wrote:
Sat Jan 09, 2021 7:31 am
One thing that intrigues me re MG and JB getting the shares back in case of default, is that if things go belly up, they will be saddled with the Club's debt incurred by ALK. So in effect they will have given up a going concern to end up with a lame duck. I am sure that they are shrewd enough to have realised this, and their acceptance means that they are quite confident that the venture will succeed. Or does it?
Presumably, since they have the cash from the loan in their possession, their view is that if payments are not made made they can use that cash to repay the loan and end up back where we were (ish).

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 10:39 am

If it's true that cash has been taken out it's unlikely to mean all of the surplus cash. Maybe £10m, £20m, £30m (we don't know) has been left in to fund potential January purchases?

After that it's harder to see where the cash comes from - other than the club. But someone mentioned the loan interest rolling up. It's quite possible that payment of the loan interest is deferred so that the cash generated by the club stays stays in the club for the foreseeable.

Spijed
Posts: 17112
Joined: Mon Jan 18, 2016 12:33 pm
Been Liked: 2892 times
Has Liked: 1294 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Spijed » Sat Jan 09, 2021 10:53 am

Are there any comparable business models at other clubs of a similar size to judge any success by?

Father Jack
Posts: 413
Joined: Thu Jan 21, 2016 8:52 pm
Been Liked: 148 times
Has Liked: 23 times
Location: Leyland

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Father Jack » Sat Jan 09, 2021 10:56 am

Danieljwaterhouse wrote:
Sat Jan 09, 2021 10:24 am
He’s not able to, he’s likely got Radiohead on loop and searching conspiracy theories in the ‘deep’ web.

I stopped reading when he mentioned a totally illegal practice...

What’s the illegal practice Daniel?
And what’s your view of the takeover now in view of the alleged financing & debt?

NewClaret
Posts: 13222
Joined: Tue Dec 31, 2019 9:51 am
Been Liked: 3037 times
Has Liked: 3759 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by NewClaret » Sat Jan 09, 2021 11:11 am

android wrote:
Sat Jan 09, 2021 10:39 am
If it's true that cash has been taken out it's unlikely to mean all of the surplus cash. Maybe £10m, £20m, £30m (we don't know) has been left in to fund potential January purchases?

After that it's harder to see where the cash comes from - other than the club. But someone mentioned the loan interest rolling up. It's quite possible that payment of the loan interest is deferred so that the cash generated by the club stays stays in the club for the foreseeable.
I’d be amazed if MG/JB had actually run off with any of the clubs cash reserves.

All conjecture, I know, but if I were guessing from the reports yesterday, I’d guess a relatively small amount of the £150m committed has been paid up front by way of loan to cover cover the cash they then control, with future instalments to cover the remainder of the assets.

I suppose the biggest question is how those additional instalments are being funded. I hope MG/JB have put some clauses in the deal on how much of the future instalments can be funded through debt. That then puts the focus on ALK raising funds through investors.

Agree on the interest point. It’s entirely feasible that the interest is not immediately payable and other terms may exist in the loan arrangement to protect us of our circumstances change.

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 11:30 am

NewClaret wrote:
Sat Jan 09, 2021 11:11 am
I’d be amazed if MG/JB had actually run off with any of the clubs cash reserves.

All conjecture, I know, but if I were guessing from the reports yesterday, I’d guess a relatively small amount of the £150m committed has been paid up front by way of loan to cover cover the cash they then control, with future instalments to cover the remainder of the assets.

I suppose the biggest question is how those additional instalments are being funded. I hope MG/JB have put some clauses in the deal on how much of the future instalments can be funded through debt. That then puts the focus on ALK raising funds through investors.

Agree on the interest point. It’s entirely feasible that the interest is not immediately payable and other terms may exist in the loan arrangement to protect us of our circumstances change.
Yes, I was not suggesting anyone was running away with the club' cash or any kind of impropriety. Overall, I am positive and "excited" about this takeover. Of course, it is risky - but so is every relegation and so on.

