ALK Capital or Farnell/Elkashashy takeover

[dsr]

I thought it had been said that the 112m consisted of 65m (MSD) + 37m (deducted from cash balance) + 10m intercompany loan to holding company?

That was how the loan arose. But it takes on its own existence after that - just because BFC borrowed money from MDS to pay for Pace's share purchase doesn't mean that we can't repay it from sale of players. (We certainly can't expect to repay it from getting money back off Pace!)

[Chester Perry]

I thought it had been said that the 112m consisted of 65m (MSD) + 37m (deducted from cash balance) + 10m intercompany loan to holding company?

Technically it is :
- a £53m loan from the holding company (Burnley FC Holdings Limited)
- A £37m loan from the club (Burnley Football and Athletic Company Limited)
- A further £10m loan from the club (Burnley Football and Athletic Company Limited)

[Chester Perry]

That was how the loan arose. But it takes on its own existence after that - just because BFC borrowed money from MDS to pay for Pace's share purchase doesn't mean that we can't repay it from sale of players. (We certainly can't expect to repay it from getting money back off Pace!)

that certainly how the Offer Letter to the small Shareholders and the last accounts would have us understand it

[Chester Perry]

that certainly how the Offer Letter to the small Shareholders and the last accounts would have us understand it

From the Offer Letter

“It is intended that this intercompany balance [the £65m loan from MSD forwarded to VSL] and the debt outstanding in respect of the BFC Funds will be cleared and settled in full through additional equity funding, or alternatively via funds from additional capital sources and/or other commercial activities.”

from the accounts
Burnley FC Holdings Limited Notes to the Financial Statements for the year ended July 31 2021
2. Judgements and key sources of estimation uncertainty
Recoverability of group balances

(Para 2.) The balance can potentially be settled by various means, and the group’s reserves are sufficient to enable a significant proportion of the balance to be settled by way of dividends if required. In such case, the financial performance of The Burnley Football & Athletic Company Limited may impact the extent to which, the timing in which, the balance is recoverable in this manner, as this could affect the likelihood of future dividends taking place. With this in mind the balance will be periodically reviewed for indicators of impairment going forward, with adjustments made in respect of any impairment indicators should they arise.

[Big Vinny K]

By selling our best players?
Which other club in world football is selling their best players to pay for a new chairman? Why is the club paying for ALK's shares? it's insanity

We are not selling our best players to pay for a new chairman.
We are selling our best players because we have been relegated and our financial obligations since the takeover could not be met without doing this.
The structure of the take over was something agreed by the previous owners and the new ones.
Absolutely nothing as fans we can do to stop somebody selling his share in the club by whatever method he chooses to.
And absolutely nothing we can do to stop someone like Alan Pace and everyone else involved funding their purchase in whatever way they want.

In terms of being the only club in the world doing this do me a favour. Virtually every club that has been relegated from the Premier League sells their best players because they have a new financial model that they have to operate in. Whether it’s servicing debt, financial fair play or their sugar daddy owners don’t fancy losing £50m plus a season….it happens with virtually every club. And on top of that we know that many of the best players and agents will push for the moves.

[joey13]

We are not selling our best players to pay for a new chairman.
We are selling our best players because we have been relegated and our financial obligations since the takeover could not be met without doing this.
The structure of the take over was something agreed by the previous owners and the new ones.
Absolutely nothing as fans we can do to stop somebody selling his share in the club by whatever method he chooses to.
And absolutely nothing we can do to stop someone like Alan Pace and everyone else involved funding their purchase in whatever way they want.

In terms of being the only club in the world doing this do me a favour. Virtually every club that has been relegated from the Premier League sells their best players because they have a new financial model that they have to operate in. Whether it’s servicing debt, financial fair play or their sugar daddy owners don’t fancy losing £50m plus a season….it happens with virtually every club. And on top of that we know that many of the best players and agents will push for the moves.

Norwich and Watford haven’t sold their best players .

[GodIsADeeJay81]

Not yet they haven't, but they've both had approx 20 players leave the club, mainly freebies, some sold a few loaned and both clubs have signed a very small number.

As yet they won't need to sell their best players with so many going out the door and bringing their wage bills down.

[daveisaclaret]

We are not selling our best players to pay for a new chairman.
We are selling our best players because we have been relegated and our financial obligations since the takeover could not be met without doing this.

We are not selling our best players to pay for a new chairman, we're selling them because of the new chairman's idea of how to run a football club in his own interest after overseeing a relegation.

What's the difference?

[RVclaret]

Norwich and Watford haven’t sold their best players .

Watford have sold Sissoko and Cucho Hernandez, while Dennis & Sarr have not taken part in pre season friendlies / didn’t go to their training camp, as they are looking to move. King and Foster have been let go. In fact, they’ve lost 10 players so far from last season. There’s also suggestions their best centre back is on his way out (Samir).

