ALK Capital or Farnell/Elkashashy takeover

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aggi
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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 12:12 pm

Chester Perry wrote:
Sun Oct 30, 2022 11:10 am
yep, that is the concern I was picking up on

and as we both know there is every chance that they have not yet finished borrowing from the club - I see the potential for around another £43m

- £21m final stage payment
- £20m to buy the ring-fenced shares of the old ownership group
- £2m or so to finalise the club credit obligations on the purchase of shares from the small shareholders assuming as many sold them as we think (that being almost all).

Of course, the current pattern of practice may change, and I think most would be very happy to see that even if they currently believe it to be unlikely.
I don't think the first part is a concern. It doesn't change the cash balance at all and although it would technically change the net assets, anyone doing DD would take them with a pinch of salt anyway.

I'd agree on the second point. The interesting thing, assuming that does happen, is whether it is funded from reserves or debt.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 12:13 pm

Casper wrote:
Mon Oct 31, 2022 12:05 pm
After the debts are paid , what is stopping Pace & Co selling the club for say £200 million , with that sum becoming the new debt ?
Unlikely because ALK will not generate the cash required to fund a leveraged buyout so someone would have to buy it outright.

I doubt they would find a buyer at that price unless the PL revenue model changes when we are in it. In reality, MG and co struggled to find a buyer.

ALK don't need to sell it for £200 million they just need to sell it for more than the £10 to 15 million they put into the club.

If they cleared the debt (a sizeable if) and sold it for £100 million they would still make an awful lot of money.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 12:16 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 11:49 am
As a stand alone legal entity the club only has debts of £33 million but in reality it appears to be the only income generating component of a group.

Therefore, with all due respect Paul - I don't think you can simplify the situation in the manner that you have....

The money owed by the BFC owners to BFC is in reality debt owed to someone else. While technically it is not BFCs debt in the absence of any other visible means of payment it is in effect debt that the club will likely incur.
I don't think this is true. It may be true for a part of it (maybe a quarter) but I would be very, very surprised if it was true for the full balance. And for the part it is true for the creditor is mainly sitting in the club's accounts anyway.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 12:20 pm

aggi wrote:
Mon Oct 31, 2022 12:16 pm
I don't think this is true. It may be true for a part of it (maybe a quarter) but I would be very, very surprised if it was true for the full balance. And for the part it is true for the creditor is mainly sitting in the club's accounts anyway.
Where is the money going to come from to pay the debt owed by ALK to the former owners? We are talking 10s of millions.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 12:27 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 12:01 pm
I was largely referring to what the club has paid out in terms of cash this season. As far as I understand it Chester seems to suggest that we still owe £51 million to the former owners, therefore, £68 - £51 = £17 million paid out of the incoming cash this season. Of course, I could have misread CPs point.

That in addition to the £30 million paid out to MSD equates to £47 million plus the transfer fees of £22 million is £69 million. To be clear, that is £69 million this season....!

My point was to try and give some context to those who think we have got £70 million in the bank from transfers and there will be funds available in January.

My point was firstly: we haven't received all that because as CP points out some of that transfer money is owed to former clubs and, secondly, there has been an awful lot cash paid out.

And yes on the upside there seem much more likelihood of a positive outcome than anyone would have thought a year ago.
From my understanding - the club's non-football outgoings this calendar year will be in the region of £87m - £90m

- £37m in loans to Pace to cover Stage Payments
- £35m+ in debt reduction with MSD when the penalty is included (it could in reality be closer to £38m if MSD applied the full value of lost interest in the penalty charge)
- £10m in loans to Pace to cover the acquisition of shares from the small shareholders (I believe there is some more needed to cover future club credit expense)
- £5m or so in Interest to MSD

On the footballing side there are the transfers and the cost of disposing of Dyche and his team, which may mean we are just paying them as normal. All the players out of contract at the end of June and had not joined a new club would have received a full salary payment (at the rate they were earning during the season) in July, which is something all clubs do following an agreement with the PFA many, many years ago.

As far as the takeover is concerned, there is just £21m left to pay the original ownership group in regard to the original deal and that is due at some point next year. Established practice would lead us to believe that the club will be loaning that money to Pace. The scheduled timing of the payment is the key question here that I have yet to find an answer to, though I suspect it will be in the reporting period of the current season

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 12:30 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 12:20 pm
Where is the money going to come from to pay the debt owed by ALK to the former owners? We are talking 10s of millions.
That isn't part of the figures already in the accounts though. As I said a couple of posts above, the interesting thing, assuming that does happen, is whether it is funded from reserves or debt.

