Burnley Football Club - first accounts under ALK

[Chester Perry]

Not Paul but from what I can see current one year Libor is at slightly over 2%, so yes I'd expect our current rate to be in the region of 10%.



Blakesboots likes to give the impression he's connected to the board, and has directly said on here before that the deal is about far more than football and these opening doors are very important. I can't pretend the thought doesn't make me uneasy.


Is this budget going to be derived from additional outside stable investment, from taking on more debts, or from player sales to fund acquisitions? Because for various reasons I'm looking at these figures and not sure how we currently could afford a net spend above at best 14 million without eating into the cash reserves needed to pay off the 65m loan in 2025 (which are already 15m short of this).

re Libor - that will have put an extra £1m on the annual interest rate - and it is only going up it seems

there are lots of things that AmericanvSports owners are/have done around their venues to increase revenues and overall returns/value here are two reported on the the last 24 hours https://huddleup.substack.com/p/the-nba ... tion=share - https://twitter.com/FOS/status/1521587219164717059 I must agmit I do not see this type of thing at our club - that requires a lot of land purchase that was tried over a decade ago

if the club really are funding the stage payments then there are other things to worry about as over £36m is due across two payments in H1 this year. The irony is that there is the Offer Letter reported mechanism to prevent an MSD default, what odds that there is some brinksmanship (further delayed stage payments) on the stage payments to allow VSL to meet an early repayment to VSL without the sellers being asked to buyback shares

[RVclaret]

It's frightening, our whole future might now be resting on the next four games.

I think that's a bit of an overreaction to say the least.

If a chunk of the 65m loan is due, let's assume half of it, call it 35m.

Cornet / Pope sales in summer would cover that. Any other sales provide funds, alongside the parachute payments, to rebuild in the Championship.

ALK bought the club when we were sitting just above the relegation places last season.

To suggest the entire clubs future is at risk is simply fear-mongering.

[aggi]

...

I don't know if Aggi, Paul or Chester can say more about the £102 million debtors figure - apologies if it's been mentioned above and I've missed it.

...

It's nothing too exciting. In layman's terms, the club have loaned ALK £102m, ALK have then used this to pay off part of the takeover and promised that they will pay the club back.

In accounting terms the "asset" is still there, just what was once a cash balance is now a promise to repay the amount.

You'd expect this to sit around until the club is sold when ALK would then have lots of money and repay it as part of the exit/sale.

[Chester Perry]

It's frightening, our whole future might now be resting on the next four games.

I don't believe that, though it would make things much smoother if we stayed up

[Nori1958]

It's frightening, our whole future might now be resting on the next four games.

Enough in reserve to repay whatever percentage of the loan is required, it will be difficult but the future of the club is not at risk, at least that's what the experts are saying.

[Chester Perry]

The Athletic with their initial report - club refusing to comment

https://archive.ph/PhvwP

[Lancasterclaret]

It's frightening, our whole future might now be resting on the next four games.

I know my limitations on understanding stuff like this, and rely on people who clearly know what they are talking about

I know you don't have much time for the current owners from your posts, but that kind of post does not help at all

[Chester Perry]

re Libor - that will have put an extra £1m on the annual interest rate - and it is only going up it seems

there are lots of things that AmericanvSports owners are/have done around their venues to increase revenues and overall returns/value here are two reported on the the last 24 hours https://huddleup.substack.com/p/the-nba ... tion=share - https://twitter.com/FOS/status/1521587219164717059 I must agmit I do not see this type of thing at our club - that requires a lot of land purchase that was tried over a decade ago

if the club really are funding the stage payments then there are other things to worry about as over £36m is due across two payments in H1 this year. The irony is that there is the Offer Letter reported mechanism to prevent an MSD default, what odds that there is some brinksmanship (further delayed stage payments) on the stage payments to allow VSL to meet an early repayment to VSL without the sellers being asked to buyback shares

that should be repayment to MSD at the end

[CrosspoolClarets]

I don't know if Aggi, Paul or Chester can say more about the £102 million debtors figure - apologies if it's been mentioned above and I've missed it.

I was wondering the same. It is the one thing in there that seems a bit opaque. I’m speculating on the below, if others set me straight on it I’d appreciate it.

What seems likely is that the £102m is owed by the new owner’s wider takeover vehicle, which then begs the question of how likely it is to materialise if further investment cannot be secured. Good luck to them with that (genuinely). Does it relate to remaining payments to Mike and co? I note Aggi’s above comment.

That all seems to be “step 2”. Step 1 was the initial transactions that contribute to the club being £90m-£100m worse off - the change in net funds is £95,381k comprising the loan and the reduction in bank balances.

I think what I am driving at is that with further transactions to come out in the wash the £90m “worse off” that the media reported last year and confirmed in the accounts isn’t the end of the story. There will continue to be a drag on cashflow (as I’d expect with the amount the old owners sold the club for).