[Paul Waine]

By selling our best players?
Which other club in world football is selling their best players to pay for a new chairman? Why is the club paying for ALK's shares? it's insanity

Simply the nature of (majority) ownership. ALK valued the club at a value that was sufficient to reach agreement with the previous majority owners to acquire the previous owners' shares, thus replacing them as majority owners. They've also made decisions and taken actions to facilitate how ALK will finance those purchases. ALK have expressed their ambitions for Burnley Football Club. If those ambitions are realised they will have been successful with their purchase - and we, as fans of the club, will been delighted with the club's footballing successes.

We all like to express our views on football teams' and individual footballer's performances. Some are happy to express their views on wages paid to footballers and the incoming and outgoing transfer fees paid (or not paid) for those footballers.

Some take a bigger step and put the money up to become owners of a football club. It's all part of the same process.

[joey13]

Watford have sold Sissoko and Cucho Hernandez, while Dennis & Sarr have not taken part in pre season friendlies / didn’t go to their training camp, as they are looking to move. King and Foster have been let go. In fact, they’ve lost 10 players so far from last season. There’s also suggestions their best centre back is on his way out (Samir).

That’s 1 best player from Watford , and none from Norwich whatever is said you will always defend Pace and Co so what’s the point .

[dsr]

Simply the nature of (majority) ownership. ALK valued the club at a value that was sufficient to reach agreement with the previous majority owners to acquire the previous owners' shares, thus replacing them as majority owners. They've also made decisions and taken actions to facilitate how ALK will finance those purchases. ALK have expressed their ambitions for Burnley Football Club. If those ambitions are realised they will have been successful with their purchase - and we, as fans of the club, will been delighted with the club's footballing successes.

We all like to express our views on football teams' and individual footballer's performances. Some are happy to express their views on wages paid to footballers and the incoming and outgoing transfer fees paid (or not paid) for those footballers.

Some take a bigger step and put the money up to become owners of a football club. It's all part of the same process.

Shame ALK didn't take that bigger step and put up the money.

What happens if their ambitions aren't realised?

[ClaretPete001]

I thought it had been said that the 112m consisted of 65m (MSD) + 37m (deducted from cash balance) + 10m intercompany loan to holding company?

DSR is correct. And Paul is only half right.

The £112 million is not really a loan - it is the money ALK took out of the club to pay the former owners.

Paul is correct in the sense that the money is ALKs and the loan is notional.

The £112 million has nothing to do with MSD.

[Paul Waine]

I'm not quite sure where you get the idea that "it doesn't matter" what the loan is. If ALK go belly up because they have liabilities and no assets, then Burnley FC's £112m goes belly up as well. But the amounts BFC still owe - they don't go belly up. I think what you mean is that it doesn't matter to ALK if they can't pay their loan to BFC because we can't force them to, and it doesn't matter to ALK if Burnley have to sell all their PL players to repay the MSD loan. But it matters to supporters of BFC, even if we don't have a financial interest in whether the club survives.

But we all know that ALK has the asset that is Burnley Football Club. So long as BFC has a positive value, that the club's assets exceed the 3rd party liabilities, whether player wages or MSD loan, there is nothing that could make ALK go bust.

The club is not in the Premier League this season. Hence many of the Premier League players have left. Those that weren't ooc are being sold to PL clubs. Those that remain will be on lower wages, just as described in the club's annual report - 45% lower if Peter Crouch's sharing of his Stoke contract is, as he suggested, typical. New younger players have been signed, some on loan. Vincent Kompany is the club's new manager. We look forward to seeing how the club performs under a new manager, new system and a large number of new players.

[ClaretPete001]

We are not selling our best players to pay for a new chairman.
We are selling our best players because we have been relegated and our financial obligations since the takeover could not be met without doing this.
The structure of the take over was something agreed by the previous owners and the new ones.
Absolutely nothing as fans we can do to stop somebody selling his share in the club by whatever method he chooses to.
And absolutely nothing we can do to stop someone like Alan Pace and everyone else involved funding their purchase in whatever way they want.

In terms of being the only club in the world doing this do me a favour. Virtually every club that has been relegated from the Premier League sells their best players because they have a new financial model that they have to operate in. Whether it’s servicing debt, financial fair play or their sugar daddy owners don’t fancy losing £50m plus a season….it happens with virtually every club. And on top of that we know that many of the best players and agents will push for the moves.

This is substantively not true. As a number of those who have liked this particular post have been only too keen to point out the loss of TV revenue has been more than likely matched by the reduction in wages as a consequence of relegation.

A substantive amount of cash has been taken from the business - well in excess of £50 million, which would have safeguarded the squad.