Thinking about it some more, I reckon the cash taken out is a temporary measure and some form of further debt (maybe they have only used part of the loan initially) is available to repay this cash as and when the cash is needed by the club. Why borrow at say 7% p.a or 10% p.a (a high rate for sure), when there is cash sitting in the balance sheet doing nothing (and presumably earning next to nothing at very low interest rates). It makes sense to temporarily reduce the amount of debt with this cash and pay it back when needed. Otherwise you are just incurring an unnecessary net interest cost.
Last edited by android on Sat Jan 09, 2021 1:48 pm, edited 1 time in total.

Danieljwaterhouse
Posts: 1009
Joined: Fri Jan 22, 2016 8:55 pm
Been Liked: 308 times
Has Liked: 350 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Danieljwaterhouse » Sat Jan 09, 2021 11:37 am

Father Jack wrote:
Sat Jan 09, 2021 10:56 am
What’s the illegal practice Daniel?
And what’s your view of the takeover now in view of the alleged financing & debt?
You can’t use money in a business to buy that business.

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 11:38 am

Father Jack wrote:
Sat Jan 09, 2021 10:56 am
What’s the illegal practice Daniel?
And what’s your view of the takeover now in view of the alleged financing & debt?
If the previous owners are being paid out with cash from the club, the substance of the transaction is a distribution of profits and should be treated as such.
This user liked this post: Danieljwaterhouse

Father Jack
Posts: 413
Joined: Thu Jan 21, 2016 8:52 pm
Been Liked: 148 times
Has Liked: 23 times
Location: Leyland

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Father Jack » Sat Jan 09, 2021 11:55 am

Danieljwaterhouse wrote:
Sat Jan 09, 2021 11:37 am
You can’t use money in a business to buy that business.
Isn’t that standard practice for a leveraged takeover?
And nothing illegal about it?

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 12:04 pm

Father Jack wrote:
Sat Jan 09, 2021 11:55 am
Isn’t that standard practice for a leveraged takeover?
And nothing illegal about it?
No. Standard practice is to borrow money against the assets of the target company.
This user liked this post: Danieljwaterhouse

dandeclaret
Posts: 3513
Joined: Thu Jan 21, 2016 11:55 am
Been Liked: 2560 times
Has Liked: 300 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by dandeclaret » Sat Jan 09, 2021 1:04 pm

NewClaret wrote:
Sat Jan 09, 2021 9:19 am
For clarity, I wasn't suggesting we should’ve spent the entire £55m on players, just some of it. £55m (if true) is a big chunk of change to both invest and ensure sensible savings, particularly since players are not paid entirely upfront and we have limited (zero?) outstanding commitments.

I do agree that you’ve got to recruit well, in saleable assets, or that’s a risk. Sarr at Watford is another more recent example. But player recruitment is an absolutely essential part of running a football club or you’d run out of players eventually! We’d be playing CT’s 502 formation soon enough, given how few players we have.

You have to recruit, it’s just a case of what you’re willing to spend and how ambitious you want to be. I don’t think it’s inevitable we get relegated in a few years, if you recruit sensibly with the right balance of players (i.e. not all ageing pro’s - some saleable assets in there too).
Is £55m a big chunk of change given the business circumstances? If relegation happens?


Wage bill of £87m (accounts 2018/2019)
Assumed Wage cut (agressive) at 25% - Wage Bill becomes £66m

Income (excluding Broadcasting) £22.8m -assumed cut of 35% - 14m

Shortfall of £52m

Offset by Parachute payments of £42m and £35m

Leaves a £10m shortfall year 1, £17m in year 2 and £52m in year 3 (And this excludes likely £2 - £4m pa increase in costs for the academy)

All of a sudden, that £55m doesn't look too big. If all of a sudden, you invest in a couple of players, you're likely to see a further £30m of that disappear over 3 years, and if you sign players and they don't work out, and you get relegated, it's fairly easy to see how things can turn bad quickly.

Player recruitment at Burnley has been prudent, and allowed for 2 top 10 finishes in the last 3 years. It has been mainly unexciting, but effective.

Edit - either way, the assets at purchase price would still have left the same value of assets, and therefore the price paid would likely be similar - hence disagreeing that MG and JB have fattened the cash balance only to run away with it. The way they've grown the value of their shares is to create a successful, sustainable, over performing business.
Last edited by dandeclaret on Sat Jan 09, 2021 1:43 pm, edited 1 time in total.