CP has that debt standing at £23m (plus maybe another £20m to buy the shares that Garlick, etc still own).

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 12:41 pm

aggi wrote:
Mon Oct 31, 2022 12:30 pm
That isn't part of the figures already in the accounts though. As I said a couple of posts above, the interesting thing, assuming that does happen, is whether it is funded from reserves or debt.

CP has that debt standing at £23m (plus maybe another £20m to buy the shares that Garlick, etc still own).
I suspect the only thing that has stopped them using the reserves so far has been the amount that would have to be paid to other shareholders - with the debt to MSD almost halved, there is plenty of headroom in the reserves to meet that requirement in December 2025. There is also enough to cover the additional share acquisition too, but that would involve additional payments to those same shareholders first if I'm not mistaken. This is why I suspect there will be more debt taken on by VSL courtesy of the club to meet the requirements outlined.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 12:48 pm

aggi wrote:
Mon Oct 31, 2022 12:12 pm
I don't think the first part is a concern. It doesn't change the cash balance at all and although it would technically change the net assets, anyone doing DD would take them with a pinch of salt anyway.

I'd agree on the second point. The interesting thing, assuming that does happen, is whether it is funded from reserves or debt.
I understand what you are saying, the most pressing concern is more one of Cash flow rather than balance, given so much is flowing out of the club for non-football reasons

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 12:53 pm

aggi wrote:
Mon Oct 31, 2022 12:30 pm
That isn't part of the figures already in the accounts though. As I said a couple of posts above, the interesting thing, assuming that does happen, is whether it is funded from reserves or debt.

CP has that debt standing at £23m (plus maybe another £20m to buy the shares that Garlick, etc still own).
I think we maybe talking at cross purposes. I didn't say it was was/wasn't in the accounts - it was that strict interpretations of accounting processes are not really as relevant in a group situation as with stand alone legal entities because the group directors can often do as they will.

If the club has has to pay for the debt it won't we called a debtor on the balance sheet but it is still a debt the club will incur one way or another.

I think if they can get the MSD loan paid off they will simply hock the ground again and incur more debt because I see no way they will build up cash reserves with 40 odd million to pay to, 5 loanees appearing in the first team and 2 influential players 34 next season.

And that assumes MSD would want to loan them money in the absence of cash because no one else is likely to....

On the other hand, they've achieved far more than I thought they would so what do I know.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 1:04 pm

Chester Perry wrote:
Mon Oct 31, 2022 12:41 pm
I suspect the only thing that has stopped them using the reserves so far has been the amount that would have to be paid to other shareholders - with the debt to MSD almost halved, there is plenty of headroom in the reserves to meet that requirement in December 2025. There is also enough to cover the additional share acquisition too, but that would involve additional payments to those same shareholders first if I'm not mistaken. This is why I suspect there will be more debt taken on by VSL courtesy of the club to meet the requirements outlined.
If they are spending £90 million outgoing cash this year where are the reserves coming from...?

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 1:11 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 1:04 pm
If they are spending £90 million outgoing cash this year where are the reserves coming from...?
The reserves are the accumulated historic profits that allows them to pay dividends - it is stands well over £60m currently

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 1:22 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 12:53 pm
I think we maybe talking at cross purposes. I didn't say it was was/wasn't in the accounts - it was that strict interpretations of accounting processes are not really as relevant in a group situation as with stand alone legal entities because the group directors can often do as they will.

If the club has has to pay for the debt it won't we called a debtor on the balance sheet but it is still a debt the club will incur one way or another.

I think if they can get the MSD loan paid off they will simply hock the ground again and incur more debt because I see no way they will build up cash reserves with 40 odd million to pay to, 5 loanees appearing in the first team and 2 influential players 34 next season.

And that assumes MSD would want to loan them money in the absence of cash because no one else is likely to....

On the other hand, they've achieved far more than I thought they would so what do I know.
If you look at what new ownership have achieved (particularly if we gain promotion this season) then post the final share payments you would expect a financial lender such as MSD would have the confidence in loaning to the club again, given its payment record and the fact it has demonstrated that it can manage with substantial sums leaving it on a regular basis - who know the money may be even used for a positive business return rather than a personal one.