And you can't conflate business models with the selling of players. The model used to buy this club is unusual in the Premier League and the EFL particularly for a club of our size for good reason because our underlying revenue outside of the PL is not enough to fund it.

[Newcastleclaret93]

This is substantively not true. As a number of those who have liked this particular post have been only too keen to point out the loss of TV revenue has been more than likely matched by the reduction in wages as a consequence of relegation.

A substantive amount of cash has been taken from the business - well in excess of £50 million, which would have safeguarded the squad.

And you can't conflate business models with the selling of players. The model used to buy this club is unusual in the Premier League and the EFL particularly for a club of our size for good reason because our underlying revenue outside of the PL is not enough to fund it.

Very well put.

People will try spin it whatever they can but fundamentally your point is as accurate as it comes.

[ClaretPete001]

But we all know that ALK has the asset that is Burnley Football Club. So long as BFC has a positive value, that the club's assets exceed the 3rd party liabilities, whether player wages or MSD loan, there is nothing that could make ALK go bust.

The club is not in the Premier League this season. Hence many of the Premier League players have left. Those that weren't ooc are being sold to PL clubs. Those that remain will be on lower wages, just as described in the club's annual report - 45% lower if Peter Crouch's sharing of his Stoke contract is, as he suggested, typical. New younger players have been signed, some on loan. Vincent Kompany is the club's new manager. We look forward to seeing how the club performs under a new manager, new system and a large number of new players.

There is nothing that could make ALK go bust as long as they operate within the constraints of a small town club budget and use all the profits from the PL league years to pay off the debt.

You are back to New York investment bankers as football messiahs again Paul, which they may well be the case but it seems unlikely.

[Chester Perry]

Technically it is :
- a £53m loan from the holding company (Burnley FC Holdings Limited)
- A £37m loan from the club (Burnley Football and Athletic Company Limited)
- A further £10m loan from the club (Burnley Football and Athletic Company Limited)

not quite sure how I typed £53m when I meant £65m

[dsr]

But we all know that ALK has the asset that is Burnley Football Club. So long as BFC has a positive value, that the club's assets exceed the 3rd party liabilities, whether player wages or MSD loan, there is nothing that could make ALK go bust.

The club is not in the Premier League this season. Hence many of the Premier League players have left. Those that weren't ooc are being sold to PL clubs. Those that remain will be on lower wages, just as described in the club's annual report - 45% lower if Peter Crouch's sharing of his Stoke contract is, as he suggested, typical. New younger players have been signed, some on loan. Vincent Kompany is the club's new manager. We look forward to seeing how the club performs under a new manager, new system and a large number of new players.

So as long as Burnley FC is worth at least £1, ALK will be able to sell Burnley FC and repay the £112m loan with the proceeds? Try again.

ALK has one significant asset, and that's BFC. It has at least two significant liabilites, and they are Garlick and the BFC loan. It is nonsense to say that as long as BFC is not insolvent, then ALK is not insolvent. The only way ALK could repay their £180m or so liabilities, is to sell BFC for £180m or so. Do you think there are any buyers at that price?

[Paul Waine]

There is nothing that could make ALK go bust as long as they operate within the constraints of a small town club budget and use all the profits from the PL league years to pay off the debt.

You are back to New York investment bankers as football messiahs again Paul, which they may well be the case but it seems unlikely.

Hi Pete, how much profit has the club accumulated during the "Premier League years," Pete? Do we count just the past 6 seasons, or include the 2014/15 season, or even go back as far as 2009/10? And, include the Championship years in this number. Remember, most of the tv money every season goes on player wages.

"You are back to New York investment bankers as football messiahs again." A curious thing for you to say, Pete. Do any of my recent posts mention the backgrounds/previous careers/experience of our current majority shareholders?

[quoonbeatz]

So as long as Burnley FC is worth at least £1, ALK will be able to sell Burnley FC and repay the £112m loan with the proceeds? Try again.

No, £1 wouldn't be likely to cover the 3rd party liabilities.

[Big Vinny K]

Norwich and Watford haven’t sold their best players .

They sold them last time - Buendia etc
There’s a reason they are a yo yo club - spend very little on players and sell any good ones eventually
Watford linked with losing Dennis, Sarr and others
Plus they have operated a lot in the loan market in recent years and dodgy deals with their feeder clubs

[Big Vinny K]

This is substantively not true. As a number of those who have liked this particular post have been only too keen to point out the loss of TV revenue has been more than likely matched by the reduction in wages as a consequence of relegation.

A substantive amount of cash has been taken from the business - well in excess of £50 million, which would have safeguarded the squad.

And you can't conflate business models with the selling of players. The model used to buy this club is unusual in the Premier League and the EFL particularly for a club of our size for good reason because our underlying revenue outside of the PL is not enough to fund it.