It may work if they run a successful model of staying up, buying young (Cornet and Collins) and selling at a huge profit. But as I have said before, it is the skill of the owners we need to rely on now, more so than before.

[Jambo]

Probably a sign of how worried I was that I was fearing they would be even worse than they actually are...

However Pace/ALK/their sycophants dress it up, the club has gone from having £80m in the bank to having £100m of debts - it is an incredible change.

Yes, Garlick and co cut spending and bumped up the cash reserves to prepare for a sale and yes, the squad is in considerably better shape with more sellable assets (Cornet, WW, Collins and Roberts in addition to Pope, McNeil, Taylor etc)

But it is hard to see how we fund the further squad rebuild we require with the finances in the state that they are now. Relegation could be absolutely disastrous.

[Chester Perry]

Coming through at Companies House now - Holding Company accounts posted (we saw these last night) - Burnley Football and Athletic Club Limited are pending - should be a bit more detail in these latter ones hopefully

[RVclaret]

Coming through at Companies House now - Holding Company accounts posted (we saw these last night) - Burnley Football and Athletic Club Limited are pending - should be a bit more detail in these latter ones hopefully

What more detail are you looking for in those?

[fatboy47]

It's frightening, our whole future might now be resting on the next four games.

I don't think that's in any way a sensationalist view.

Relegation could easily trigger a fire sale at the club in order to allow ALK to meet its obligations before offloading the club at a knockdown price.

I can see, and understand, that the business strategy was to profit from the Prem cash allied to shrewd player trading.
Once relegation has kicked in they may find that our crown jewels may have to go on the cheap.

[aggi]

It's nothing too exciting. In layman's terms, the club have loaned ALK £102m, ALK have then used this to pay off part of the takeover and promised that they will pay the club back.

In accounting terms the "asset" is still there, just what was once a cash balance is now a promise to repay the amount.

You'd expect this to sit around until the club is sold when ALK would then have lots of money and repay it as part of the exit/sale.

Just to note when I refer to this stuff as "nothing too exciting" I mean it's what I expected to see from an accountant's viewpoint, the transaction is fairly much as was initially reported.

From a fan's point of view, removing millions in cash from the club and replacing it with a somewhat vague promise to repay it in the future may be viewed as "exciting".

[Chester Perry]

I was wondering the same. It is the one thing in there that seems a bit opaque. I’m speculating on the below, if others set me straight on it I’d appreciate it.

What seems likely is that the £102m is owed by the new owner’s wider takeover vehicle, which then begs the question of how likely it is to materialise if further investment cannot be secured. Good luck to them with that (genuinely). Does it relate to remaining payments to Mike and co? I note Aggi’s above comment.

That all seems to be “step 2”. Step 1 was the initial transactions that contribute to the club being £90m-£100m worse off - the change in net funds is £95,381k comprising the loan and the reduction in bank balances.

I think what I am driving at is that with further transactions to come out in the wash the £90m “worse off” that the media reported last year and confirmed in the accounts isn’t the end of the story. There will continue to be a drag on cashflow (as I’d expect with the amount the old owners sold the club for).

It may work if they run a successful model of staying up, buying young (Cornet and Collins) and selling at a huge profit. But as I have said before, it is the skill of the owners we need to rely on now, more so than before.

What is interesting is that it appears the stage payments are being actioned as loans to a VSL company - VSL stated in the offer letter that it intended to repay at least the initial loan and the MSD loan value via new investment (which could also be a sale of the club) we know that the search for new investors of significance has proven fruitless so far.

What we know to be factual is that the club has seen circa £53m+ taken from it's cashflow since the takeover to help fund it
- £37m related company loan
- £10m post account date advance
- £6m+ in interest payments (paid quarterly - I count 5)

[Conroy92]

All I seem to be able to make from all this is that if Garlick had used £30 million of the cash at bank to sign an extra few players and stayed in charge we'd still have £50million in the coffers, be debt free and posting a very small loss over a difficult period.

[spt_claret]

if the club really are funding the stage payments then there are other things to worry about as over £36m is due across two payments in H1 this year. The irony is that there is the Offer Letter reported mechanism to prevent an MSD default, what odds that there is some brinksmanship (further delayed stage payments) on the stage payments to allow VSL to meet an early repayment to VSL without the sellers being asked to buyback shares

I am a bit confused here. Are you saying the club still need to find another 36m in cash to pay to Garlick and John B, in the next financial year? Could the 10m to a holding company be part of this?
The second point confuses me even more. What would be the advantage of early repayment to Dell while not triggering the ownership reversion- beyond ALK retaining ownership and Garlick not being on the hook for determining how to repay the loan?

It's frightening, our whole future might now be resting on the next four games.