More importantly for an investor it will have shown that regular returns are possible

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 1:39 pm

Chester Perry wrote:
Mon Oct 31, 2022 1:11 pm
The reserves are the accumulated historic profits that allows them to pay dividends - it is stands well over £60m currently
How are you understanding reserves? There are cash reserves, which is the accumulated cash in the business but the historic P/L reserve is a balance sheet item to show how the business has derived it's assets and liabilities.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 1:45 pm

Chester Perry wrote:
Mon Oct 31, 2022 1:11 pm
The reserves are the accumulated historic profits that allows them to pay dividends - it is stands well over £60m currently
It could be said, and probably will be now by some, that the reserves were the second of Mike Garlick's parting gifts/incentives in the takeover after the cash pile. Their historic build-up during his tenure showed that the club was making enough excess in the Premier League (under the financial budgetary controls MG employed) to service the MSD loan, the reserves that already had been amassed could then repay the capital courtesy of a dividend when the loan term expired.

to be appropriately exploited this required Pace to employ similar budget restraint as Garlick did, what we are actually seeing is even greater budget restraint as a result of not being able to attract new investors and the club having to finance the takeover payments.

Still, the vast majority of the fans are very much happier now than they were in the summer of 2020

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by jen1066 » Mon Oct 31, 2022 1:51 pm

Chester Perry wrote:
Mon Oct 31, 2022 1:22 pm
If you look at what new ownership have achieved (particularly if we gain promotion this season) then post the final share payments you would expect a financial lender such as MSD would have the confidence in loaning to the club again, given its payment record and the fact it has demonstrated that it can manage with substantial sums leaving it on a regular basis - who know the money may be even used for a positive business return rather than a personal one.

More importantly for an investor it will have shown that regular returns are possible
Interesting reading, thanks.
What are your thoughts on Pace's plans to get the club back into the black and for both the club and himself to make a profit? Would these be 2 of the first targets?

1. Keep hold of Kompany and keep improving the style of football along with using his 'pulling power' and (so far) his and the club's scouting ability to entice good players to the club such as Benson and Zaroury to sell at a profit (until we no longer need to sell)?
2. Get promoted and in turn attract new investment

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 1:57 pm

Chester Perry wrote:
Mon Oct 31, 2022 1:45 pm
It could be said, and probably will be now by some, that the reserves were the second of Mike Garlick's parting gifts/incentives in the takeover after the cash pile. Their historic build-up during his tenure showed that the club was making enough excess in the Premier League (under the financial budgetary controls MG employed) to service the MSD loan, the reserves that already had been amassed could then repay the capital courtesy of a dividend when the loan term expired.

to be appropriately exploited this required Pace to employ similar budget restraint as Garlick did, what we are actually seeing is even greater budget restraint as a result of not being able to attract new investors and the club having to finance the takeover payments.

Still, the vast majority of the fans are very much happier now than they were in the summer of 2020
I maybe misunderstanding but...

The £60 million almost all comes from the differential between Championship and PL costs. So, when a club first gets promoted it has Championship costs but earns PL income, which generated the huge profits in 2016/17 and to a lesser extent 2017/18.

The club hasn't made significant profits since because PL costs wipe out that differential.

This time however there would be no differential because we don't own the players unless the club can buy 7 PL standard players for £20 or £30 million.

No investor is going to take seriously the claim the club makes profits over a prolonged period. MSD only lent the money to the club on the basis of Cash reserves and saleable assets (players and stadium). The former (relating to point b) is greatly reduced because we've sold them all and have replaced them with loanees and the latter is in Burnley.

And, as you say, if the club spends £90 million on non-trading assets this financial year then I doubt there will be much cash left.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 2:31 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 12:53 pm
I think we maybe talking at cross purposes. I didn't say it was was/wasn't in the accounts - it was that strict interpretations of accounting processes are not really as relevant in a group situation as with stand alone legal entities because the group directors can often do as they will.

If the club has has to pay for the debt it won't we called a debtor on the balance sheet but it is still a debt the club will incur one way or another.

I think if they can get the MSD loan paid off they will simply hock the ground again and incur more debt because I see no way they will build up cash reserves with 40 odd million to pay to, 5 loanees appearing in the first team and 2 influential players 34 next season.