Jacko
Posts: 68
Joined: Fri Jan 22, 2016 8:18 pm
Been Liked: 30 times
Has Liked: 18 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Jacko » Sat Jan 09, 2021 1:39 pm

Yes, leveraged buyouts raise money against assets and cashflow. However, the new owners now have access to the cash in the bank - that is relevant. Question is what they do with it.

Chester Perry
Posts: 19167
Joined: Thu Jun 02, 2016 11:06 am
Been Liked: 3115 times
Has Liked: 481 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Sat Jan 09, 2021 1:49 pm

As I have posted before - the bank balance reflects a point in time it is not a steady level of reserves - it is there to assist operational cashflow, particularly at times when there is little that is actually coming in, such as the last 9-10 months of behind closed doors operation, there would have been some retail cash flow but little else.

we are now seeing some working numbers (thanks to androids look at Velocity - that is much appreciated)

- so 80m is actually dollars not GBP - therefore £60m
- the input from ALK appears to be £10m (not £15m)
- MG and JB have been paid £32m from the clubs cash reserves

all that gives us the £102m we have heard so much about

so what is left - if the £55m number is to be believed as cash holding at the time of the report - questions
- is this before or after December wages and outgoings
- we know Sean is about to be paid his bonus in the coming weeks, does this apply to the rest of the squad and coaching staff or have they been paid (if it is everyone that is circa £20m possibly more)
- what other payments are due (stage payment on Brownhill perhaps?)
- where is the season ticket money being held? it feels like ALK are now using it as working capital

I am not seeing where transfer funds are coming from - the 2nd Central Payment of the season from the Premier League is due in February, this is much smaller than the summer one and is likely to only cover operational costs.

Of course there is commercial sponsorship income to consider, we do not know:
- the payment plans
- if there has been growth in this area in the las 2 seasons - (it reasonable to expect some given the pattern in the last 3 sets of accounts, but difficult to assess the impacts of any rebates, we know Lovebet is down £250k)

ClaretMov
Posts: 2499
Joined: Tue Aug 20, 2019 3:13 pm
Been Liked: 843 times
Has Liked: 822 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretMov » Sat Jan 09, 2021 1:52 pm

ZZZZZZZZzzzzzzz

FFS, Just let the new owners (business men) get on with running their new business

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 1:53 pm

I have edited my post about the use of cash in the business to make it clearer that if true it is likely (temporarily) reducing the debt (or equity required) rather than helping to "purchase the business".

But Tall Paul & Daniel I don't see how the cash paid out can have been a distribution of profits as you suggest? Surely then a dividend would have had o be paid to ALL shareholders, which has not happened.

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 2:00 pm

Chester Perry wrote:
Sat Jan 09, 2021 1:49 pm
As I have posted before - the bank balance reflects a point in time it is not a steady level of reserves - it is there to assist operational cashflow, particularly at times when there is little that is actually coming in, such as the last 9-10 months of behind closed doors operation, there would have been some retail cash flow but little else.

we are now seeing some working numbers (thanks to androids look at Velocity - that is much appreciated)

- so 80m is actually dollars not GBP - therefore £60m
- the input from ALK appears to be £10m (not £15m)
- MG and JB have been paid £32m from the clubs cash reserves

all that gives us the £102m we have heard so much about

so what is left - if the £55m number is to be believed as cash holding at the time of the report - questions
- is this before or after December wages and outgoings
- we know Sean is about to be paid his bonus in the coming weeks, does this apply to the rest of the squad and coaching staff or have they been paid (if it is everyone that is circa £20m possibly more)
- what other payments are due (stage payment on Brownhill perhaps?)
- where is the season ticket money being held? it feels like ALK are now using it as working capital

I am not seeing where transfer funds are coming from - the 2nd Central Payment of the season from the Premier League is due in February, this is much smaller than the summer one and is likely to only cover operational costs.

Of course there is commercial sponsorship income to consider, we do not know:
- the payment plans
- if there has been growth in this area in the las 2 seasons - (it reasonable to expect some given the pattern in the last 3 sets of accounts, but difficult to assess the impacts of any rebates, we know Lovebet is down £250k)
Thanks Chester. Just to be clear my Velocity balance sheet is a guess. I think it would look something like that but the exact numbers are highly unlikely to be correct. It may well be £15m equity not £10m or some other number. The broad outline is emerging but my numbers are only guesses based on the press articles.