Based on my reasonable grasp of maths but admittedly limited grasp of accounting, I think even before the loan we would need to reduce our wage bill to around 1/4-1/3 of current level to breakeven with the loss of revenue, even with parachute payments. We are that reliant on PL money now. Factor in the loan, that screams a fire sale of players. Which in turn screams relegation fight again- and at that point I dread to think how we fund the remaining loan repayments.

The concerning part is based on some of Chester's posts, the bonus structure appears to also financially inhibit us by actually outweighing the increased prize money. Finishing too high depletes our potential transfer/wage budget, putting us in the bizarre position of being unable to afford either relegation or great success.

[JohnMcGreal]

Thanks to some excellent reporting by posters on here as well as reporters elsewhere in the media, none of this has come as a surprise.

The club is in a very precarious situation whichever way you look at it, and PL status is pretty much essential.

I've come round to the view that maybe there was a sort of grim inevitability to all of this, due to the breakdown of the relationship between Dyche and Garlick and with Garlick looking to sell etc, but it doesn't make it any easier. Hats off to those who are still able to feel fairly relaxed about the situation.

Hopefully we can pick up another vital 3 points on Saturday.

[Pickles]

Eeek. Wonder which pitch at Towneley the phoenix club will have.

[Papabendi]

I don't think that's in any way a sensationalist view.

Relegation could easily trigger a fire sale at the club in order to allow ALK to meet its obligations before offloading the club at a knockdown price.

I can see, and understand, that the business strategy was to profit from the Prem cash allied to shrewd player trading.
Once relegation has kicked in they may find that our crown jewels may have to go on the cheap.

we can assume the players that would leave would be leaving anyway

[Chester Perry]

I am a bit confused here. Are you saying the club still need to find another 36m in cash to pay to Garlick and John B, in the next financial year? Could the 10m to a holding company be part of this?
The second point confuses me even more. What would be the advantage of early repayment to Dell while not triggering the ownership reversion- beyond ALK retaining ownership and Garlick not being on the hook for determining how to repay the loan?

I am saying that in the first half of this year there was a schedule for two stage payments to be made
- the first was due in March - given the sign off date in the accounts (April 28 2022) the £10m advance could have been used to cover part of that - my understanding is the amount due was slightly greater) - the second payment due in June is much greater - I cannot share other information as it is likely to get deleted by the mods

The early repayment (not a full one) is triggered by relegation as I have been suggesting for a while now and as confirmed by the accounts - a further partial repayment is required is we do not bounce back straight away

Based on my reasonable grasp of maths but admittedly limited grasp of accounting, I think even before the loan we would need to reduce our wage bill to around 1/4-1/3 of current level to breakeven with the loss of revenue, even with parachute payments. We are that reliant on PL money now. Factor in the loan, that screams a fire sale of players. Which in turn screams relegation fight again- and at that point I dread to think how we fund the remaining loan repayments.

hence the buy-back clause with the Sellers

The concerning part is based on some of Chester's posts, the bonus structure appears to also financially inhibit us by actually outweighing the increased prize money. Finishing too high depletes our potential transfer/wage budget, putting us in the bizarre position of being unable to afford either relegation or great success.

not quite - there is definitely a tiered structure to bonus payments and for the first time these accounts confirm tha tthe merit based payment is shared in significant part with the football staff - when you add in European qualification (and I imagine a cup win) it becomes troublesome

In part it is a result of budgeting for a 17th place finish and not expecting much more but it does prove that for team development, we need the churn of selling to buy new players - Dyche, having sat in on board meetings for a large part of Garlick's tenure will have known this, yet he still refused to sell players to facilitate it. VSL appeared to have removed that facility with their new deal for him

[Chester Perry]

What more detail are you looking for in those?

there is always a hope for more - still lots of unanswered questions and these are specific to the club as a stand alone entity no the group - likely to be nuances only but they will not be exactly the same

[quoonbeatz]

Hats off to those who are still able to feel fairly relaxed about the situation.

Hard not to be relaxed when it's out of everyone's hands.

I think 2 things strike me about this:

1. There's a lot of people who were very "we want a takeover" who are now "not THAT kind of takeover." This was the deal on the table and, compared to the other one with the dodgy lawyer everyone condemned, it was the one most people preferred (without knowing any of the detail). The alternative was to continue underfunding the squad and the almost certain prospect if the manager leaving ages ago - which again, most people were dead against.

So we are where we are.

2. It's hard to get too upset about accounts that are nearly a year out of date. No idea what the picture looks like now, could be worse, could be similar, could even have improved.

[OffTheBar]

Almost certainly means that we are paying more in interest now - no escaping inflation in this deal (that is the clever Covid induced measure from MSD that also neatly covers the impact of Putin's acts). It is understood that Southampton have a fixed rate deal - though that is a higher initial rate than the one we have (9.104%,) it could end up being lower overall given that MSD have interest paid quarterly our payments are rising each time at the moment

any infor on the Libor replacement Paul?