Which bit of my post is not true ?
I have basically said that the club now need to operate with the budget constraints it is now faced with - whether that’s servicing its new debt, repayment of loans, etc etc.
In addition to this we have had other one off expenses like paying or Dyche and his team.
The reduction in our wage bill was not going be enough to cover the new commitments that were not there under the previous owners.

[ClaretPete001]

Hi Pete, how much profit has the club accumulated during the "Premier League years," Pete? Do we count just the past 6 seasons, or include the 2014/15 season, or even go back as far as 2009/10? And, include the Championship years in this number. Remember, most of the tv money every season goes on player wages.

"You are back to New York investment bankers as football messiahs again." A curious thing for you to say, Pete. Do any of my recent posts mention the backgrounds/previous careers/experience of our current majority shareholders?

Again you are hung by your own petard Paul either the club has been able to afford to pay £50 million on non-trading related activities or it can't and will go bust.

If you are suggesting it won't go bust then by inference you are suggesting £50 million could have been invested in the squad.

You haven't mentioned it in recent posts but I didn't realise you put time constraints on your views Paul. I shall give the matter more consideration in future.

[RVclaret]

DSR is correct. And Paul is only half right.

The £112 million is not really a loan - it is the money ALK took out of the club to pay the former owners.

Paul is correct in the sense that the money is ALKs and the loan is notional.

The £112 million has nothing to do with MSD.

Chester just said 65m of the 112m is from the holding company (Burnley FC holdings limited), isn’t this the MSD loan? Or it’s just a coincidence that 65m in this case is the exact same figure borrowed from MSD?

[RVclaret]

That’s 1 best player from Watford , and none from Norwich whatever is said you will always defend Pace and Co so what’s the point .

Norwich fans were angry and protesting at their board after their relegation after another shocking ‘attempt’ at staying in the league. They didn’t do much business last summer and probably don’t have as much to balance up this summer. Arguably they have far less players who are considered Prem quality anyway, who would teams even want? And now the question is have the players and fans got it in them to ‘go again’.

[KRBFC]

pretty sure we would be doing that anyway, isn't that the model, buy cheap sell for a profit ?

But the sale money would remain in the club and there for reinvestment.

[ClaretPete001]

Which bit of my post is not true ?
I have basically said that the club now need to operate with the budget constraints it is now faced with - whether that’s servicing its new debt, repayment of loans, etc etc.
In addition to this we have had other one off expenses like paying or Dyche and his team.
The reduction in our wage bill was not going be enough to cover the new commitments that were not there under the previous owners.

Without the context of the "new chairman" point you argued against all that is true.

However, the point that all the debt incurred has done is buy in a new management team (euphemistically described as "new Chairman") is substantively true.

However, I may have misunderstood your point.

[KRBFC]

Simply the nature of (majority) ownership. ALK valued the club at a value that was sufficient to reach agreement with the previous majority owners to acquire the previous owners' shares, thus replacing them as majority owners. They've also made decisions and taken actions to facilitate how ALK will finance those purchases. ALK have expressed their ambitions for Burnley Football Club. If those ambitions are realised they will have been successful with their purchase - and we, as fans of the club, will been delighted with the club's footballing successes.

We all like to express our views on football teams' and individual footballer's performances. Some are happy to express their views on wages paid to footballers and the incoming and outgoing transfer fees paid (or not paid) for those footballers.

Some take a bigger step and put the money up to become owners of a football club. It's all part of the same process.

What money did ALK put up to become owners? What money have they invested from their own pockets?

ALK will not finance the purchases though, will they? Infact, ALK aren't financing anything at all, BFC is.

Those loans are secured against the clubs assets, ALK are selling players (who were here before they arrived) to pay for loans, taken out to finance their takeover. To what benefit of the club? We sold Wood invested 50% and the rest? disappeared into a blackhole, you can't tell me that benefits the club.

[KRBFC]

We are not selling our best players to pay for a new chairman.
We are selling our best players because we have been relegated and our financial obligations since the takeover could not be met without doing this.
The structure of the take over was something agreed by the previous owners and the new ones.
Absolutely nothing as fans we can do to stop somebody selling his share in the club by whatever method he chooses to.
And absolutely nothing we can do to stop someone like Alan Pace and everyone else involved funding their purchase in whatever way they want.

In terms of being the only club in the world doing this do me a favour. Virtually every club that has been relegated from the Premier League sells their best players because they have a new financial model that they have to operate in. Whether it’s servicing debt, financial fair play or their sugar daddy owners don’t fancy losing £50m plus a season….it happens with virtually every club. And on top of that we know that many of the best players and agents will push for the moves.

