Grim

[ClaretPete001]

Hi Pete, please let me know how I do:
UTC

Hmmm no cigar is my blunt answer...! But once again Paul appreciate your time and efforts debating. I don't expect us to agree but it is good for us to lay out the arguments so others can see both sides of the argument.

Firstly, I don't dispute that AP was Global Head of Sales at Citibank until 2019. I still don't think that qualifies anyone to run a Premiership football club. In fact, he seems to have little experience running any business. I agree he is not fabulously wealthy in fact I doubt he has more money, or even as much, as the previous chairmen.

The issue I have with the investment argument is described very well in the article above - Burnley FC is not seen as investment worthy, or at least not at the price the previous owners wanted to sell at, which is why ALK was able to buy the club in the first places...! You accept this yourself, and with all due respect, this is an important point: if no one wanted to invest in the club when it had tens of million quid in the bank why would anyone want to invest in it with (potentially) £157 million quid's worth of debt?

I take your point that being very "clever" with the resources at their (ALKs) disposal is just about the only answer you (or I) could give but I do not think that is re-assuring because: (1) there is no evidence ALK is any cleverer than anyone else, (2) they have made it harder for themselves because of the additional debt (3) because of the lack of investment over the last three years means they now find themselves with playing assets that need considerable investment.

I accept that an investment banker should be good at raising capital but with little means at their disposal there is only so many times you can leverage your assets. I await to see whether ALK has more to offer but go back to the point above. Is Burnley FC an attractive investment proposition?

In summary, I think your argument boils down to one thing, which is that Burnley FC has exchanged £157 million quid's worth of debt on the back of a gamble that Alan Pace is able to run Burnley FC better than almost anyone else has run a club in the history of the Premier league.

I wish him well and respect (if not agree) with your view that there was little else on the table but I do not as yet see a sustainable business model.

[Chester Perry]

Not to mention the £68 million quid to former Owners.

It is more than that I am afraid - there is the commitment to buy the remaining shares off the old shareholders too once the initial transaction is completed, not to mention any conditional performance related payments

[Swizzlestick]

Note that Companies House are still allowing a ‘no questions asked’ three month extension to filing deadlines due to covid (which we took advantage of last year) so it could potentially be July until we see the accounts.

[Chester Perry]

......We know that the deal was reported as £102m on completion and a further £68m in 3 instalments at later dates. We know it was reported that ALK had borrowed £60m from MSD. We know it was reported that cash held by BFC was also borrowed by ALK from BFC and this cash made up part of the reported first instalment.

However, these are all figures reported by the media - and none of these figures have been confirmed.

CP has done some clever research and from John B's company, Freight Investors, annual accounts, which, before the takeover owned 19,000+ shares, that these shares were sold for over £29m. Using these figures, CP has determined that the actual price paid by ALK for their 84% share of BFC is £157m. (Reference CP's post above for more precise figures).

So, we now have a more accurate figure than the ones reported by the media, but we don't yet know if any of the other media figures are accurate or otherwise. Whatever the other figures, we do now know that ALK have acquired BFC for £157 million - which is £13m lower than previously reported figures - and means that ALK's financial commitment to the purchase is £13m less than previously understood - and means that there is £13m less funding to be found than we all previously thought......

So the offer letter to the small Shareholders dated October 4 2021 had this interesting detail

"Based on the terms of the Acquisition, the Sellers were to receive £XXXX.XX (my edit) per BHL share, and more potentially subject to the Club achieving certain performance conditions in due course."

The thing is that The accounts for Freight Investor understate the total value of their 19660 shares by over 7%, is there something we have missed? could some of the shares have been held in the group rather than the company and stated there((Notes the financial statements 17. Debtors, Due within one year on the Group for 2020)?

Paul I have just seen the offer letter to the share holders, yesterday I only had that one line in the quote above, it gives a surprising amount of detail

It seems the initial reports on the ALK transaction value were in the correct ball park (valuing the whole club at a minimum of £202.5m - the offer to the small shareholders increased that value to over £208m in October) and it is more than what can be derived from Freight Investors accounts. There is also an agreed commitment in place to buy the remaining shares of those 7 major shareholders following completion of the transaction for the 84%.

[NewClaret]

CP - few questions from me, do we know:

a) what has been paid to MG/JB to acquire their shares to date?

b) how much of this was loaned by MSD/club money? (the delta between a & b being what ALK they have raised independently)

c) what is outstanding to pay?

I get that it’s very complex but I just wondered if you could summarise those numbers if we’ve managed to deduce them yet?

[Chester Perry]

CP - few questions from me, do we know:

a) what has been paid to MG/JB to acquire their shares to date?

b) how much of this was loaned by MSD/club money? (the delta between a & b being what ALK they have raised independently)

c) what is outstanding to pay?

I get that it’s very complex but I just wondered if you could summarise those numbers if we’ve managed to deduce them yet?