Libor is being replaced with SONIA, which is pretty much the BoE rate without getting into technicalities. Loans based on libor will have been converted to sonia + a fixed spread based on historical levels of the difference between libor and the ‘term’ sonia of the payment frequency (not sure where you’ve got the quarterly payments from but believe if it’s that it will be 3m sonia + about 0.12%).

I guess the club could have hedged into fixed rate, though no idea if they’d have to put reference to that in the accounts.

[spt_claret]

I am saying that in the first half of this year there was a schedule for two stage payments to be made
- the first was due in March - given the sign off date in the accounts (April 28 2022) the £10m advance could have been used to cover part of that - my understanding is the amount due was slightly greater) - the second payment due in June is much greater - I cannot share other information as it is likely to get deleted by the mods

The early repayment (not a full one) is triggered by relegation as I have been suggesting for a while now and as confirmed by the accounts - a further partial repayment is required is we do not bounce back straight away



hence the buy-back clause with the Sellers



not quite - there is definitely a tiered structure to bonus payments and for the first time these accounts confirm tha tthe merit based payment is shared in significant part with the football staff - when you add in European qualification (and I imagine a cup win) it becomes troublesome

In part it is a result of budgeting for a 17th place finish and not expecting much more but it does prove that for team development, we need the churn of selling to buy new players - Dyche, having sat in on board meetings for a large part of Garlick's tenure will have known this, yet he still refused to sell players to facilitate it. VSL appeared to have removed that facility with their new deal for him

Cheers. I must confess the buyback and repayments stuff is still confusing me slightly, but I appreciate you can't share what you can't share.

The final point is what I was badly trying to articulate, yes. By exceeding expectations so much we exceeded our finances. Concerning that Dyche must have seen this need for transfer turnover but not sanctioned it, I know funds went into the academy and training centre as longterm investments but I'd dearly love to know what kept him from being willing to cash in to keep the squad turning over. You never want to sell your best players to then try find more replacements for cheaper, it's a tall order, but it sounds like we have little alternative.

To add to my previous post- I wasn't meaning that I think relegation is an existential threat, but I do think it could potentially trigger a Portsmouth or Bradford style relegation spiral to League 2. Not something I want to contemplate regardless. Honestly these accounts have made me slightly less pessimistic about relegation in that regard, but much less optimistic about survival- even if we stay up I see an increasing squeeze year on year, we would need to be keeping wages relatively flat, turning a net transfer profit while still in the Premier League, and staying up until at least the 2025-26 season to cover these loans by my reckoning. It's one thing to make PL survival and transfer profit the goal, another to make it the requirement.

What is interesting is that it appears the stage payments are being actioned as loans to a VSL company - VSL stated in the offer letter that it intended to repay at least the initial loan and the MSD loan value via new investment (which could also be a sale of the club) we know that the search for new investors of significance has proven fruitless so far.

What we know to be factual is that the club has seen circa £53m+ taken from it's cashflow since the takeover to help fund it
- £37m related company loan
- £10m post account date advance
- £6m+ in interest payments (paid quarterly - I count 5)

Slightly confused again- how would selling the club cover the loans? Surely the new owner would just inherit them and have to pay them? I'm multitasking which isn't helping matters.

[Chester Perry]

Libor is being replaced with SONIA, which is pretty much the BoE rate without getting into technicalities. Loans based on libor will have been converted to sonia + a fixed spread based on historical levels of the difference between libor and the ‘term’ sonia of the payment frequency (not sure where you’ve got the quarterly payments from but believe if it’s that it will be 3m sonia + about 0.12%).

I guess the club could have hedged into fixed rate, though no idea if they’d have to put reference to that in the accounts.

That is very informative, thank you

Quarterly payments were outlined in the MSD UK Holdings Limited first published accounts (year ending December 31 2020) which went into a lot of detail as to the business model in the Accounting Policy notes (not quite a definitive statement on business agreements but a very good indicator)

[jedi_master]

It would be disastrous if we are relegated, but that's been obvious for ages.

If we go down we will see our TV money evaporate and be using our parachute payments and fees received for Pope, McNeil and Cornet (and anything else we can sell) just to pay off debt. Does that mean we are in existential crisis mode? No, we can pay these requirements back as illustrated - but - what position (on the field) are we going to be in at that point? We'd likely be (at best) returning to a mid table Championship team level of existence.

Am I to note that the sacking of Sean Dyche and his entire backroom staff fresh off signing improved terms on 4 year contracts is not included. Anyone want to guess how much that has cost us, and how that is also being paid for?

[ClaretPete001]

I was wondering the same. It is the one thing in there that seems a bit opaque. I’m speculating on the below, if others set me straight on it I’d appreciate it.

What seems likely is that the £102m is owed by the new owner’s wider takeover vehicle, which then begs the question of how likely it is to materialise if further investment cannot be secured. Good luck to them with that (genuinely). Does it relate to remaining payments to Mike and co? I note Aggi’s above comment.