But morally, there's a difference between selling your best players to run the club and balance the books and selling your best players to finance debts to pay for a new chairman. I had no issue with the club selling Blake, Ade, Chaplow, Lafferty, Andy Gray and the rest to balance the books.

I have no issue with relegated sides losing their best players, that's inevitable like it was when Ings left for a compensation fee and Tripps left on a low release clause. That money however remains in the club, a huge difference between being sunk into a blackhole to pay for new owners.

[Paul Waine]

So as long as Burnley FC is worth at least £1, ALK will be able to sell Burnley FC and repay the £112m loan with the proceeds? Try again.

ALK has one significant asset, and that's BFC. It has at least two significant liabilites, and they are Garlick and the BFC loan. It is nonsense to say that as long as BFC is not insolvent, then ALK is not insolvent. The only way ALK could repay their £180m or so liabilities, is to sell BFC for £180m or so. Do you think there are any buyers at that price?

Hi dsr, you've missed off the bit where I said "that the club's assets exceed the 3rd party liabilities, whether player wages or MSD loan, there is nothing that could make ALK go bust."

Thus, if in your scenario the club is worth "at least £1" then we can be sure that the MSD loan, currently £45 million, will have been repaid. MSD won't allow the club's assets to be run down to such an extent that there is little margin between their outstanding loan and the club's assets.

Chester Perry has quoted above the accounting opinion expressed in the club's accounts about the "recoverability" of the intercompany loans due from ALK entities to the club. This is part of the "going concern" accounting treatment test. The accounts state that the club has sufficient reserves to be able to "recover" these loans by declaring dividends - such that there is no "going concern" concern.

As for the further instalments due to the previous shareholders, I've expressed my doubts that Mike Garlick et al will be due the full value of a Premier League club, when the club hasn't maintained it's Premier League status for sufficient number of seasons after selling their shares. If I'm correct, ALK's liabilities won't be as high as the £180 million you quote. If I'm not correct and these amounts remain unpaid by ALK, I don't see that there is any way that the previous shareholders could enforce payment, though they may be able to enforce return of such proportion of the shares represented by the amounts that remained outstanding. I believe something like this is referenced in the Offer to Small Shareholders Letter... Effectively, the previous shareholders will be the "buyers at that price" you ask about - getting back that proportion of their shares.

[ClaretPete001]

Chester just said 65m of the 112m is from the holding company (Burnley FC holdings limited), isn’t this the MSD loan? Or it’s just a coincidence that 65m in this case is the exact same figure borrowed from MSD?

It's not co-incidence.

The club borrowed £65 million from MSD so that ALK could take it out of the club to pay the former owners.

The point is the liability for the MSD loan is with the club not ALK. The club has to pay the £65 million or it will lose Turf Moor, Gawthorpe and all of its assets.

The £65 million ALK borrowed from Burnley has nothing to do with MSD it is simply the money ALK took to the pay the former owners and is unlikely ever to be paid back. In other words, it is likely a loan with no conditions attached to it.

[Big Vinny K]

Without the context of the "new chairman" point you argued against all that is true.

However, the point that all the debt incurred has done is buy in a new management team (euphemistically described as "new Chairman") is substantively true.

However, I may have misunderstood your point.

I’m saying the club is operating under a new financial framework and that selling its best players is not to pay for a new chairman but to service / pay for a very different set of costs and commitments than existed under the previous owners (and with after relegation a very different level of revenue too).
Most clubs that are relegated have always faced similar challenges - sponsorship revenue falling, TV income etc and often when the clubs are debt ridden the debt providers will have clauses relating to relegation to reduce their exposure.

And in our case it’s made significantly harder because we got relegated in the year after a take over that has clearly burdened the club with tens of millions of costs we did not have previously.

[Chester Perry]

Chester just said 65m of the 112m is from the holding company (Burnley FC holdings limited), isn’t this the MSD loan? Or it’s just a coincidence that 65m in this case is the exact same figure borrowed from MSD?

Club has the £65m loan from MSD, and then forward loaned the whole sum to VSL, Burnley Football and Athletic Club Limited has the 'privilege' (sic) of paying the interest on the MSD loan and probably has also paid the the reduction on capital this summer along with any penalties charged (if indeed they were charged)

It seems to me that the original intention was for the respective balances balances were to be aligned via a dividend paid to VSL from Burnley Football and Athletic Club Limited which would be returned to the Burley FC Holdings Limited in the form of loan repayment - however paying dividends this summer - though possible, would also mean paying dividends to all the other shareholders too, so I am GUESSING that the £20m received by MSD could be matched with an equal value impairment on the loan from Burnley FC Holdings - there is scope to manage that in the current year accounts that close on Sunday.

[KRBFC]

I wonder what happens if we aren't promoted soon, look at the figures the Venkys are paying out of their own pocket to keep Rovers semi competitive. ALK seemingly don't have any money to cover losses, a ton of supporters on club credit lowering the income, dwindling parachute payments. Fortunes still needing to be stripped from the club.