Chester Perry
Posts: 19167
Joined: Thu Jun 02, 2016 11:06 am
Been Liked: 3115 times
Has Liked: 481 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Sat Jan 09, 2021 2:07 pm

android wrote:
Sat Jan 09, 2021 2:00 pm
Thanks Chester. Just to be clear my Velocity balance sheet is a guess. I think it would look something like that but the exact numbers are highly unlikely to be correct. It may well be £15m equity not £10m or some other number. The broad outline is emerging but my numbers are only guesses based on the press articles.
that makes my post hypothesis too

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 2:21 pm

android wrote:
Sat Jan 09, 2021 1:53 pm
I have edited my post about the use of cash in the business to make it clearer that if true it is likely (temporarily) reducing the debt (or equity required) rather than helping to "purchase the business".

But Tall Paul & Daniel I don't see how the cash paid out can have been a distribution of profits as you suggest? Surely then a dividend would have had o be paid to ALL shareholders, which has not happened.
Yes, that's why if they've done it as an inter-company loan they're on dodgy ground with HMRC and why I find the reports of the club's cash being used to finance the deal difficult to believe.
android wrote:
Sat Jan 09, 2021 2:00 pm


Thanks Chester. Just to be clear my Velocity balance sheet is a guess. I think it would look something like that but the exact numbers are highly unlikely to be correct. It may well be £15m equity not £10m or some other number. The broad outline is emerging but my numbers are only guesses based on the press articles.
The £10/15m is unlikely to have been put in as equity, it'll be a directors' loan with a nominal amount of equity.

Paul Waine
Posts: 9845
Joined: Fri Jan 22, 2016 2:28 pm
Been Liked: 2344 times
Has Liked: 3164 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Paul Waine » Sat Jan 09, 2021 2:26 pm

android wrote:
Sat Jan 09, 2021 1:53 pm
I have edited my post about the use of cash in the business to make it clearer that if true it is likely (temporarily) reducing the debt (or equity required) rather than helping to "purchase the business".

But Tall Paul & Daniel I don't see how the cash paid out can have been a distribution of profits as you suggest? Surely then a dividend would have had o be paid to ALL shareholders, which has not happened.
Hi android, yes, if MG and JB wanted to take cash out of the business they could do it only by declaring a dividend and paying that dividend equally, per share, to all shareholders. If they'd done that they would still be the owners of the business.

Selling the business to someone else places the business in the position where the new owners make all the decisions about the business. This, of course, can include borrowing money that is secured on the business's assets and using the businesses assets in a way that they choose, so long as it is consistent with the terms of the loan. If the new owners of a business wanted to do anything that was not in the interest of the lender of any money then the loan covenants will prevent them. So, the lenders will take control to prevent/cure a breach of the covenants.

Exciting times.

UTC

Paul Waine
Posts: 9845
Joined: Fri Jan 22, 2016 2:28 pm
Been Liked: 2344 times
Has Liked: 3164 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Paul Waine » Sat Jan 09, 2021 2:29 pm

Tall Paul wrote:
Sat Jan 09, 2021 2:21 pm

The £10/15m is unlikely to have been put in as equity, it'll be a directors' loan with a nominal amount of equity.
Hi, Tall Paul, I'm raising an eyebrow at the idea that Velocity Sports can borrow £60m while it has only £10 of equity. (Yes, £10, not £10 million). However good the club's assets are that provide security for the loan and lender, including MSD, will be looking for a bigger commitment of their own equity by Alan Pace and his colleagues.

Exciting times.

UTC

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 2:35 pm

Paul Waine wrote:
Sat Jan 09, 2021 2:29 pm
Hi, Tall Paul, I'm raising an eyebrow at the idea that Velocity Sports can borrow £60m while it has only £10 of equity. (Yes, £10, not £10 million). However good the club's assets are that provide security for the loan and lender, including MSD, will be looking for a bigger commitment of their own equity by Alan Pace and his colleagues.

Exciting times.

UTC
If they have put more than £10 in as equity shares, they havent informed Companies House yet.