That all seems to be “step 2”. Step 1 was the initial transactions that contribute to the club being £90m-£100m worse off - the change in net funds is £95,381k comprising the loan and the reduction in bank balances.

I think what I am driving at is that with further transactions to come out in the wash the £90m “worse off” that the media reported last year and confirmed in the accounts isn’t the end of the story. There will continue to be a drag on cashflow (as I’d expect with the amount the old owners sold the club for).

It may work if they run a successful model of staying up, buying young (Cornet and Collins) and selling at a huge profit. But as I have said before, it is the skill of the owners we need to rely on now, more so than before.

I don't know how they are going to re-pay the £102 million. 37 million of it has almost certainly gone and the other amount is probably deferred payments.

Cornet and Collins cost 25 million and are on Premiership contracts. That is a lot of money on two players who at this point in time would not be worth any more than that....! In addition, you've got to play them to see an increase in value, which is a risk and managers have got to integrate them into a squad that can compete year in year out in the Premiership.

The problems are already starting to manifest we had to buy a 29 year old to replace Wood ad we've just given Jay a new contract because in reality ten Cornet's and Collins to replace ten OOCs would cost a lot of money.

It's a very difficult proposition to envisage working over a sustained period...! Long enough for the current owners to see an increase in the value of the club to an extent that makes their investment worthwhile.

But of course it is not impossible.

[Chester Perry]

Slightly confused again- how would selling the club cover the loans? Surely the new owner would just inherit them and have to pay them? I'm multitasking which isn't helping matters.

Money used for the purchase would be used by VSL to cover the repayments - of course the plan is for new investment to do that - but we have been through that discussion a few times now

alternatively VSL could just get the cash difference for the new valuation (assuming it goes up) and the new owner buys the group at Kettering Capital Level with all the debt intact

The recent Southampton sale saw cash plus debt sale and the new owners are looking to pay off the MSD loan - they are finding that challenging as it has defined repayment events and windows and early repayment incurs substantial penalties that are targeted at recovering the entire interest repayment outlined over the duration of the initial loan agreement

[jedi_master]

I don't know how they are going to re-pay the £102 million. 37 million of it has almost certainly gone and the other amount is probably deferred payments.

Cornet and Collins cost 25 million and are on Premiership contracts. That is a lot of money on two players who at this point in time would not be worth any more than that....! In addition, you've got to play them to see an increase in value, which is a risk and managers have got to integrate them into a squad that can compete year in year out in the Premiership.

The problems are already starting to manifest we had to buy a 29 year old to replace Wood ad we've just given Jay a new contract because in reality ten Cornet's and Collins to replace ten OOCs would cost a lot of money.

It's a very difficult proposition to envisage working over a sustained period...! Long enough for the current owners to see an increase in the value of the club to an extent that makes their investment worthwhile.

But of course it is not impossible.

I would not sell Collins for less than £30m, he's certainly increased in value as far as I am concerned. I cannot name you many centre backs playing as well as him at the age he is in this league, if any. Cornet has been hit and miss but I think his goals might lead to someone from the lower reaches thinking he is better than he actually is, I can see us being able to make a profit on him and get around £20m.

[Chester Perry]

Hard not to be relaxed when it's out of everyone's hands.

I think 2 things strike me about this:

1. There's a lot of people who were very "we want a takeover" who are now "not THAT kind of takeover." This was the deal on the table and, compared to the other one with the dodgy lawyer everyone condemned, it was the one most people preferred (without knowing any of the detail). The alternative was to continue underfunding the squad and the almost certain prospect if the manager leaving ages ago - which again, most people were dead against.

So we are where we are.

2. It's hard to get too upset about accounts that are nearly a year out of date. No idea what the picture looks like now, could be worse, could be similar, could even have improved.

1 the squad was never underfunded - just look at the Wages + Amortisation to Revenue ratios. Our difficulty was in increasing revenues and/or selling the players that would have provided the monies to spend

2 I am going with option a. worse

[JohnMcGreal]

Hard not to be relaxed when it's out of everyone's hands.

There are lots of things which we have no control over, yet they can still cause a lot of anxiety and worry, but I take your point.

[dsr]

The top holding company will have a balance sheet something like this (before the minority shareholders were bought out):

ASSET - Burnley Football Club, £180m.

LIABILITY - debt owed to Burnley Football Club, £102m
LIABILITY - balance of purchase price owed to Garlick and B, £60m
SHARE CAPITAL - £15m.

There's a £3m gap because all these figures are approximate so there's no point trying to bve exact.

The point is that for Burnley FC to get the £102m back, it depends on the club being sold for over £160m. No doubt Garlick and John B will get first dibs, and BFC will get what's left.

If we get relegated, what are the chances of a bankrupt club outside the PL in a smallish catchment area, being sold for £160m?

