KateR wrote: ↑Wed Feb 24, 2021 3:30 pm
dsr/Paul.
maybe I missing something or I am over thinking how this works but I don't think I'm nitpicking, consequently I would like your thoughts/feedback on the following:
ALK (whomever the entity taking the loan is) takes a loan, whatever the amount but for now let's 60 million.
BFC has money in the bank whatever the amount is but let's say 50 million
Therefore, there is now at a point in time 110 million for the new owners, maybe a millisecond or whatever before the transfer funds to MG & Co.
A payment is made from the 110 million to MG & Co, this payment is not 200 million so for now let's just say there is a contract/promissory note for 150 million, can be any number, whatever they decided upon, this let's say was in the form of 4 payments over a certain time period, yet unknown but for now let's guess at 5 years with a 20% equal payment.
December 31 2020 30 million is paid to MG & Co but they also retain shareholdings until a final payment is made in 5 years, where the final shareholdings are transferred to the new owners. Under a formal contract agreement the new owners become the chairman and can change the direction of the club.
From the 110 million only 30 has been paid (it could be a larger amount for the first payment with the remainder spread of 5 years or even 3 years)
This leaves a larger amount of funds for the new owners to play with, clearly not aimed at buying first team players as January proved, but they have the funds available to make the changes they believe will improve the club and increase revenues.
The numbers above are irrelevant in terms of accuracy but what is relevant is the structure of the deal and how payments are made. Clearly the loan & money in the bank were never going to cover the cost of the purchase, it is a staged process, with full buy in from the previous owners, in terms of they believed the proposed buyout business plan could work. Clearly it was not a thank you and walk with all the funds for BFC in there bank accounts, M Ashley for example had the problem selling Newcastle for the full amount and has come around to the belief that only a staged/gated payout will work.
Clearly as we all know the operating costs for BCF will continue as they were from 2020, however in 2021 our operating costs can be expected to increase due to the new owners involvement.
The incoming revenue from 2020 through 2021 will be the same, except where the new owners can generate revenue beyond what was already in place when they made the purchase, TV, adverizing, merchandise sales etc.
Today there is a loan to service, additional costs for the new owners over and above what was in 2020, 2022 payments to MG & Co. or the second staged payment.
You can not grow revenues in a few months, some new initiatives will take a year or two to take off, hence staged payments to MG & Co plus staged loan payments, therefore it's a race to grow revenue to a point that it will be higher than the outgoing addition costs of operation. There will be a tipping point/pivot somewhere down the line regarding this but I would not have thought before two years.
Just some of my thoughts and why I say what I say, there is rationale behind it, now it could be an absolute rubbish rationale but............
This was not a simple loan, thank you, transfer 100+ million to the previous owners, do you actually believe they took approx 150 - 180 million because I'm positive they didn't.
[NOTE - where I refer to ALK it is actually their new company that owns BFC but I can't remember its name; where I refer to Garlick this includes JohnB and possibly, to a lesser extent, other directors. This is outline principles.]
Roughly subject to approximate numbers I think what happened is:
1. Start of play - BFC had £50m cash, Garlick had the shares.
2. Garlick sold the shares to ALK, ALK owe Garlick £170m.
3. ALK have £30m of their own money which they pay to Garlick. Now ALK owe Garlick £140m.
So far, Burnley FC are not affected except that we have a new owner.
4. ALK have no more money so they get Burnley FC to lend them £50m cash. ALK pay it to Garlick. Now ALK owe Garlick £90m, and they owe Burnley FC £50m.
5. A loan is taken out for £60m. I don't know whether ALK took out the loan but promised that Burnley FC would pay it off, or whether Burnley FC took out the loan. Either way, it's Burnley FC who will be making the payments. This £60m is paid by ALK to Garlick. Now ALK owe Garlick £30m, and they owe Burnley FC £110m.
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so the end results are:
GARLICK - Before, he had his own wealth + Burnley FC shares. After, he has his own wealth + £140m cash + £30m owed by ALK.
ALK - Before, they (or rather, this new company) had £30m cash from investors. Now, it owns Burnley FC shares notionally worth £170m and owes £30m to Garlick and £110m; this makes up the £30m value that the investors put in.
BURNLEY FC - Before, we had £50m cash and we owed nothing. Now, we have no cash, we have a £60m loan with an overdraft facility, and ALK owe us £110m.
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And here are the problems as I see them.
1. ALK owes Garlick £30m over the next 5 years. They have only one possible source of income, and that is Burnley FC. Burnley FC will have to pay them, one way or another, £30m to cover that debt.
2. ALK's directors will be drawing a salary. Burnley FC will also be paying heavy interest on the £60m loan - about £5m per year according to estimates. We will probably be paying a capital element of that loan as well. But Burnley FC will not be receiving interest or repayment of capital on the money ALK owes to Burnley FC.
3. ALK (again, referring to the new company here) has only one asset, and that is Burnley FC shares. If they sell those shares at a profit, then they can repay the £110m they owe to Burnley FC. If they lose money on those shares (eg. if we get relegated), or if they hang on to those shares and don't sell, then there is no money in their pot to repay the £110m they owe.
4. This new company may be owned by ALK but ALK has no legal duty to pay its debts of it goes belly up. ALK can wash its hands of Burnley FC, push the shares back to Garlick, and walk away. Burnley FC will have to pay its debts back or go into administration.