Mind you, it looks like they haven't told them about the changes in directorships either :shock:

Rumbletonk
Posts: 814
Joined: Sat Sep 17, 2016 5:25 pm
Been Liked: 313 times
Has Liked: 285 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Rumbletonk » Sat Jan 09, 2021 2:39 pm

I look at this on paper and find it very difficult not to jump to an angry conclusion. Then I take a step back and look at a man who's moved over here with his family. I'm going glass half full.

Paul Waine
Posts: 9845
Joined: Fri Jan 22, 2016 2:28 pm
Been Liked: 2344 times
Has Liked: 3164 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Paul Waine » Sat Jan 09, 2021 2:45 pm

NewClaret wrote:
Sat Jan 09, 2021 11:11 am

I suppose the biggest question is how those additional instalments are being funded. I hope MG/JB have put some clauses in the deal on how much of the future instalments can be funded through debt. That then puts the focus on ALK raising funds through investors.
Hi New, I'd be very surprised if MG/JB had asked to insert any clauses in the sale and purchase agreement about how ALK fund it. Yes, there'd be a discussion about the timings of the payments to them, and as this appears to be over 4 instalments, they would have discussed how they could be comfortable that they will, in time, receive all 4 instalments - with security over the club's shares being reported as their remedy. Beyond getting paid for the sale of their shares they'd have no interest in placing limitations on how ALK raised the funds to pay them. They will know that some of their money would be covered by borrowings secured against the club's assets, but they wouldn't have any reason to ask to place limitations on much is borrowed, on what terms or anything else.

However, by continuing as directors both MG and JB will carry the same responsibilities as all other directors for the financial performance of the club, including not allowing the club to run up debts that the club knows it can't meet. (Trading while insolvent can result in directors being banned from being directors and is not limited to the one entity that breached the insolvency rules).

So, maybe my second point is what achieves the control you are suggesting.

Exciting times.

UTC

Paul Waine
Posts: 9845
Joined: Fri Jan 22, 2016 2:28 pm
Been Liked: 2344 times
Has Liked: 3164 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Paul Waine » Sat Jan 09, 2021 2:48 pm

Tall Paul wrote:
Sat Jan 09, 2021 2:35 pm
If they have put more than £10 in as equity shares, they havent informed Companies House yet.

Mind you, it looks like they haven't told them about the changes in directorships either :shock:
Agree. I'm not sure exactly how quickly they need to inform Companies House of all the developments. Some of them I think do have to be registered in a timely manner. I'm sure they won't be late in filing what they need to file. I'd anticipate Companies House may need a few days after receiving filing(s) to update their database.

Exciting times.

UTC

joey13
Posts: 7501
Joined: Thu Jan 21, 2016 12:39 pm
Been Liked: 1767 times
Has Liked: 1230 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by joey13 » Sat Jan 09, 2021 2:51 pm

Rumbletonk wrote:
Sat Jan 09, 2021 2:39 pm
I look at this on paper and find it very difficult not to jump to an angry conclusion. Then I take a step back and look at a man who's moved over here with his family. I'm going glass half full.
Didn’t he say all his children had been born in London?

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sat Jan 09, 2021 2:52 pm

Paul Waine wrote:
Sat Jan 09, 2021 2:48 pm
Agree. I'm not sure exactly how quickly they need to inform Companies House of all the developments. Some of them I think do have to be registered in a timely manner. I'm sure they won't be late in filing what they need to file. I'd anticipate Companies House may need a few days after receiving filing(s) to update their database.

Exciting times.

UTC
Now everything is filed online, they're updated pretty much instantly after the filings are accepted.

Rumbletonk
Posts: 814
Joined: Sat Sep 17, 2016 5:25 pm
Been Liked: 313 times
Has Liked: 285 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Rumbletonk » Sat Jan 09, 2021 3:18 pm

joey13 wrote:
Sat Jan 09, 2021 2:51 pm
Didn’t he say all his children had been born in London?
No idea Joey. I presume they grew up in the US and have moved to the area now though. Thats how I read it but I could be wrong

joey13
Posts: 7501
Joined: Thu Jan 21, 2016 12:39 pm
Been Liked: 1767 times
Has Liked: 1230 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by joey13 » Sat Jan 09, 2021 3:33 pm