[RVclaret]

1 the squad was never underfunded - just look at the Wages + Amortisation to Revenue ratios. Our difficulty was in increasing revenues and/or selling the players that would have provided the monies to spend

2 I am going with option a. worse

How can you say it wasn’t underfunded when you’ve just said £53m of the clubs funds have been used to fund the takeover? That £53m could have gone a long way on significantly improving the squad.

And how can the accounts be worse now, given revenue will be back at pre covid levels this season? The loss of 2.7m is minuscule compared to losses across PL clubs and this season surely revenue will be back up touching the high 120s.

[dsr]

I think that's a bit of an overreaction to say the least.

If a chunk of the 65m loan is due, let's assume half of it, call it 35m.

Cornet / Pope sales in summer would cover that. Any other sales provide funds, alongside the parachute payments, to rebuild in the Championship.

ALK bought the club when we were sitting just above the relegation places last season.

To suggest the entire clubs future is at risk is simply fear-mongering.

We can't use parachute payments to fund the rebuilding because we will need them, to pay the wages. We can't fund top-of-the-championship wages on gate money alone.

If we go down, we need to find say £35m immediately and still need £3m per year interest for 3 more years before paying the balance of £30m in 2025. So if we don't get back up, 2024-25 will see us with no parachute money, £3m interest to pay, £30m loan to repay, and a load of fresh air to pay it with.

[spt_claret]

Money used for the purchase would be used by VSL to cover the repayments - of course the plan is for new investment to do that - but we have been through that discussion a few times now

alternatively VSL could just get the cash difference for the new valuation (assuming it goes up) and the new owner buys the group at Kettering Capital Level with all the debt intact

The recent Southampton sale saw cash plus debt sale and the new owners are looking to pay off the MSD loan - they are finding that challenging as it has defined repayment events and windows and early repayment incurs substantial penalties that are targeted at recovering the entire interest repayment outlined over the duration of the initial loan agreement

Ah so it would just be a case of selling up then VSL paying off the loan with the proceeds, leaving VSL with no profits beyond any profit on sale, and the club with an owner that's just spent however much money for a club with little in the way of cash. I think I was overthinking it, cheers.

Cornet and Collins cost 25 million and are on Premiership contracts. That is a lot of money on two players who at this point in time would not be worth any more than that....! In addition, you've got to play them to see an increase in value, which is a risk and managers have got to integrate them into a squad that can compete year in year out in the Premiership.

Concerned as I am I think it's reasonable to believe we could already turn a profit on both. If we were relegated that might change if clubs try to use our desperation to chip the price, but I'd expect us to already be able to net a profit if we sold both. Of course, we would then have to replace both.
Lurching from overly slow squad turnover to high speed churning doesn't seem the best of plans to me. We would need the best transfer team in the league. I genuinely hope that's what the takeover got us.

[Chester Perry]

How can you say it wasn’t underfunded when you’ve just said £53m of the clubs funds have been used to fund the takeover? That £53m could have gone a long way on significantly improving the squad.

And how can the accounts be worse now, given revenue will be back at pre covid levels this season? The loss of 2.7m is minuscule compared to losses across PL clubs and this season surely revenue will be back up touching the high 120s.

I answered the first in my original reply - and I have been saying that for a long time now

The second is easy
- there is no new investor and the takeover is still being paid for by the club generating negative cashflow
- costs at the club are increasing particularly wages and amortisation (5 new signings)
- the bounce back in revenues is likely to be less than pre-covid levels (even with price rises )
- we have made a number of off-field investments (admittedly and thankfully aimed at revenue growth), the last set of accounts saw we cut everything to bare bones,
- we do not know where we are commercially and need a new shirt sponsor.
- add in that the pitch probably needs replacing this summer (it is the oldest in the Premier League) and vaious other initiatives life is challenging

there is plenty more

[quoonbeatz]

There are lots of things which we have no control over, yet they can still cause a lot of anxiety and worry, but I take your point.

No, you're right and tbh I shouldn't be sounding so flippant about it. I think it's partly my ambivalence to the PL. I want us to be as good as we can be but this is a pointless league to be in for about 2/3rds of the clubs in it. I'd rather we weren't just existing to be in it or needing to be in it to exist but that's for a whole other conversation really!

[quoonbeatz]

1 the squad was never underfunded - just look at the Wages + Amortisation to Revenue ratios. Our difficulty was in increasing revenues and/or selling the players that would have provided the monies to spend

2 I am going with option a. worse

1 agreed and I was always fine with us living within our means. The perception of many fans and, to a significant extent, the manager, was that we weren't spending enough or risking enough. That's why so many wanted a takeover.

2 that's fine, you will have for more of an idea than me!

[paulatky]

CP within debtors there is £102m stated as owed from other group companies.

Do you have further details of this figure

[Chester Perry]

CP within debtors there is £102m stated as owed from other group companies.