And that assumes MSD would want to loan them money in the absence of cash because no one else is likely to....

On the other hand, they've achieved far more than I thought they would so what do I know.
Of that £143m the majority is using the club's existing cash or the MSD loan (of which estimates are ~ 50% has been repaid). It definitely isn't all external debt at the moment and the only debt that is being serviced is the MSD that we are aware of.

They may incur more debt but it is likely we will see that as further guarantees being put in place.

The accounting treatment helps to keep it clear what is really going to impact onto the cash or not.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 2:41 pm

Chester Perry wrote:
Mon Oct 31, 2022 1:11 pm
The reserves are the accumulated historic profits that allows them to pay dividends - it is stands well over £60m currently
Just to add detail, a lot of that reserve is actually made up of the intercompany debtor from the group further up the chain. As such, it would be fine to use it to clear some of the intercompany debt, you wouldn't actually need the cash. The issue would be the shares that are held by other entities, you'd need to actually pay them.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 3:16 pm

aggi wrote:
Mon Oct 31, 2022 2:31 pm
Of that £143m the majority is using the club's existing cash or the MSD loan (of which estimates are ~ 50% has been repaid). It definitely isn't all external debt at the moment and the only debt that is being serviced is the MSD that we are aware of.

They may incur more debt but it is likely we will see that as further guarantees being put in place.

The accounting treatment helps to keep it clear what is really going to impact onto the cash or not.

In simple cash terms the questions is: Group ALK has debts of over £73 million (£33 million to MSD and £40 million to the former owners).

If, as CP says, the club will spend £90 million in cash this year, which as far as I understand it doesn't include the above who pays the £73 million?

One possible answer is that if we get promoted to the PL we will have a PL windfall but we are going to have to replace 7 first team players (if you include Dervişoğlu).

That is the conundrum for me: where is all this money going to come from?

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 3:20 pm

aggi wrote:
Mon Oct 31, 2022 2:41 pm
Just to add detail, a lot of that reserve is actually made up of the intercompany debtor from the group further up the chain. As such, it would be fine to use it to clear some of the intercompany debt, you wouldn't actually need the cash. The issue would be the shares that are held by other entities, you'd need to actually pay them.
That's a bit confusing as well. The historical P/L reserve comes from historical profits. Historical profits may have been used to fund intercompany debt but isn't made up of it as such.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 3:40 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 3:16 pm
In simple cash terms the questions is: Group ALK has debts of over £73 million (£33 million to MSD and £40 million to the former owners).
£20m of what you are counting there is an option that as far as we know had not yet been exercised - the ringfence is in place for 2 more years (ends October 2024)

so, roughly we have external to the VSL group

- £33m debt to MSD
- £21m in outstanding stage payments

There is intrigue on the club credit element of the purchase of shares from the small shareholders, though I am not sure how that would be represented in this particular discussion

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 3:53 pm

Chester Perry wrote:
Mon Oct 31, 2022 3:40 pm
£20m of what you are counting there is an option that as far as we know had not yet been exercised - the ringfence is in place for 2 more years (ends October 2024)

so, roughly we have external to the VSL group

- £33m debt to MSD
- £21m in outstanding stage payments

There is intrigue on the club credit element of the purchase of shares from the small shareholders, though I am not sure how that would be represented in this particular discussion
The other thing to consider here is the time frame of each of the debts being paid

So
- £21m final stage payment is in 2023
- the option of the final shares for £20m is by October 2024
- £33m to MSD is in December 2025 if we are promoted this time - if not there is a further capital reduction (with penalties next summer) my guess is a circa £20m payment leaving £15m or so outstanding
- I am assuming that 60% or so of the £6m+ club credit has already been exercised and that the remainder will trickle though in the next couple of years

Consequently, this calendar year should be the last huge blow out re the takeover and subsequently it should be reduced and ideally expunged by 2026

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 3:56 pm

Chester Perry wrote:
Mon Oct 31, 2022 3:40 pm
£20m of what you are counting there is an option that as far as we know had not yet been exercised - the ringfence is in place for 2 more years (ends October 2024)

so, roughly we have external to the VSL group

- £33m debt to MSD
- £21m in outstanding stage payments

There is intrigue on the club credit element of the purchase of shares from the small shareholders, though I am not sure how that would be represented in this particular discussion
Ok just to make it easier let's forget BFC to all purposes and intents it does not exist anymore other than as a notional trading identity. It has a legal status for as long as the Directors of ALK desire. We all work for companies that change company names, charge huge inter company loans, management fees and consultancy fees etc. It is as it is ...in business.