No to all of those I am afraid, we have a rough idea of the schedule for instalments (since changed we believed, though I would think that is only related to the interim payments not the final payment which small shareholders are told triggers the countdown to the end of the MSD loan) but not what they are in proportion to the overall transaction - we don't even know what the first payment was, reports suggest £102m though Kettering Capital only had £98m in actual share capitalisation on December 30 2020. We don't even know if that was spent in full on shares though I suspect it was

I and all those who received the offer letter that can be bothered to make the calculations know what all seven former major shareholders are expecting from the initial transaction and the agreed follow-up for remaining shares. But we don't know the bonus payments or performance criteria attached to them on the current transaction or indeed if the follow-up transaction has the same performance element or even a higher agreed price.

[Paul Waine]

Paul I have just seen the offer letter to the share holders, yesterday I only had that one line in the quote above, it gives a surprising amount of detail

It seems the initial reports on the ALK transaction value were in the correct ball park (valuing the whole club at a minimum of £202.5m - the offer to the small shareholders increased that value to over £208m in October) and it is more than what can be derived from Freight Investors accounts. There is also an agreed commitment in place to buy the remaining shares of those 7 major shareholders following completion of the transaction for the 84%.

Hi CP, I'm not clear what you are saying. Re John B and Freight Investors accounts: we know that JB thru FI owned 19,660 shares. This is the exact figure on the BFC shareholders' list in Dec-2020 immediately before the takeover. We can check this filing on BFC Holdings Companies House records. We can also see 19,660 shares reported sold by Freight Investors to Calder Vale. So, we can work out the value of those shares and, as you have done, this gives the purchase value of all the shares purchased by Calder Vale - again, as reported on the recent shareholders' listing - as £157 million.

I haven't got a copy of the letter to shareholders. However, that letter is for the purchase of shares, for those who chose to sell, towards the end of last year. There's no reason why the share value on 30-Dec-2020 and the value in late 2021 should be the same. I understand the terms of the sale include 50% paid in cash and 50% as a club credit, with the club credit redeemable at any time the holder of the credit wants to redeem it (i.e. it doesn't expire).

We also know, again, from Freight Investors accounts that the purchase price is paid over a number of instalments in 2021/22/23, per FI accounts.

I'm also unclear how you have determined that all of the "7 major shareholders" are still holding some shares? Wasn't it just MG and JB who retained some of their shares? I guess we can compare the shareholder lists are check which ones of the 7 major shareholders continue to hold shares after the takeover.

Is there anything in the offer letter to shareholders that gives us any further insights?

BTW: I took a look at Derby County's Companies House records today. It includes the Administrator's Statement of Affairs. MSD is listed as secured creditor with fixed and floating charge for the amount of £20,000,000. There's also a new Debenture between Derby County (in Administration) and MSD. The new debenture/charge appears to be dated a few days after the £20m statement of affairs date. Whether this means MSD have advanced more funds to Derby to assist through their situation, or whether the new debenture means the added additional loan to bring the total up to £20m I can't see any information. As always, it is interesting to read all the "rights" that the lender (MSD) has under the Debenture.

[Paul Waine]

Paul I have just seen the offer letter to the share holders, yesterday I only had that one line in the quote above, it gives a surprising amount of detail

It seems the initial reports on the ALK transaction value were in the correct ball park (valuing the whole club at a minimum of £202.5m - the offer to the small shareholders increased that value to over £208m in October) and it is more than what can be derived from Freight Investors accounts. There is also an agreed commitment in place to buy the remaining shares of those 7 major shareholders following completion of the transaction for the 84%.

I've also now had a chance to view the offer letter to the small shareholders. Agree, there is more detail there than I was aware of. More questions, as you say.

[Chester Perry]

Paul, as of the last confirmation statement all 7 former major shareholders still hold shares (around 10.1% of their former holding (except Barry Kilby who had to sell all his Total BSK Pension Fund shares as a result of his prior legal agreement with Mike G, which Barry revealed in October https://www.lancs.live/sport/football/f ... e-21854366) he has just 32 shares now.

the letter to the shareholders states the minimum share transaction price (in pounds and pence) that was agreed for the 84% and says there are further conditional payments if certain criteria are met and that they are to buy the remaining shares once the initial transaction is complete. As posted above that minimum Share transaction price valued the whole club at circa £202.5m. Also as stated yesterday that then means that the 19660 shares are worth over 7% more than the £30.022m we thought the Freight Investor Accounts said they were which is why I was asking the questions yesterday.

Interesting stuff re Derby, sounds like the £20m is now the total loan exposure

[ClaretPete001]

It is more than that I am afraid - there is the commitment to buy the remaining shares off the old shareholders too once the initial transaction is completed, not to mention any conditional performance related payments

Fair point Chester but I think there is a point at which the absolute truth of things become irrelevant.

And I say that to make a point about the level at which the debt becomes unsustainable.

[aggi]

I don't think that is true we had tens of millions of quid in the bank until a couple of years ago.

We now have to find £5-6 million quid from turnover that will very quickly reduce from £140 million to £50 million.