[Chester Perry]

I wonder what happens if we aren't promoted soon, look at the figures the Venkys are paying out of their own pocket to keep Rovers semi competitive. ALK seemingly don't have any money to cover losses, a ton of supporters on club credit lowering the income, dwindling parachute payments. Fortunes still needing to be stripped from the club.

The club credit has to be paid for by VSL- which is why Paul Waine speculated (with sound reasoning) that the £10m advance was for the purpose of meeting the cost of by all those shares from the small shareholders

[KRBFC]

Nobody has even mentioned further money owed to the outgoing directors, I thought that figure was supposedly around £60m. People speculated it would become £0 if we were relegated, there is 0 proof of that though. Others speculated if ALK missed repayments, Garlick would regain control. Do we have any clarity on this at all?

[Paul Waine]

Again you are hung by your own petard Paul either the club has been able to afford to pay £50 million on non-trading related activities or it can't and will go bust.

If you are suggesting it won't go bust then by inference you are suggesting £50 million could have been invested in the squad.

You haven't mentioned it in recent posts but I didn't realise you put time constraints on your views Paul. I shall give the matter more consideration in future.

Pete, you said "You are back ...... again" - and this is why I asked where I'd mentioned Alan Pace's financial experience in recent posts?

I've no problem you spending time looking up my earlier posts. I don't mind at all. (I don't promise to be always consistent. Context may be important).

See above for my thoughts on the club and ALK finances. I don't believe I've made any comments about the quantum of funds available to invest in the squad. I think we all know that the club's model is "buy and trade" - I believe it has always been "buy and trade" ever since the maximum wage was abolished in the early 60s. The Premier League tv money has never been sufficient to maintain a "small town club" such as Burnley.

[RVclaret]

I wonder what happens if we aren't promoted soon, look at the figures the Venkys are paying out of their own pocket to keep Rovers semi competitive. ALK seemingly don't have any money to cover losses, a ton of supporters on club credit lowering the income, dwindling parachute payments. Fortunes still needing to be stripped from the club.

Most, if not all, Championship clubs run on operating losses. Don’t forget the Venky’s didn’t manage things very well for quite some time, the run was awfully run from top to bottom. They had a huge wage bill which was mismanaged.

The trick is smart recruitment, or an academy that produces, so that there’s always saleable assets - we’d end up similar to Swansea right now, they’ve just had to sell Flynn Downes for 10m and their biggest spend of the summer will likely be Harry Darling from MK Dons for 1.5m. But yet they’ve got a nice philosophy in the club, a young modern manager and they are a dark horse for the play offs I reckon.

In my opinion, that’s why ALK and VK are stacking the team with as much young talent now as possible, to ensure, as Kompany said himself, there is a sustainability to how we do things, and we can remain competitive for the years that follow, should we not be promoted immediately.

[Chester Perry]

I’m saying the club is operating under a new financial framework and that selling its best players is not to pay for a new chairman but to service / pay for a very different set of costs and commitments than existed under the previous owners (and with after relegation a very different level of revenue too).
Most clubs that are relegated have always faced similar challenges - sponsorship revenue falling, TV income etc and often when the clubs are debt ridden the debt providers will have clauses relating to relegation to reduce their exposure.

And in our case it’s made significantly harder because we got relegated in the year after a take over that has clearly burdened the club with tens of millions of costs we did not have previously.

The costs the previous ownership passed on were wages and running costs, all outstanding transfer payments have been made. Contractual provisions mean that all players signed by the previous owners had relegation clauses re wages - my opinion (not universally shared) is that our major signings last season (Wout and Max) did not have wage reduction clauses upon relegation (this is based on very different wording in the accounts around this point).

The previous ownership ensured they had reserves to help cover costs on relegation particularly so that the Academy could maintain its Cat 1 status. The new ownership initially borrowed circa £23m to initially fund the takeover with the intention of essentially flipping shares, by selling part of VSL to new investors and returning this money within the same financial year/ That plan failed and had continued to do so, hence further 'loans from the club by VSL - that and on the field failures explain better how we have got to where we are

[KRBFC]

Most, if not all, Championship clubs run on operating losses. Don’t forget the Venky’s didn’t manage things very well for quite some time, the run was awfully run from top to bottom. They had a huge wage bill which was mismanaged.

The trick is smart recruitment, or an academy that produces, so that there’s always saleable assets - we’d end up similar to Swansea right now, they’ve just had to sell Flynn Downes for 10m and their biggest spend of the summer will likely be Harry Darling from MK Dons for 1.5m. But yet they’ve got a nice philosophy in the club, a young modern manager and they are a dark horse for the play offs I reckon.