Do you have further details of this figure

On December 30 2020 Kettering capital showed as having almost £98m in capital - I have speculated for a while now that this is made up of:
- £10 VSL investors own money
- £65m MSD loan (now confirmed by the accounts)
- £23m related company loan (clubs money

this was based on the share sale prices in Kettering capital

The accounts now state that the related company loan now totals £37m i.e. an additional £14m has be extracted from the clubs cash balance probably to fund the first stage payment, which you may remember was late as VSL could not find new investors

The accounts confirm that the MSD loan now sits with the club at Holding Company level (I have been stating this for a while now also)

add the two together and you get £102m owed by group companies - the club is now part of a larger company heirarchy even though it is the principal engine of that structure

a further £10m has been 'advanced' which I presume is for a recent stage payment - giving us a total £112m known debt from group entities

[paulatky]

CP within debtors there is £102m stated as owed from other group companies.

Do you have further details of this figure

[spt_claret]

1 agreed and I was always fine with us living within our means. The perception of many fans and, to a significant extent, the manager, was that we weren't spending enough or risking enough. That's why so many wanted a takeover.

2 that's fine, you will have for more of an idea than me!

Not trying to speak for anyone else but offering my personal perspective on the "underfunding" issue in case others share it: I do believe we were underfunded but not in regards to our revenue, purely in terms of our relative spend Vs others in the league. If we're spending less than rivals then unless we keep striking absolute bargains or have a miracle worker manager, we will become less competitive over time, not more or even equally. I appreciate the money simply wasn't there and that overperforming expectations re. Europe probably inhibited our ability to make new signings as that money still went into the squad but in the form of wage bonuses rather than new investment. The total flat funding in summer 2020, based on the accounts, looks to be in part due to another high wagebill squeezing the budget, probably also an element of covid-proofing, and a cynic might say "to fatten the accounts for the takeover" but I'm not convinced of this element.

We can't spend what isn't there and were already at the upper limit of our means in wages and paying off the few transfers we did make, but that isn't mutually exclusive from "in order to remain competitive in the league and not lose pace with our rivals, we needed higher net investment on new players". It just means we COULDN'T make this investment (without selling to buy ie. No net increase in spending and relying on great deals, overperformance or significant player development). Which is why as frustrating as it was,I'm not blaming Garlick having seen the accounts.

I would like to think that when other people talk about underfunding, they're meaning similar, rather than wanting us to exceed 100% investment to turnover.

[clarethomer]

There's been a lot of debate about how ClaretPete arrived at his "£200m debt" figure. To be fair to Pete, I don't think he was necessarily speaking of the accounts as at 31st July 2021.

Thanks Paul

Im not sure if I am asking the right question then as I was looking for clarity around the funding of the takeover which was in this period.

If there is circa £37m of cash reduction in the bank and a £65m loan from MSD. Is this the money that has funded the purchase?

I'm not clear on what has been paid for the club up to this point and what is still yet to pay for - or how it is being financed ?

Is there a way of explaining this simply with what the accounts show at this stage? If not, no worries?

[quoonbeatz]

Not trying to speak for anyone else but offering my personal perspective on the "underfunding" issue in case others share it: I do believe we were underfunded but not in regards to our revenue, purely in terms of our relative spend Vs others in the league. If we're spending less than rivals then unless we keep striking absolute bargains or have a miracle worker manager, we will become less competitive over time, not more or even equally. I appreciate the money simply wasn't there and that overperforming expectations re. Europe probably inhibited our ability to make new signings as that money still went into the squad but in the form of wage bonuses rather than new investment. The total flat funding in summer 2020, based on the accounts, looks to be in part due to another high wagebill squeezing the budget, probably also an element of covid-proofing, and a cynic might say "to fatten the accounts for the takeover" but I'm not convinced of this element.

We can't spend what isn't there and were already at the upper limit of our means in wages and paying off the few transfers we did make, but that isn't mutually exclusive from "in order to remain competitive in the league and not lose pace with our rivals, we needed higher net investment on new players". It just means we COULDN'T make this investment (without selling to buy ie. No net increase in spending and relying on great deals, overperformance or significant player development). Which is why as frustrating as it was,I'm not blaming Garlick having seen the accounts.

I would like to think that when other people talk about underfunding, they're meaning similar, rather than wanting us to exceed 100% investment to turnover.

I think you'd very disappointed! I'd wager most people were questioning why we were making £Xm profits and not buying players. Certainly that's the gist you'd get from many people on social media, phone-ins, article comments etc, including on here.

[ClaretPete001]

Concerned as I am I think it's reasonable to believe we could already turn a profit on both. If we were relegated that might change if clubs try to use our desperation to chip the price, but I'd expect us to already be able to net a profit if we sold both. Of course, we would then have to replace both.
Lurching from overly slow squad turnover to high speed churning doesn't seem the best of plans to me. We would need the best transfer team in the league. I genuinely hope that's what the takeover got us.