Lastly, because of the lack of investment we have a first 11 of whom only Brownhill and Mc Neil will not be 30 or around that age next season.

You cannot say in any way shape or form it is the same as in the past

When I say previous position I meant if we went down now but the takeover hadn't happened, the squad would be pretty similar (and possibly worse).

It's certainly a worse picture financially but, in the big picture, it's probably only another year or two of safety net.

[ewanrob]

CP, PW,CP001, and others...a facinating read.

May I ask a question...MG & Directors (the Club) before Covid hit had money in the Bank (40-50-60Million who knows), at that point they felt they could not go on any further I assume because of the funding needed. My question is, why did they not go out and borrow money to bolster the squad as ALK did for the Purchase. Do banks look on them in a different way if they have a surplus ?

I never understood why they never borrowed against future Sky payments to enable us to strengthen our Infrastructure...sorry if my question is to simplistic!!

[NewClaret]

No to all of those I am afraid, we have a rough idea of the schedule for instalments (since changed we believed, though I would think that is only related to the interim payments not the final payment which small shareholders are told triggers the countdown to the end of the MSD loan) but not what they are in proportion to the overall transaction - we don't even know what the first payment was, reports suggest £102m though Kettering Capital only had £98m in actual share capitalisation on December 30 2020. We don't even know if that was spent in full on shares though I suspect it was.

Thanks CP.

Are we therefore saying £98m initial investment is our best guess with ~£60m MSD, ~£20m dry powder & ~£18m ALK investment split based on media speculation?

My personal views are that, while the sums seem scary to us, in the scheme of corporate financing they’re not so significant (i.e. ALK should be able to raise them by various means). Particularly from America where business valuations are much higher than ours in the UK. Albeit, a lot of this hinges on us retaining our PL status. I’ll feel much happier when that ability has been demonstrated, however.

[ClaretPete001]

When I say previous position I meant if we went down now but the takeover hadn't happened, the squad would be pretty similar (and possibly worse).

It's certainly a worse picture financially but, in the big picture, it's probably only another year or two of safety net.

The club has generated a lot of money, which has not been spent on playing assets.

Most people suspect that we are only 1 or 2 players short of having a decent squad.

This is absolutely not what we have seen in the past where the club has refused to spend money it has NOT got but it seems self-evident that not only has it NOT spent the money that it has got but it no longer has a model that could withstand the loss of revenue after relegation.

In now way is this the same as if the take over hadn't taken place. For a start, we wouldn't have £60 million worth of debt secured against the assets.

I'm a bit lost as to where you are coming form tbh albeit I may be misunderstanding your point.

[ClaretPete001]

Thanks CP.

Are we therefore saying £98m initial investment is our best guess with ~£60m MSD, ~£20m dry powder & ~£18m ALK investment split based on media speculation?

My personal views are that, while the sums seem scary to us, in the scheme of corporate financing they’re not so significant (i.e. ALK should be able to raise them by various means). Particularly from America where business valuations are much higher than ours in the UK. Albeit, a lot of this hinges on us retaining our PL status. I’ll feel much happier when that ability has been demonstrated, however.

Again the whole point of this takeover is to get around the fact that the club is not a great investment proposition. It clearly states that in the article and in the thread. A point accepted by everyone.

It's quite possible American investment banks are full of idiots but I wouldn't bank on it (forgive the pun)

[Chester Perry]

Thanks CP.

Are we therefore saying £98m initial investment is our best guess with ~£60m MSD, ~£20m dry powder & ~£18m ALK investment split based on media speculation?

My personal views are that, while the sums seem scary to us, in the scheme of corporate financing they’re not so significant (i.e. ALK should be able to raise them by various means). Particularly from America where business valuations are much higher than ours in the UK. Albeit, a lot of this hinges on us retaining our PL status. I’ll feel much happier when that ability has been demonstrated, however.

If we take the differing prices of shares paid for in Kettering Capital December 30 2020 (50,000 @ £200 each and 49,000 @ £1795.918 each) then it is possible that all investors combined in Velocity Sports Limited only put £10m into the transaction and the rest came from the MSD loan and the clubs funds.

[Tall Paul]

Note that Companies House are still allowing a ‘no questions asked’ three month extension to filing deadlines due to covid (which we took advantage of last year) so it could potentially be July until we see the accounts.

The automatic extension was withdrawn in April last year, it now has to be appllied for. Burnley FC Holdings Ltd filing deadline is still shown as 30 April 2022.

[NewClaret]

CP, PW,CP001, and others...a facinating read.

May I ask a question...MG & Directors (the Club) before Covid hit had money in the Bank (40-50-60Million who knows), at that point they felt they could not go on any further I assume because of the funding needed. My question is, why did they not go out and borrow money to bolster the squad as ALK did for the Purchase. Do banks look on them in a different way if they have a surplus ?

I never understood why they never borrowed against future Sky payments to enable us to strengthen our Infrastructure...sorry if my question is to simplistic!!

I think the only people who could answer this are MG/JB.