Rumbletonk wrote:
Sat Jan 09, 2021 3:18 pm
No idea Joey. I presume they grew up in the US and have moved to the area now though. Thats how I read it but I could be wrong
He said they had lived between New York and London

Rumbletonk
Posts: 814
Joined: Sat Sep 17, 2016 5:25 pm
Been Liked: 313 times
Has Liked: 285 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Rumbletonk » Sat Jan 09, 2021 6:02 pm

OK Ny and London then. I cant remember what we were on about now

Steve-Harpers-perm
Posts: 5744
Joined: Sun Jan 24, 2016 10:52 am
Been Liked: 1868 times
Has Liked: 835 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Steve-Harpers-perm » Sat Jan 09, 2021 6:41 pm

For all the criticism of the funding we have no idea about any possible future investment from people or groups they may know. Safe to say a bunch of former Wall Street investors probably have better contacts in the business world than in all due respect the outgoing board members.

android
Posts: 670
Joined: Fri Apr 08, 2016 10:01 am
Been Liked: 119 times
Has Liked: 43 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by android » Sat Jan 09, 2021 7:06 pm

Paul Waine wrote:
Sat Jan 09, 2021 2:26 pm
Hi android, yes, if MG and JB wanted to take cash out of the business they could do it only by declaring a dividend and paying that dividend equally, per share, to all shareholders. If they'd done that they would still be the owners of the business.

Selling the business to someone else places the business in the position where the new owners make all the decisions about the business. This, of course, can include borrowing money that is secured on the business's assets and using the businesses assets in a way that they choose, so long as it is consistent with the terms of the loan. If the new owners of a business wanted to do anything that was not in the interest of the lender of any money then the loan covenants will prevent them. So, the lenders will take control to prevent/cure a breach of the covenants.

Exciting times.

UTC
Hi Paul, yes, my question about the distribution of profits was more rhetorical really - I was trying to politely point out that there had not been a dividend payment as was being suggested.

I'm sure that your posts have been helpful to many (and much appreciated) but I am actually very experienced in finance, business and also acquisitions to some degree. I probably hide it well! You might remember that I mentioned a month or so ago that in my experience the highest number possible tends to be the first one in the press - in this case £200m. I did say that it didn't necessarily follow that this would be the actual investment amount or that all shareholders would get their share of this amount. You were having none of it at the time but I think I will probably be proved right about that at least. Despite the £200m valuation, it does seem that the gross investment amount is more likely around £170m (84%) and that of that perhaps only around £100m (£102m has been reported but we don't know if it is correct) has been put up up front and there appears to be a substantial amount deferred.

It seems to me that the deferred consideration / potential clawback of shares by MG/JB is a good thing in terms of risk from a fans viewpoint. MG and JB will probably be involved for longer than we thought and will have a financial interest, as well as a fan's interest, in making the venture a success.

Any thoughts on my stab at the acquirer's balance sheet this morning? Tall Paul is not keen on the inter-company balance but it seems like a possibility to me and I can't think how else they moved some cash out - if indeed they did. Again, I don't see this as in any way sinister or wrong, as I am assuming it would be temporary efficient cash management.

UTC
This user liked this post: Paul Waine

Paul Waine
Posts: 9845
Joined: Fri Jan 22, 2016 2:28 pm
Been Liked: 2344 times
Has Liked: 3164 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Paul Waine » Sun Jan 10, 2021 12:13 am

android wrote:
Sat Jan 09, 2021 7:06 pm
Hi Paul, yes, my question about the distribution of profits was more rhetorical really - I was trying to politely point out that there had not been a dividend payment as was being suggested.

I'm sure that your posts have been helpful to many (and much appreciated) but I am actually very experienced in finance, business and also acquisitions to some degree. I probably hide it well! You might remember that I mentioned a month or so ago that in my experience the highest number possible tends to be the first one in the press - in this case £200m. I did say that it didn't necessarily follow that this would be the actual investment amount or that all shareholders would get their share of this amount. You were having none of it at the time but I think I will probably be proved right about that at least. Despite the £200m valuation, it does seem that the gross investment amount is more likely around £170m (84%) and that of that perhaps only around £100m (£102m has been reported but we don't know if it is correct) has been put up up front and there appears to be a substantial amount deferred.