In my opinion, that’s why ALK and VK are stacking the team with as much young talent now as possible, to ensure, as Kompany said himself, there is a sustainability to how we do things, and we can remain competitive for the years that follow, should we not be promoted immediately.

Exactly my point, who covers these losses whilst repaying debts? ALK seemingly haven't got a pot to **** in. We better hope Scott Twine turns into Ronaldo.

[Big Vinny K]

The costs the previous ownership passed on were wages and running costs, all outstanding transfer payments have been made. Contractual provisions mean that all players signed by the previous owners had relegation clauses re wages - my opinion (not universally shared) is that our major signings last season (Wout and Max) did not have wage reduction clauses upon relegation (this is based on very different wording in the accounts around this point).

The previous ownership ensured they had reserves to help cover costs on relegation particularly so that the Academy could maintain its Cat 1 status. The new ownership initially borrowed circa £23m to initially fund the takeover with the intention of essentially flipping shares, by selling part of VSL to new investors and returning this money within the same financial year/ That plan failed and had continued to do so, hence further 'loans from the club by VSL - that and on the field failures explain better how we have got to where we are

Agreed but basically a completely different financial model under the new owners which carries far more risk than the previous model

[Paul Waine]

What money did ALK put up to become owners? What money have they invested from their own pockets?

ALK will not finance the purchases though, will they? Infact, ALK aren't financing anything at all, BFC is.

Those loans are secured against the clubs assets, ALK are selling players (who were here before they arrived) to pay for loans, taken out to finance their takeover. To what benefit of the club? We sold Wood invested 50% and the rest? disappeared into a blackhole, you can't tell me that benefits the club.

ALK put up enough of their own money to become the club's owners. That's all they needed to do. You or I, if we had enough personal wealth, could have competed to do the same. That's the privilege of ownership, being in control and deciding how to run the things that you own.

If you believe that ALK "aren't financing anything at all..." then you are suggesting that anyone without any personal wealth could buy and own the club. Do you think you could do it? I know I don't have the money and couldn't do it. (I'd be happy to be a member of the club's finance team, if they had the need for an "over 65" person on their team).

[RVclaret]

Exactly my point, who covers these losses whilst repaying debts? ALK seemingly haven't got a pot to **** in. We better hope Scott Twine turns into Ronaldo.

I’m sure there’s a plan. Much like I thought there’d be a plan on relegation, many didn’t, many thought s*** or bust etc. Kompany has bought into the plan and has praised the owners transparency in his dealings with them, while also stating the debt won’t be there forever. At the moment, we are the biggest spenders in the division and are a couple of players shy of having a very competitive, exciting team / squad. That’ll all do for me, for now.

[Chester Perry]

Nobody has even mentioned further money owed to the outgoing directors, I thought that figure was supposedly around £60m. People speculated it would become £0 if we were relegated, there is 0 proof of that though. Others speculated if ALK missed repayments, Garlick would regain control. Do we have any clarity on this at all?

I estimated the outstanding balance was £45m - £47m
depending on sources you will hear
- that the was an additional sum paid on the £11m due in March but paid late which enabled VSL to move out an end June payment of up to £26m to September
- The end of June payment was paid in full at the beginning of that month

I err to the former

as to the price reduction - the theory makes sense, it is a common business practise in takeovers for such a clause, just that no reference had been made to it from any source I have seen/heard

[KRBFC]

ALK put up enough of their own money to become the club's owners. That's all they needed to do. You or I, if we had enough personal wealth, could have competed to do the same. That's the privilege of ownership, being in control and deciding how to run the things that you own.

If you believe that ALK "aren't financing anything at all..." then you are suggesting that anyone without any personal wealth could buy and own the club. Do you think you could do it? I know I don't have the money and couldn't do it. (I'd be happy to be a member of the club's finance team, if they had the need for an "over 65" person on their team).

The difference between us and Pace is his contacts in finance, he rocked up, spent nothing out of his own pocket but had the contacts at MSD to turn us into Credit Card FC. If MSD said no when approached by Pace, he couldn't have taken over.

He bought a £170m football club with it's own money, it's absolutely genius for him, win win, he can't lose.

[Colburn_Claret]

This is substantively not true. As a number of those who have liked this particular post have been only too keen to point out the loss of TV revenue has been more than likely matched by the reduction in wages as a consequence of relegation.

A substantive amount of cash has been taken from the business - well in excess of £50 million, which would have safeguarded the squad.

And you can't conflate business models with the selling of players. The model used to buy this club is unusual in the Premier League and the EFL particularly for a club of our size for good reason because our underlying revenue outside of the PL is not enough to fund it.