They had £80m cash at point of sale. Eighty million. Albeit as CP will tell you, a proportion of that was a TV down payment and committed to future expenses.

Personally, I cannot see why the previous ownership needed to build funds to that level. In my opinion, we’d have been better to invest part of that in the team. Yes, you have to consider the scenario where you fall through the trap door but the best way to prevent that is to steer clear of it altogether. There’s a balance and I think it had swung much too far in the wrong direction.

In the summer prior to takeover (now known as the “Dale Stephens window” ), I argued vehemently on here that we should raise some debt to fund signings, if necessary. I was told that nobody would lend to us (my suggestion was £20m).

As it turns out it wasn’t necessary because we had £80m at the time of those debates. But the argument from other posters was that nobody would lend to a club - despite having an experienced chairman that has run us as prudently and responsibly as any football club in the land for several years. Yet some 6 months later MSD lent ALK and their relatively unproven directors, an alleged £60m. So that theory was clearly rubbish.

In summary: the only answer I can find is that they were desperate to get out and knew that the only way to do that was to build the cash to levels that could help fund their exit (whilst taking no debt themselves to allow a prospective buyer to leverage). Albeit I remain hopeful there may be more to it than we don’t know about. That the previous board have not had us over and we will ultimately become more comfortable with the arrangements than we are now.

[ClaretPete001]

If we take the differing prices of shares paid for in Kettering Capital December 30 2020 (50,000 @ £200 each and 49,000 @ £1795.918 each) then it is possible that all investors combined in Velocity Sports Limited only put £10m into the transaction and the rest came from the MSD loan and the clubs funds.

I suppose it's also possible that the £10 million put in by Velocity is a loan being paid for by Burnley FC albeit not secured against the assets.

[Tall Paul]

I think the only people who could answer this are MG/JB.

They had £80m cash at point of sale. Eighty million. Albeit as CP will tell you, a proportion of that was a TV down payment and committed to future expenses.

Personally, I cannot see why the previous ownership needed to build funds to that level. In my opinion, we’d have been better to invest part of that in the team. Yes, you have to consider the scenario where you fall through the trap door but the best way to prevent that is to steer clear of it altogether. There’s a balance and I think it had swung much too far in the wrong direction.

In the summer prior to takeover (now known as the “Dale Stephens window” ), I argued vehemently on here that we should raise some debt to fund signings, if necessary. I was told that nobody would lend to us (my suggestion was £20m).

As it turns out it wasn’t necessary because we had £80m at the time of those debates. But the argument from other posters was that nobody would lend to a club - despite having an experienced chairman that has run us as prudently and responsibly as any football club in the land for several years. Yet some 6 months later MSD lent ALK and their relatively unproven directors, an alleged £60m. So that theory was clearly rubbish.

In summary: the only answer I can find is that they were desperate to get out and knew that the only way to do that was to build the cash to levels that could help fund their exit (whilst taking no debt themselves to allow a prospective buyer to leverage). Albeit I remain hopeful there may be more to it than we don’t know about. That the previous board have not had us over and we will ultimately become more comfortable with the arrangements than we are now.

The theory wasn't rubbish. I'm pretty sure MSD hasn't lent money to the club.

[Chester Perry]

I suppose it's also possible that the £10 million put in by Velocity is a loan being paid for by Burnley FC albeit not secured against the assets.

Entirely so, I am afraid.

[ewanrob]

I think the only people who could answer this are MG/JB.

They had £80m cash at point of sale. Eighty million. Albeit as CP will tell you, a proportion of that was a TV down payment and committed to future expenses.

Personally, I cannot see why the previous ownership needed to build funds to that level. In my opinion, we’d have been better to invest part of that in the team. Yes, you have to consider the scenario where you fall through the trap door but the best way to prevent that is to steer clear of it altogether. There’s a balance and I think it had swung much too far in the wrong direction.

In the summer prior to takeover (now known as the “Dale Stephens window” ), I argued vehemently on here that we should raise some debt to fund signings, if necessary. I was told that nobody would lend to us (my suggestion was £20m).

As it turns out it wasn’t necessary because we had £80m at the time of those debates. But the argument from other posters was that nobody would lend to a club - despite having an experienced chairman that has run us as prudently and responsibly as any football club in the land for several years. Yet some 6 months later MSD lent ALK and their relatively unproven directors, an alleged £60m. So that theory was clearly rubbish.

In summary: the only answer I can find is that they were desperate to get out and knew that the only way to do that was to build the cash to levels that could help fund their exit (whilst taking no debt themselves to allow a prospective buyer to leverage). Albeit I remain hopeful there may be more to it than we don’t know about. That the previous board have not had us over and we will ultimately become more comfortable with the arrangements than we are now.

Interesting reply NewClaret many thanks

[ewanrob]

The theory wasn't rubbish. I'm pretty sure MSD hasn't lent money to the club.

Eloborate please, so where has the money come from...or did ALK have it all the time

[fatboy47]

Yes, you have to consider the scenario where you fall through the trap door but the best way to prevent that is to steer clear of it altogether.