It's pure conjecture on both our parts.

What I am trying to demonstrate is that £25 million is a lot of money for two players. The ancillary costs would make that figure even higher.

And the point is high speed churn is not going to happen because we haven't got the seed money to make that happen. 4 players of similar quality would be £50 - £60 million to buy and if one failed (like Gibson) the profits could be gone.

And we have 10 OOC players.

In other words, it's easy to talk about buying young and selling at a profit but the cost, timescales involved in increasing their value sufficiently and the problem of constantly replacing them and integrating them into a team makes it difficult as a business model.

[Down_Rover]

It is very hard to draw conclusions about accounts that are over 12 months in the past.

Another season has gone by and it is reasonable to assume the Balance Sheet has improved since then. This is because the P&L Account is likely to be better, attendances at the ground and a further years trading. Even in 2021 the loss of £3m was after charging £20m+ on amortisation of player contracts. Further, a note to the 2021 accounts suggests that net transfer spend in this season was £1.3m ie minimal.

The likelihood is that cash at bank is now much higher than £50m

So what happens if we are relegated. MSD will want their loan back. The Club says we cant pay and needs a compromise. We agree, say, to pay half and then two quarters in 2024 and 2025.

We will have cash in the Bank, sale of players on expensive contracts who will leave anyway and the parachute payments. We will still be better funded than most Championship clubs until the parachute payments stop, by which time our cost base will reduce. The worst scenario I can see is that we will have to compete against Championship clubs with no financial edge. It is where we started.

In the background we have ALK who will not want the £102m debt to crystallise and MSD who will agree to a compromise rather than see the club fall over and they lose their dosh. Both ALK and MSD are in too deep to allow the club to fall over.

On the other hand if we avoid relegation ALK and MSD will invest to attempt to ensure a longer term survival plan

[Chester Perry]

Not trying to speak for anyone else but offering my personal perspective on the "underfunding" issue in case others share it: I do believe we were underfunded but not in regards to our revenue, purely in terms of our relative spend Vs others in the league. If we're spending less than rivals then unless we keep striking absolute bargains or have a miracle worker manager, we will become less competitive over time, not more or even equally. I appreciate the money simply wasn't there and that overperforming expectations re. Europe probably inhibited our ability to make new signings as that money still went into the squad but in the form of wage bonuses rather than new investment. The total flat funding in summer 2020, based on the accounts, looks to be in part due to another high wagebill squeezing the budget, probably also an element of covid-proofing, and a cynic might say "to fatten the accounts for the takeover" but I'm not convinced of this element.

We can't spend what isn't there and were already at the upper limit of our means in wages and paying off the few transfers we did make, but that isn't mutually exclusive from "in order to remain competitive in the league and not lose pace with our rivals, we needed higher net investment on new players". It just means we COULDN'T make this investment (without selling to buy ie. No net increase in spending and relying on great deals, overperformance or significant player development). Which is why as frustrating as it was,I'm not blaming Garlick having seen the accounts.

I would like to think that when other people talk about underfunding, they're meaning similar, rather than wanting us to exceed 100% investment to turnover.

It has been shown that the European qualification cost us financially - we lost a few £million on that one - we needed the group stages to turn that around but that would have further impacted the league form if you believe Dyche's selections were a pointer to his thinking - either way we were not equipped to deal with the surprise it obviously and delightfully was

[ecc]

It's pretty much diastrous for any club to be relegated from the PL. If ever there was a poisoned chalice, the PL is it.

I'm just focusing on our battle to stay up.

UTC

[Chester Perry]

It is very hard to draw conclusions about accounts that are over 12 months in the past.

Another season has gone by and it is reasonable to assume the Balance Sheet has improved since then. This is because the P&L Account is likely to be better, attendances at the ground and a further years trading. Even in 2021 the loss of £3m was after charging £20m+ on amortisation of player contracts. Further, a note to the 2021 accounts suggests that net transfer spend in this season was £1.3m ie minimal.

The likelihood is that cash at bank is now much higher than £50m

So what happens if we are relegated. MSD will want their loan back. The Club says we cant pay and needs a compromise. We agree, say, to pay half and then two quarters in 2024 and 2025.

We will have cash in the Bank, sale of players on expensive contracts who will leave anyway and the parachute payments. We will still be better funded than most Championship clubs until the parachute payments stop, by which time our cost base will reduce. The worst scenario I can see is that we will have to compete against Championship clubs with no financial edge. It is where we started.

In the background we have ALK who will not want the £102m debt to crystallise and MSD who will agree to a compromise rather than see the club fall over and they lose their dosh. Both ALK and MSD are in too deep to allow the club to fall over.

On the other hand if we avoid relegation ALK and MSD will invest to attempt to ensure a longer term survival plan

I cannot agree with a single point of that