The ALK group has £54 million worth of visible debt and potentially another £20 million.

It has reduced it's asset base by about £70 million (if you include Chris Wood): as a consequence, it has 5 loanees playing for the first team.

It hasn't made profits for years; and if you are right - the group is going to pay something akin to £90 million out this year there is likely no cash left.

That to me is about where we are at in fag packet terms.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 3:59 pm

Chester Perry wrote:
Mon Oct 31, 2022 3:53 pm
The other thing to consider here is the time frame of each of the debts being paid

So
- £21m final stage payment is in 2023
- the option of the final shares for £20m is by October 2024
- £33m to MSD is in December 2025 if we are promoted this time - if not there is a further capital reduction (with penalties next summer) my guess is a circa £20m payment leaving £15m or so outstanding
- I am assuming that 60% or so of the £6m+ club credit has already been exercised and that the remainder will trickle though in the next couple of years

Consequently, this calendar year should be the last huge blow out re the takeover and subsequently it should be reduced and ideally expunged by 2026
Ok I haven't factored this in the above. If the above is correct and we do get promoted then it looks likely we can clear off much of the debt.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 4:04 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 3:56 pm
Ok just to make it easier let's forget BFC to all purposes and intents it does not exist anymore other than as a notional trading identity. It has a legal status for as long as the Directors of ALK desire. We all work for companies that change company names, charge huge inter company loans, management fees and consultancy fees etc. It is as it is ...in business.

The ALK group has £54 million worth of visible debt and potentially another £20 million.

It has reduced it's asset base by about £70 million (if you include Chris Wood): as a consequence, it has 5 loanees playing for the first team.

It hasn't made profits for years; and if you are right - the group is going to pay something akin to £90 million out this year there is likely no cash left.

That to me is about where we are at in fag packet terms.
I am sure that some will see this in a better light than they did a couple of days ago when they were adding that internal number of £149m to the external debt

still as I said the vast majority are happier now than they were in the summer of 2020 when we were
- in the Premier League
- had no debt
- started the season knowing that even if there were more rebates to come our way for the next two seasons and all games were behind closed doors, we still would not fall into debt

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:13 pm

Chester Perry wrote:
Mon Oct 31, 2022 4:04 pm
I am sure that some will see this in a better light than they did a couple of days ago when they were adding that internal number of £149m to the external debt

still as I said the vast majority are happier now than they were in the summer of 2020 when we were
- in the Premier League
- had no debt
- started the season knowing that even if there were more rebates to come our way for the next two seasons and all games were behind closed doors, we still would not fall into debt
Well yes. I'm sure the vast majority on here knew that investment bankers from Utah would sign up VK and together they would find 4 quality PL players available for a loan add them to four existing PL players and turn them into the best team in the Championship playing vastly superior football.

Being the idiot that I am I had no idea that was going to happen because I completely ignored all the other times in history it has happened.

I've learned my lesson and I'm now off to put a £100 on Derek Chisora

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by claretonthecoast1882 » Mon Oct 31, 2022 4:15 pm

Jesus, let it go. We have players on loan just like almost every club in the division.. who cares

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Duffer_ » Mon Oct 31, 2022 4:19 pm

Apologies - just trying to do a summary/recap in cash flow terms only. Please correct me where any assumptions are off beam as it's been a while since I've thought about this.

c£180m was needed to pay off MG and other shareholders. "We" have had:

1) surplus cash at bank of c£60m
2) new monies from ALK of c£10m
3) net profit on player sales of c£60m
4) MSD net cash inflow of c£30m (£60m received, £30m repaid, leaving external creditor of £30m)

This leaves us with c£50m of cash to find - c£30m to repay MSD and c£20m to pay MG et al. I think my assumptions on most of the cash inflows are on the optimistic side but it's the only way I can square it with the £54m (£33m to MSD and £21m to MD) balance outstanding from CP. OR...is there a possibility that we generated positive cash flows in the 21/22 season (excluding non-football /financing activity)? Depends to a large extent on the bonus structure for staying up I suppose.