This...absolutely this.

[Chester Perry]

I think the only people who could answer this are MG/JB.

They had £80m cash at point of sale. Eighty million. Albeit as CP will tell you, a proportion of that was a TV down payment and committed to future expenses.

Personally, I cannot see why the previous ownership needed to build funds to that level. In my opinion, we’d have been better to invest part of that in the team. Yes, you have to consider the scenario where you fall through the trap door but the best way to prevent that is to steer clear of it altogether. There’s a balance and I think it had swung much too far in the wrong direction.

In the summer prior to takeover (now known as the “Dale Stephens window” ), I argued vehemently on here that we should raise some debt to fund signings, if necessary. I was told that nobody would lend to us (my suggestion was £20m).

As it turns out it wasn’t necessary because we had £80m at the time of those debates. But the argument from other posters was that nobody would lend to a club - despite having an experienced chairman that has run us as prudently and responsibly as any football club in the land for several years. Yet some 6 months later MSD lent ALK and their relatively unproven directors, an alleged £60m. So that theory was clearly rubbish.

In summary: the only answer I can find is that they were desperate to get out and knew that the only way to do that was to build the cash to levels that could help fund their exit (whilst taking no debt themselves to allow a prospective buyer to leverage). Albeit I remain hopeful there may be more to it than we don’t know about. That the previous board have not had us over and we will ultimately become more comfortable with the arrangements than we are now.

The £80m was as of July 31 2020, not December 30 2020. We could be crude and take away the accruals and outstanding tax and argue that there was really only £15m or so actually in reserves. Even if you took away an average previous level of accruals (circa £25m - £30m) as it can be argued they are just part of the business cash flow - there is no more than £45m of reserve. Of course between July 31 2020 and December 30 2020 the club had little opportunity for cash being brought inwards, (no matchday income, we know sponsors delayed or even failed to make payments) yet there were substantial outgoing, even with tightened belts that was likely to be £5m + per month. At the time of Matt Slaters article that broke the news of circa £30m of clubs circa £50m - £55m in cash I said I though that was a credible figure.

Not having owners with the wealth to be benefactors or guarantors of loans (and the longstanding culture of the board to be careful - the itv digital legacy that still remains fresh to Barry Kilby) we took the option of bunkering down. Many didn't like that, when they saw others borrowing and spending (all those clubs had owners with the wealth to bail their clubs out and/or had just been promoted so were guaranteed a much larger income (Leeds spent almost two seasons transfer monies in that summer - the owners said it was the plan at the time). Others (notably West Ham) made a net transfer profit in the summer and bought in January when their season had a rosy picture. Our club owners looked prepared to wheel and deal, but it appears that the manager blocked the sale of the asset that would allow that to happen (Tarks) as he could not get his preferred target who was injured.

[ClaretPete001]

Eloborate please, so where has the money come from...or did ALK have it all the time

Think about it Ewan. Did Burnley FC buy itself?

[Chester Perry]

.... I'm pretty sure MSD hasn't lent money to the club.

Me too - records clearly show MSD lent money to Calder Vale Holdings - the club provides the security and probably the means of both servicing the interest and ultimate repayment, if the loan cannot be rolled over into a new one. The distinction is important

[Tall Paul]

Eloborate please, so where has the money come from...or did ALK have it all the time

They've lent to ALK (or as CP says one of the holding companies) secured on the asset they're using the loan to buy. There's a huge difference between doing that and lending to a football club to spend on players.

I wish people would stop conflating ALK's debt with BFC's

[ClaretPete001]

The £80m was as of July 31 2020, not December 30 2020. We could be crude and take away the accruals and outstanding tax and argue that there was really only £15m or so actually in reserves. Even if you took away an average previous level of accruals (circa £25m - £30m) as it can be argued they are just part of the business cash flow - there is no more than £45m of reserve. Of course between July 31 2020 and December 30 2020 the club had little opportunity for cash being brought inwards, (no matchday income, we know sponsors delayed or even failed to make payments) yet there were substantial outgoing, even with tightened belts that was likely to be £5m + per month. At the time of Matt Slaters article that broke the news of circa £30m of clubs circa £50m - £55m in cash I said I though that was a credible figure.

Not having owners with the wealth to be benefactors or guarantors of loans (and the longstanding culture of the board to be careful - the itv digital legacy that still remains fresh to Barry Kilby) we took the option of bunkering down. Many didn't like that, when they saw others borrowing and spending (all those clubs had owners with the wealth to bail their clubs out and/or had just been promoted so were guaranteed a much larger income (Leeds spent almost two seasons transfer monies in that summer - the owners said it was the plan at the time). Others (notably West Ham) made a net transfer profit in the summer and bought in January when their season had a rosy picture. Our club owners looked prepared to wheel and deal, but it appears that the manager blocked the sale of the asset that would allow that to happen (Tarks) as he could not get his preferred target who was injured.

You are a mine of information Chester - great stuff; however, unless I am misunderstanding I think much of the above seems to conflict with what you say earlier.