It seems to me that the deferred consideration / potential clawback of shares by MG/JB is a good thing in terms of risk from a fans viewpoint. MG and JB will probably be involved for longer than we thought and will have a financial interest, as well as a fan's interest, in making the venture a success.

Any thoughts on my stab at the acquirer's balance sheet this morning? Tall Paul is not keen on the inter-company balance but it seems like a possibility to me and I can't think how else they moved some cash out - if indeed they did. Again, I don't see this as in any way sinister or wrong, as I am assuming it would be temporary efficient cash management.

UTC
Thanks, android. I recall some of the exchange of views you mention. I agree, at this stage my view that ALK Capital would offer to acquire 100% of the shares isn't proving accurate. I hadn't factored both MG and JB remaining as directors and both retaining 4,000 shares - which we are told BFC directors are required to hold.

Of course, there've been a lot of different numbers reported by the media. Is Bloomberg accurate, or the Athletic or any of the other figures quoted elsewhere. It may be some time before we have better ideas.

Your "pro forma" guestimated balance sheet looks reasonable. I'd read it as your own estimates. Then I read CP's comment and started to search for your sources that I appeared to have missed. Of course, you corrected CP's initial view that you'd got a firmer basis/source(s) for the figures than you do, or that any of us can have. I'm sure there will be things in the way the deal is structured that we won't have guessed at.

Of course, I'm looking forward to how the next few weeks unfold. What will we do "in the market" in January. What actions will be taken with player contracts through the end of the season. And, who will we get in the FA Cup 4th - and 5th - round.

Exciting times.

UTC
These 2 users liked this post: Duffer_ android

claretandy
Posts: 4751
Joined: Thu Jan 21, 2016 12:47 pm
Been Liked: 953 times
Has Liked: 238 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by claretandy » Sun Jan 10, 2021 8:31 am

Paul Waine wrote:
Sun Jan 10, 2021 12:13 am
Thanks, android. I recall some of the exchange of views you mention. I agree, at this stage my view that ALK Capital would offer to acquire 100% of the shares isn't proving accurate. I hadn't factored both MG and JB remaining as directors and both retaining 4,000 shares - which we are told BFC directors are required to hold.

Of course, there've been a lot of different numbers reported by the media. Is Bloomberg accurate, or the Athletic or any of the other figures quoted elsewhere. It may be some time before we have better ideas.

Your "pro forma" guestimated balance sheet looks reasonable. I'd read it as your own estimates. Then I read CP's comment and started to search for your sources that I appeared to have missed. Of course, you corrected CP's initial view that you'd got a firmer basis/source(s) for the figures than you do, or that any of us can have. I'm sure there will be things in the way the deal is structured that we won't have guessed at.

Of course, I'm looking forward to how the next few weeks unfold. What will we do "in the market" in January. What actions will be taken with player contracts through the end of the season. And, who will we get in the FA Cup 4th - and 5th - round.

Exciting times.

UTC
The 4000 share rule isn't a rule as such, it was a self-imposed minimum you had to buy to get a seat on the board, it could be changed to any number.

Tall Paul
Posts: 7170
Joined: Thu Jan 21, 2016 8:07 am
Been Liked: 2560 times
Has Liked: 690 times

Re: ALK Capital or Farnell/Elkashashy takeover

Post by Tall Paul » Sun Jan 10, 2021 8:52 am

android wrote:
Sat Jan 09, 2021 7:06 pm
.Any thoughts on my stab at the acquirer's balance sheet this morning? Tall Paul is not keen on the inter-company balance but it seems like a possibility to me and I can't think how else they moved some cash out - if indeed they did. Again, I don't see this as in any way sinister or wrong, as I am assuming it would be temporary efficient cash management.

UTC
If they have indeed used the club's money to buy the shares, that will be the way they've done it.
Hi Paul, yes, my question about the distribution of profits was more rhetorical really - I was trying to politely point out that there had not been a dividend payment as was being suggested
I wasn't suggesting there had been a dividend payment, I was saying that it would be likely that HMRC would see the inter-company transaction as a distribution of profits and treat it as such, which is why I'm extremely dubious of the reports that they've used the club's cash in that way.

Post Reply