Is there also a possibilty that we are generating positive cash flows in the 22/23 season due to parachute payments being in excess of our significantly reduced wage bill? Not forgetting we are still paying for SD and his backroom staff.

If there are no cash surpluses from the 2 seasons, then the remaining £50m has to come from further player sales, parachute payments from next season (assuming we can trim wages further) or from future PL monies (assumes we do not spend all of the TV monies on wages and squad improvement). Although less daunting than it once seemed, it still feels like promotion is a financial necessity to me.

Edit: this assumes no further external investment

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 4:25 pm

claretonthecoast1882 wrote:
Mon Oct 31, 2022 4:15 pm
Jesus, let it go. We have players on loan just like almost every club in the division.. who cares
A few might if they are all pulled in January and we have to start bedding other in, just as we had really start to get going - particularly if the Venky's get the bit between their teeth and offer much more to say Southampton for Tella and the rest

not saying that any of this will happen it is just the risk of relying so heavily on loans, as opposed to owning registrations.

your right about enjoying what we are seeing on the pitch, and I haven't seen anybody who says they are not, just some of us have seen the underlying finance issues hurt us before when promise was being shown on the pitch (and that goes back to the 70's)

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 4:33 pm

Duffer_ wrote:
Mon Oct 31, 2022 4:19 pm
Apologies - just trying to do a summary/recap in cash flow terms only. Please correct me where any assumptions are off beam as it's been a while since I've thought about this.

c£180m was needed to pay off MG and other shareholders. "We" have had:

1) surplus cash at bank of c£60m
2) new monies from ALK of c£10m
3) net profit on player sales of c£60m
4) MSD net cash inflow of c£30m (£60m received, £30m repaid, leaving external creditor of £30m)

This leaves us with c£50m of cash to find - c£30m to repay MSD and c£20m to pay MG et al. I think my assumptions on most of the cash inflows are on the optimistic side but it's the only way I can square it with the £54m (£33m to MSD and £21m to MD) balance outstanding from CP. OR...is there a possibility that we generated positive cash flows in the 21/22 season (excluding non-football /financing activity)? Depends to a large extent on the bonus structure for staying up I suppose.

Is there also a possibilty that we are generating positive cash flows in the 22/23 season due to parachute payments being in excess of our significantly reduced wage bill? Not forgetting we are still paying for SD and his backroom staff.

If there are no cash surpluses from the 2 seasons, then the remaining £50m has to come from further player sales, parachute payments from next season (assuming we can trim wages further) or from future PL monies (assumes we do not spend all of the TV monies on wages and squad improvement). Although less daunting than it once seemed, it still feels like promotion is a financial necessity to me.

Edit: this assumes no further external investment
2021/22 season was looking rather good for gash generation, I was thinking circa £20m (before player trading) then we sacked Dyche and his team, got relegated and paid MSD circa £35m+.

It could be reasonably argued that relegation saved around £12m in bonus payments and £3m-£5m in conditional transfer payments (Brownhill, Collins, Roberts, Cornet and Weghorst) for staying in the Premier league

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:34 pm

claretonthecoast1882 wrote:
Mon Oct 31, 2022 4:15 pm
Jesus, let it go. We have players on loan just like almost every club in the division.. who cares
Bless....

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by RVclaret » Mon Oct 31, 2022 4:34 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 4:13 pm
Well yes. I'm sure the vast majority on here knew that investment bankers from Utah would sign up VK and together they would find 4 quality PL players available for a loan add them to four existing PL players and turn them into the best team in the Championship playing vastly superior football.

Being the idiot that I am I had no idea that was going to happen because I completely ignored all the other times in history it has happened.

I've learned my lesson and I'm now off to put a £100 on Derek Chisora
You’re just gutted your doom and gloom forecasting that were plastered on every thread all summer haven’t come off, and now you are saving face hanging onto the loan and PL experience thing, quite funny really.
These 2 users liked this post: thehistorylecturer66 jen1066

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 4:36 pm

Chester Perry wrote:
Mon Oct 31, 2022 4:25 pm
A few might if they are all pulled in January and we have to start bedding other in, just as we had really start to get going - particularly if the Venky's get the bit between their teeth and offer much more to say Southampton for Tella and the rest

not saying that any of this will happen it is just the risk of relying so heavily on loans, as opposed to owning registrations.

your right about enjoying what we are seeing on the pitch, and I haven't seen anybody who says they are not, just some of us have seen the underlying finance issues hurt us before when promise was being shown on the pitch (and that goes back to the 70's)
Maybe they’ll all be at Leicester’s training ground in January like Tarky and Dwight were a couple of years ago according to our resident expert .