As you point out in the article there seems to have been a point where it became clear that the club was not an investable proposition and that the best way for the former owners to achieve a satisfactory sale price was a leveraged buy out. No one can believe that the former owners would regard that as a prudent or careful. if neither you nor I can see a sustainable business model then surely the previous owners could not either.

And again they have taken a considerable risk with the £68 million quid dependent upon survival.

Indeed the investment in playing assets dried up long before Covid. Additionally, when we were last promoted from the Premiership the club incurred relatively substantive losses much talked about in the media. Not careful or prudent either

Absolutely none of this seems to be careful or prudent nor does there seem to have been great risk to the former owners because whatever the size of the cash reserves it was enough to sustain the club for a period.

The problem as far as a I am concerned none of this makes much sense.

[ClaretPete001]

They've lent to ALK (or as CP says one of the holding companies) secured on the asset they're using the loan to buy. There's a huge difference between doing that and lending to a football club to spend on players.

I wish people would stop conflating ALK's debt with BFC's

You have to because MSD will have a charge on the assets of the club.

[aggi]

The club has generated a lot of money, which has not been spent on playing assets.

Most people suspect that we are only 1 or 2 players short of having a decent squad.

This is absolutely not what we have seen in the past where the club has refused to spend money it has NOT got but it seems self-evident that not only has it NOT spent the money that it has got but it no longer has a model that could withstand the loss of revenue after relegation.

In now way is this the same as if the take over hadn't taken place. For a start, we wouldn't have £60 million worth of debt secured against the assets.

I'm a bit lost as to where you are coming form tbh albeit I may be misunderstanding your point.

I'd say it's too early to assess whether they are willing to spend (summer window was decent, this one wasn't) or not.

My basic point is that if we go down we have a limited amount of time to have a good chance of going up, after that we're hoping for a Coyle or a Dyche to do the unexpected.

We probably had a better chance under Garlick as we had that bigger safety net (which personally I thought was sensible) but there wasn't much option of additional financing if that didn't work.

As it is now we'd probably have less time to get back up due to the additional pressures. On the flip there may (emphasis on the may) be the chance of further additional financing that we didn't have access to.

But ultimately, if we didn't go back up fairly soon, we'll probably end up in about the same place.

I'm not particularly onboard with how the takeover appears to have happened but I'm also not going to condemn and write the club off based on the very limited information that we have.

[Tall Paul]

You have to because MSD will have a charge on the assets of the club.

You don't, a charge isn't the same as a debt.

[ClaretPete001]

I'd say it's too early to assess whether they are willing to spend (summer window was decent, this one wasn't) or not.

My basic point is that if we go down we have a limited amount of time to have a good chance of going up, after that we're hoping for a Coyle or a Dyche to do the unexpected.

We probably had a better chance under Garlick as we had that bigger safety net (which personally I thought was sensible) but there wasn't much option of additional financing if that didn't work.

As it is now we'd probably have less time to get back up due to the additional pressures. On the flip there may (emphasis on the may) be the chance of further additional financing that we didn't have access to.

But ultimately, if we didn't go back up fairly soon, we'll probably end up in about the same place.

I'm not particularly onboard with how the takeover appears to have happened but I'm also not going to condemn and write the club off based on the very limited information that we have.

I think you are failing to account for the problem of servicing the debt in the championship. The turnover will likely decrease from £140 million to around £50 million. I think that is the issue of a longer period of time outside the Premiership.

It seems unlikely we will secure more finance and the debt we have will to repay will make a return less likely. It's potentially a vicious cycle.

Totally accept that you want to give the new owners a fair crack of the whip.

I think this thread is a genuine attempt to understand the situation as opposed to a critique of individuals.

[ClaretPete001]

You don't, a charge isn't the same as a debt.

Tbh I just feel that the semantics of who owns what gets in the way of understanding what this means for the club.

You are right a charge is not the same as a debt up to the point you don't pay it.

[ewanrob]

What chance has a novice like myself got of understanding this, you all seem to be quering each others facts / assumptions !

Cheers anyway, its a great read...

[ClaretAndJew]

If Dave Checketts owns SCP Worldwide, a company which purchased an NHL team in the St Louis Cardinals and was also part of an attempted take over of the then St Louis Rams (NFL) then surely there isn't a worry about money. He is also the CEO of a company worth $750 million.

Surely we're ok?

Or am I oversimplifying the complex?

[NewClaret]

Me too - records clearly show MSD lent money to Calder Vale Holdings - the club provides the security and probably the means of both servicing the interest and ultimate repayment, if the loan cannot be rolled over into a new one. The distinction is important

But without the security being provided by the club, CV would not have got the loan. So tomatoes tomatoes for me, whatever corporate structure these things are wrapped up in.

Ultimately our previous owners could have raised funds using the same assets as security.

[ClaretPete001]

If Dave Checketts owns SCP Worldwide, a company which purchased an NHL team in the St Louis Cardinals and was also part of an attempted take over of the then St Louis Rams (NFL) then surely there isn't a worry about money. He is also the CEO of a company worth $750 million.