You can't safeguard the squad. The reality is the players have a resale value, if we failed to cash in now, the players stayed and failed to bounce back, even more of those players would be ooc, free to talk to third parties, and they all would have their values drop as a result.
It's always painful as a fan to see your players, especially your best players leave, but it is a reality of the situation relegation brings. The fans would have been happy if we'd tried to hang on, but as a business decision it would have been a bad idea. Without the sales we wouldn't have this huge incoming of new, fresh, younger players, and God knows we needed it. To carry our aged squad for another season would just be pushing an even bigger problem further down the road, it's a gamble that fails far more often than it succeeds.

I'm not privy to what Alan Pace thinks, or does with the money. I just trust him to be doing what he thinks is best for the club, because there isn't a scenario whereby harming the club does him any favours in the long run, and I believe he is here for the long run. Whatever his plan is, it must have been good enough to impress VK, who had other offers on the table, but chose to try and create APs vision at Burnley.

[Paul Waine]

You can't safeguard the squad. The reality is the players have a resale value, if we failed to cash in now, the players stayed and failed to bounce back, even more of those players would be ooc, free to talk to third parties, and they all would have their values drop as a result.
It's always painful as a fan to see your players, especially your best players leave, but it is a reality of the situation relegation brings. The fans would have been happy if we'd tried to hang on, but as a business decision it would have been a bad idea. Without the sales we wouldn't have this huge incoming of new, fresh, younger players, and God knows we needed it. To carry our aged squad for another season would just be pushing an even bigger problem further down the road, it's a gamble that fails far more often than it succeeds.

I'm not privy to what Alan Pace thinks, or does with the money. I just trust him to be doing what he thinks is best for the club, because there isn't a scenario whereby harming the club does him any favours in the long run, and I believe he is here for the long run. Whatever his plan is, it must have been good enough to impress VK, who had other offers on the table, but chose to try and create APs vision at Burnley.

Great post, Colburn. Little bit to add: Vincent Kompany studied for an MBA at Manchester Business School while he was playing for City. An impressive qualification for anyone to gain. More so, for someone playing elite level professional football. Vincent Kompany, with his MBA, is very well qualified to understand Alan Pace's business plan and Burnley's finances. It should give us all a lot of confidence that Vincent Kompany understands the club's finances and has chosen to become Burnley's manager. (Of course, Alan Pace also has an MBA).

[Paul Waine]

The costs the previous ownership passed on were wages and running costs, all outstanding transfer payments have been made. Contractual provisions mean that all players signed by the previous owners had relegation clauses re wages - my opinion (not universally shared) is that our major signings last season (Wout and Max) did not have wage reduction clauses upon relegation (this is based on very different wording in the accounts around this point).

The previous ownership ensured they had reserves to help cover costs on relegation particularly so that the Academy could maintain its Cat 1 status. The new ownership initially borrowed circa £23m to initially fund the takeover with the intention of essentially flipping shares, by selling part of VSL to new investors and returning this money within the same financial year/ That plan failed and had continued to do so, hence further 'loans from the club by VSL - that and on the field failures explain better how we have got to where we are

Hi CP, is this new information re "initially borrowed circa £23m" etc? Or, am I mis-reading and you are referring to the £37 million loaned by BFC to ALK/VSL?

My expectation of ALK/VS US funding plan - based on seeing many similar structures used across many US business sectors - is that ALK is funded by Alan Pace and his close colleagues and VS US is set up alongside ALK to bring in additional investors. VS US would sell new shares (not "flip" existing shares) to the new investors as they subscribed for the shares. (The US sportsman introduced to Turf Moor in, from memory, Nov 2020, would be one such investor in VS US).

Re player relegation clauses, I'm unsure whether Wout Weghorst did or didn't have a relegation clause. Maybe he did, but also had the commitment to go out on loan on his original Premier League wages, so that he wasn't playing in the Championship on significantly higher wages than his 1st team squad colleagues. WW was signed in Jan when BFC were firmly in the relegation position. Maxwel Cornet may be in a different position. He was signed in August and no one was speaking of the risk of relegation for BFC at that time. It's likely that his BFC wage was higher than he was on in France and higher than he was being offered to move to Germany. It's possible therefore that the Premier League standard (Peter Crouch says relegation clauses are standard) would be accepted in Cornet's contract alongside the modest release clause that would apply on relegation.

As for the change in wording in the accounts, maybe this is no more than creating the space for flexibility with the contracts, flexibility that was being applied imaginatively with WW and MC and may be a good option to have in other circumstances.

[Paul Waine]

I estimated the outstanding balance was £45m - £47m
depending on sources you will hear
- that the was an additional sum paid on the £11m due in March but paid late which enabled VSL to move out an end June payment of up to £26m to September
- The end of June payment was paid in full at the beginning of that month

Hi CP, are these the further instalments you are referring to? Is any of this public domain, anywhere?