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:40 pm

Duffer_ wrote:
Mon Oct 31, 2022 4:19 pm
Apologies - just trying to do a summary/recap in cash flow terms only. Please correct me where any assumptions are off beam as it's been a while since I've thought about this.

c£180m was needed to pay off MG and other shareholders. "We" have had:

1) surplus cash at bank of c£60m
2) new monies from ALK of c£10m
3) net profit on player sales of c£60m
4) MSD net cash inflow of c£30m (£60m received, £30m repaid, leaving external creditor of £30m)

This leaves us with c£50m of cash to find - c£30m to repay MSD and c£20m to pay MG et al. I think my assumptions on most of the cash inflows are on the optimistic side but it's the only way I can square it with the £54m (£33m to MSD and £21m to MD) balance outstanding from CP. OR...is there a possibility that we generated positive cash flows in the 21/22 season (excluding non-football /financing activity)? Depends to a large extent on the bonus structure for staying up I suppose.

Is there also a possibilty that we are generating positive cash flows in the 22/23 season due to parachute payments being in excess of our significantly reduced wage bill? Not forgetting we are still paying for SD and his backroom staff.

If there are no cash surpluses from the 2 seasons, then the remaining £50m has to come from further player sales, parachute payments from next season (assuming we can trim wages further) or from future PL monies (assumes we do not spend all of the TV monies on wages and squad improvement). Although less daunting than it once seemed, it still feels like promotion is a financial necessity to me.

Edit: this assumes no further external investment
I would say errs on the positive but an excellent summation of where we seem to be at...

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 4:44 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 4:40 pm
I would say errs on the positive but an excellent summation of where we seem to be at...
Not really the external debt is @£32m is it not ?
The £20m owed to MG et al is the owners’ debt not the clubs ? How they finance that remains to be seen at this point.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:46 pm

RVclaret wrote:
Mon Oct 31, 2022 4:34 pm
You’re just gutted your doom and gloom forecasting that were plastered on every thread all summer haven’t come off, and now you are saving face hanging onto the loan and PL experience thing, quite funny really.
As I say, you'd have to be an idiot to think spending £50 million on shares was a good idea even if you had a crystal ball to see into the future.

I mean we're talking notionally here anyway - the future hasn't happened yet.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:50 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:44 pm
Not really the external debt is @£32m is it not ?
The £20m owed to MG et al is the owners’ debt not the clubs ? How they finance that remains to be seen at this point.
I think it is more realistic to present the £20 million as a group debt as opposed to some notional figure that exists with the owners.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 4:52 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 4:50 pm
I think it is more realistic to present the £20 million as a group debt as opposed to some notional figure that exists with the owners.
Because it suits your agenda

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Duffer_ » Mon Oct 31, 2022 4:55 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:44 pm
Not really the external debt is @£32m is it not ?
The £20m owed to MG et al is the owners’ debt not the clubs ? How they finance that remains to be seen at this point.
That's why I added "assuming no external investment". Hard to see how we secure that investment without PL status and even harder to see how a Championship club with a turnover of £25m services that level of financing. The fact that we are playing great stuff on the field, and AP gets credit for the appointment of VK, does not make the model any more sensible, even with the benefit of hindsight.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 4:56 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:52 pm
Because it suits your agenda
If you mean my view that it was a risky deal that placed unnecessary risk on our club then No because it is not relevant.

It makes more sense because it is unlikely that the owners would expose themselves to £20 million quid's worth of debt without leveraging all the assets at their disposal.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 4:56 pm

Duffer_ wrote:
Mon Oct 31, 2022 4:55 pm
That's why I added "assuming no external investment". Hard to see how we secure that investment without PL status and even harder to see how a Championship club with a turnover of £25m services that level of financing. The fact that we are playing great stuff on the field, and AP gets credit for the appointment of VK, does not make the model any more sensible, even with the benefit of hindsight.
I never said it did

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 4:57 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 4:56 pm
If you mean my view that it was a risky deal that placed unnecessary risk on our club then No because it is not relevant.