Surely we're ok?

Or am I oversimplifying the complex?

No not oversimplifying - but have you got links?

[Tall Paul]

Tbh I just feel that the semantics of who owns what gets in the way of understanding what this means for the club.

You are right a charge is not the same as a debt up to the point you don't pay it.

But it isn't semantics, it's an important distinction.

The debt isn't on the club unless and until ALK are unable to repay it. I suspect it isn't repayable until ALK sells the club on, hopefully at a profit so, as long as things don't go tits up (which admittedly could be fairly likely in the event of relegation and failure to quickly get back up), it will never be a BFC debt.

[NewClaret]

The £80m was as of July 31 2020, not December 30 2020. We could be crude and take away the accruals and….. At the time of Matt Slaters article that broke the news of circa £30m of clubs circa £50m - £55m in cash I said I though that was a credible figure.

Yep, my point was more that at the times I was debating raising debt to fund signings we had £80m, not at the point of transaction.

We basically had a business capable of throwing off enough cash to get £80m. The rest is accounting. The pound notes in the bank don’t lie. But I agree with your view of what that the “true” balance net of expenditure was much lower & your figure is probably right. Maybe even lower.

For me personally, what it boils down to is that I preferred the old financial position and fiscal responsibility of the previous chairman, but I far prefer the ideas, the willingness to invest, the calibre of player we are targeting and communication of the current.

So I am literally that previous chairman was as responsible on exit as he was during his tenure and there’s a reasonable and achievable plan, with the necessary protections, sat behind this takeover.

[dsr]

They've lent to ALK (or as CP says one of the holding companies) secured on the asset they're using the loan to buy. There's a huge difference between doing that and lending to a football club to spend on players.

I wish people would stop conflating ALK's debt with BFC's

That's right. If they had lent the money to Burnley FC, then Burnley FC could have used it to strengthen the squad. They would have had to pay it back eventually, but they would have had the benefit of the money.

What this loan is, is a loan to ALK who have no readily disposable assets, and Burnley FC have agreed that if ALK can't find the cash, then Burnley FC will pay it back. If we get relegated, ALK will certainly not have the money and Burnley FC will have to pay the loan just as if it was our own loan. BFC pay it back, but without the benefit of paying it back in the first place.

I think that's where you're at cross purposes with many of us. You're not looking at possibilities and probabilites, you're just looking at today's position, and today's position is that we don't owe £60m Tomorrow, we might owe £60m, but that's tomorrow's problem. And, as you accurately say, this was not a loan to BFC and provides no benefit whatsoever to BFC.

[dsr]

But it isn't semantics, it's an important distinction.

The debt isn't on the club unless and until ALK are unable to repay it. I suspect it isn't repayable until ALK sells the club on, hopefully at a profit so, as long as things don't go tits up (which admittedly could be fairly likely in the event of relegation and failure to quickly get back up), it will never be a BFC debt.

The debt will have a fixed and fairly short date for repayment. These sort of high interest high risk loans are never open-ended.

[dsr]

But without the security being provided by the club, CV would not have got the loan. So tomatoes tomatoes for me, whatever corporate structure these things are wrapped up in.

Ultimately our previous owners could have raised funds using the same assets as security.

Our previous owners didn't need to raise funds. They could have used the £50m surplus swilling around in the bank and saved themselves the several million per year interest.

[ClaretPete001]

But it isn't semantics, it's an important distinction.

The debt isn't on the club unless and until ALK are unable to repay it. I suspect it isn't repayable until ALK sells the club on, hopefully at a profit so, as long as things don't go tits up (which admittedly could be fairly likely in the event of relegation and failure to quickly get back up), it will never be a BFC debt.

Equally, ALK could have financial problems unrelated to BFC and that could lead to non-payment of the debt to MSD.

In many ways it not being a debt of Burnley FC increases the clubs exposure but again we are getting away from the main point that there is a risk to the assets of Burnley FC.

I think we both agree on that point..!

[NewClaret]

Our previous owners didn't need to raise funds. They could have used the £50m surplus swilling around in the bank and saved themselves the several million per year interest.

No arguments from me there.

Many disagreed at the time & said it would be irresponsible of the Board not to retain the dry powder store. Yet by comparison to where we think we are today, I’m guessing most would prefer a smaller dry powder store without any debt.

[dsr]

If Dave Checketts owns SCP Worldwide, a company which purchased an NHL team in the St Louis Cardinals and was also part of an attempted take over of the then St Louis Rams (NFL) then surely there isn't a worry about money. He is also the CEO of a company worth $750 million.

Surely we're ok?

Or am I oversimplifying the complex?

ALK is a limited company. If the directors choose to pay ALK's loans, that is a personal decision out of the goodness of their hearts, and they have no legal obligation to.

Dave Checketts and anyone else who is involved are businessmen who have invested in BFC for profit. The cash put down was relatively small compared with the huge potential profit if the PL continues to increase in value and BFC are still part of the PL. They have no reason to pay more if the club gets relegated.