It makes more sense because it is unlikely that the owners would expose themselves to £20 million quid's worth of debt without leveraging all the assets at their disposal.
Pure conjecture.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 4:58 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:52 pm
Because it suits your agenda
the particular point Pete is making there is far from being unreasonable given what we have seen and actually chooses to make the £149m (so far) internal debt no more than an irritation in the scheme of things which is far more generous than others would be.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Duffer_ » Mon Oct 31, 2022 5:02 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:56 pm
I never said it did
I never said you said it did :lol:

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by ClaretPete001 » Mon Oct 31, 2022 5:04 pm

thehistorylecturer66 wrote:
Mon Oct 31, 2022 4:57 pm
Pure conjecture.
Rejecting the history of the deal and how it has been funded thus far is somewhat of an odd stance for a history lecturer don't you think...?

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 5:11 pm

jen1066 wrote:
Mon Oct 31, 2022 1:51 pm
Interesting reading, thanks.
What are your thoughts on Pace's plans to get the club back into the black and for both the club and himself to make a profit? Would these be 2 of the first targets?

1. Keep hold of Kompany and keep improving the style of football along with using his 'pulling power' and (so far) his and the club's scouting ability to entice good players to the club such as Benson and Zaroury to sell at a profit (until we no longer need to sell)?
2. Get promoted and in turn attract new investment
If Kompany continues this trajectory, then we will not be keeping hold of him for very long - just look at how Brighton (whose owner has pumped over £400m into them have been gutted by Chelsea and Newcastle in the last year (and it is still happening) - that is the nature of things

I suspect any potential new investor, certainly any significant ones, are looking for a level of Premier League stability and debt reduction, both external and internal before getting involved, given that it is all related to share buying. They may be happy to use their inward investment to reduce the internal debt if the external debt has been cleared

just my view on the send point and it may be that others have a different perspective that makes a lot of sense too.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Duffer_ » Mon Oct 31, 2022 5:15 pm

I really struggle to countenance the idea that ALK would not have negotiated a mechanism to reduce the purchase price on relegation.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by aggi » Mon Oct 31, 2022 5:19 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 3:16 pm
In simple cash terms the questions is: Group ALK has debts of over £73 million (£33 million to MSD and £40 million to the former owners).

If, as CP says, the club will spend £90 million in cash this year, which as far as I understand it doesn't include the above who pays the £73 million?

One possible answer is that if we get promoted to the PL we will have a PL windfall but we are going to have to replace 7 first team players (if you include Dervişoğlu).

That is the conundrum for me: where is all this money going to come from?
MSD has a few years to run, it looks like we're looking to make profits on player trading, and we might get promoted. That gives a hefty influx of cash but does risk stability, or there may be more debt (being a debt free club isn't that common). I'm not saying that this is a good thing but it may not be a disaster.

The main point is not confusing the money that the group companies owe to the club with debt that the club owes externally.
ClaretPete001 wrote:
Mon Oct 31, 2022 3:20 pm
That's a bit confusing as well. The historical P/L reserve comes from historical profits. Historical profits may have been used to fund intercompany debt but isn't made up of it as such.
True, but when assessing whether a dividend can be paid you need to base that on the current assets. The club doesn't have the assets to pay a £50m cash dividend but can pay a dividend up to the group because that is utilising a different asset.

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by thehistorylecturer66 » Mon Oct 31, 2022 5:21 pm

ClaretPete001 wrote:
Mon Oct 31, 2022 5:04 pm
Rejecting the history of the deal and how it has been funded thus far is somewhat of an odd stance for a history lecturer don't you think...?
Not really .. I’m of the opinion that they know what they’re doing and you and Chester don’t that’s all 😉😂

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Re: ALK Capital or Farnell/Elkashashy takeover

Post by Chester Perry » Mon Oct 31, 2022 5:24 pm

Duffer_ wrote:
Mon Oct 31, 2022 5:15 pm
I really struggle to countenance the idea that ALK would not have negotiated a mechanism to reduce the purchase price on relegation.
It is a strange one, I agree, but as I have repeatedly pointed out - the place you would expect that information to exist is in the notes to the financial reports for Freight Investor (Holdings) Limited, John B's business that sold £32m+ worth of shares to VSL, there is no mention of it, though this is the source of much of the detail on the payment schedule (number of instalments and completement period - the most recent set of accounts for them published last month makes absolutely no mention of the transaction at all

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