[Chester Perry]

You are a mine of information Chester - great stuff; however, unless I am misunderstanding I think much of the above seems to conflict with what you say earlier.

As you point out in the article there seems to have been a point where it became clear that the club was not an investable proposition and that the best way for the former owners to achieve a satisfactory sale price was a leveraged buy out. No one can believe that the former owners would regard that as a prudent or careful. if neither you nor I can see a sustainable business model then surely the previous owners could not either.

And again they have taken a considerable risk with the £68 million quid dependent upon survival.

Indeed the investment in playing assets dried up long before Covid. Additionally, when we were last promoted from the Premiership the club incurred relatively substantive losses much talked about in the media. Not careful or prudent either

Absolutely none of this seems to be careful or prudent nor does there seem to have been great risk to the former owners because whatever the size of the cash reserves it was enough to sustain the club for a period.

The problem as far as a I am concerned none of this makes much sense.

Not quite Pete

In the article I say that The ALK Three took advantage of circumstance, it was pretty obvious to observers that Dyche would walk at the end of his contract (or find a role elsewhere) if Garlick remained at the helm, none of the other directors had the means to buy Garlick out so it was down to who had offers on the table - Elkashashy partnered with the toxic Farnell and there have been so many dubious and ghostlike bids for teams in the England from the Middle East in the last decades that many prefer to steer clear. It seems that both old and new administrations had complete faith in his abilities,

That repeated stance of mine always throws up the issue of investment from those who find it difficult to accept - which again I have answered a number of times - just look at the wages + amortisation to revenue ratios (a truer cost of our football operations) over the last five sets of accounts it explains a lot when you consider there are other expenses and investments around the club too. Alternatively look at the operational profit numbers they are actually pretty marginal. Significant player investment could only happen with player trading and a combination of managerial reluctance and players determined to run down their contracts so they can boost the value of their next deal (which is now a definite trend across the game) made that extremely difficult.

Last summer saw the club, from an operational level, at its strongest position in years in terms of getting new players in. Wages had been trimmed significantly and there were no outstanding transfer payments left. Also amortisation had been brought down to possibly less than £25m, with revenues forecast to increase significantly (matchday, sponsorship and no more rebates to pay) that brought the opportunity to spend - I was forecasting at least £40m for players on four year deals more if the deals were longer (which I think Cornet and Collins are). I was also arguing in the Summer of 2020 that if there had been no Covid the club were well aligned for a similar spend, the future outlook and adjusted budget forecasts ended that.

[Chester Perry]

The debt will have a fixed and fairly short date for repayment. These sort of high interest high risk loans are never open-ended.

The debt to MSD is due to be repaid five years after the final payment is made to the previous 7 major shareholders for the 84% transaction - it is clearly stated in the offer letter to the small shareholders. Which means if that final date of the initial agreement is changed then it has to be with the blessing of MSD (that may not be necessary for the interim ones), probably at an additional cost. Which given all the information we have collated that the principal is currently due in late 2028 early 2029

It is notable that when MSD put their loans on the markets they afford themselves some leeway by putting additional length in the deal, giving them wriggle room should delays be experienced

[aggi]

ALK is a limited company. If the directors choose to pay ALK's loans, that is a personal decision out of the goodness of their hearts, and they have no legal obligation to.

Dave Checketts and anyone else who is involved are businessmen who have invested in BFC for profit. The cash put down was relatively small compared with the huge potential profit if the PL continues to increase in value and BFC are still part of the PL. They have no reason to pay more if the club gets relegated.

Again, we don't know that. It wouldn't be a surprise to see some personal guarantees in there too.

Obviously if it does come to the point that the club ends up becoming liable for the debts that ALK have then Pace et al will have lost any money that they invested.

[Chester Perry]

If Dave Checketts owns SCP Worldwide, a company which purchased an NHL team in the St Louis Cardinals and was also part of an attempted take over of the then St Louis Rams (NFL) then surely there isn't a worry about money. He is also the CEO of a company worth $750 million.

Surely we're ok?

Or am I oversimplifying the complex?

Which company is that and is it his?

He was fronting a bid for the St Louis Rams - his experience gives credibility to the NFL as to how the franchise would be managed, it is very much unclear how big his share of the bid was - that bid ended because one of the main backers turned out to be quite toxic on a reputational front. it is not unusual in the US for such partnerships - look at FSG (Red Sox and Liverpool) many believe it is just a couple of individuals when the reality is that 20 family offices are involved in the ownership group

Checketts had the Cardinals franchise taken off him by the league because he did not have the funds they deemed necessary to be competitive. Then league then managed the sale of that franchise, deciding who would be the next owner and at what price not Checketts.

Checketts stopped investing in Real Salt Lake (he had reach his ceiling of ability and was pushed out by the partner he brought in for that reason.

The reason very rich people get more wealthy is not because they invest their own money but that they can borrow money at rates that are low enough to then generate significant returns which increase their wealth. The deal with MSD does not appear match that pattern.