Swiss Ramble on Burnley finances

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Lancasterclaret
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Swiss Ramble on Burnley finances

Post by Lancasterclaret » Mon May 16, 2022 7:18 am

https://twitter.com/SwissRamble/status/ ... 1968959493

No one does finances better than this lad

Well worth a look

Nonayforever
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Re: Swiss Ramble on Burnley finances

Post by Nonayforever » Mon May 16, 2022 7:30 am

Exciting times

Newcastleclaret93
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Re: Swiss Ramble on Burnley finances

Post by Newcastleclaret93 » Mon May 16, 2022 7:39 am

Pretty much details everything we already know.

If relegated it’s going to be a hell of a bumpy ride

RVclaret
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Re: Swiss Ramble on Burnley finances

Post by RVclaret » Mon May 16, 2022 8:19 am

Swiss Ramble is great. Obviously everything we already know but he puts in enormous effort to make it so everyone can understand.
This user liked this post: SussexDon1inIreland

Goalposts
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Re: Swiss Ramble on Burnley finances

Post by Goalposts » Mon May 16, 2022 8:26 am

Yes so this on my twitter feed this morning, balanced as ever is Swiss

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Re: Swiss Ramble on Burnley finances

Post by Quickenthetempo » Mon May 16, 2022 9:12 am

A little surprised we only paid 13m in tax over 5 years.

I thought football clubs would be hit quite hard.

CrosspoolClarets
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Re: Swiss Ramble on Burnley finances

Post by CrosspoolClarets » Mon May 16, 2022 9:13 am

A good read, not much new but some useful bits teased out like the Covid impact.

I would have liked a forecast of the impact of relegation in terms of debt to player sales rebalancing, but Swiss probably doesn’t want to speculate scenarios. My hunch is that we should remain competitive next season at the top end. We don’t know the substantial part of the debt needing repaying but if it was £40m that could be funded by Cornet, Pope and one other player going which would still leave some quality, plus it would reduce interest and leave us in better shape if we came back. The caveat there is player sales don’t lead to immediate cash flow so paying off that loan may have worse than expected consequences to our rebuilding. The opposite to that is player purchases don’t need as much immediate cash either, and ALK are likely to try to bounce back ASAP with a gamble or two or their future here looks bleak.

So it is analysis of that kind of scenario I would find useful to see if my (relatively) positive view of relegation is too optimistic.

Billy Balfour
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Re: Swiss Ramble on Burnley finances

Post by Billy Balfour » Mon May 16, 2022 9:23 am

It sickens me that this was allowed in the first place. It might be too late for us, but we require legislation to stop 'community assets' being sold on in this way (heavily leveraged buyouts).

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Re: Swiss Ramble on Burnley finances

Post by aggi » Mon May 16, 2022 10:38 am

Obviously nothing new there but nicely presented. The one that stood out to me was this, we don't generate much income through player sales and it will be interesting to see if that changes going forward. There's definitely a few players who you would expect may end up leaving for decent money.

Image

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Re: Swiss Ramble on Burnley finances

Post by claretabroad » Mon May 16, 2022 11:13 am

Mother Jones have been doing a series on the state of private equity in the US and have written an article on us. It is an interesting take from a US perspective.

https://www.motherjones.com/mojo-wire/2 ... -football/

This might be behind a paywall so let me know if you can't see it.

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Re: Swiss Ramble on Burnley finances

Post by Chester Perry » Mon May 16, 2022 1:58 pm

claretabroad wrote:
Mon May 16, 2022 11:13 am
Mother Jones have been doing a series on the state of private equity in the US and have written an article on us. It is an interesting take from a US perspective.

https://www.motherjones.com/mojo-wire/2 ... -football/

This might be behind a paywall so let me know if you can't see it.
While we can - I will transcribe it - it is a bit all over the place really and not up to date with information MSD loan value - and finishes on the digital 'bond type' token that we have heard nothing about since it was mentioned just before Christmas - though I agree with the summation as to it's value to investors

This Is What Happens When Private Equity Takes Over Your Soccer Team
Burnley is in rough shape. So is the team’s books.

TIM MURPHY - Senior Reporter

Burnley Football Club is not one of the planet’s great soccer powers. Over the last decade-and-a-half the Lancashire-based squad has gone back and forth between the bottom half of the English Premier League—the world’s best domestic league—and the country’s second division, which is, for reasons not worth getting into, called the Championship. The team’s style of play is grass-stained, low-scoring, and deeply frustrating. Their nickname is “The Clarets.” Their field is called Turf Moor. Their manager, until he was fired quite recently for reasons I will get to, had the look of a man who would glass you at the pub if you spoke ill of the pea wet. But he was actually a nice enough guy, by most accounts, and Burnley has been more competent for a while than they really ought to be.

Now that you’re all caught up on what Burnley is, let’s talk about why it’s screwed. For a long time, English soccer teams—especially ones in small cities with names like “The Clarets”—were not especially great investments for people looking to make money. The profit margins weren’t huge and were often non-existent, and the system of demoting the worst teams every year means that it is actually possible for a club to fail. The Premier League sends the three worst teams down to the Championship at the end of the season. The Championship does the same to its bottom three teams. And so on. In English leagues, you don’t get to just kind of putter around for a while hoarding draft picks until you find the right formula. If you don’t win, you go down, and you take a massive hit in your revenues, which come from TV rights. Up until 2020, Burnley’s chairman was a guy named Mike Garlick, who grew up near Turf Moor and ran a successful job-recruitment consulting firm. He was the 19th-richest owner in a 20-team league at one point—sort of the Burnley of owners.

But as the Premier League’s revenues and stature have grown, it’s become a destination for genuine global wealth. Middle-Eastern petro-states, Russian oligarchs, and NFL owners all bought clubs. And as with every other asset class these days, from dentist offices to prisons to single-family homes, you can also find a private equity firm sniffing around. In 2020, Garlick and another minority owner, John Banaszkiewicz, agreed to sell their stake in Burnley to a firm called ALK Capital, which was helmed by a Citi alum named Alan Pace. Many fans were optimistic about the deal, hoping that a new injection of cash would give the team more money to spend on on-field talent.

That’s not what’s happened, though. The takeover was a classic leveraged buyout. When ALK took over the club, it did so in a way that depleted the team’s cash reserves to pay off the old owners, and then saddled the club with massive loan debt. Burnley effectively paid for its own takeover on the predication of its future value. As The Guardian’s David Conn reported last year:

Sources with knowledge of the deal did, however, confirm some essential elements: the initial payments to Garlick, Banaszkiewicz and the other sellers have been financed with a loan from MSD UK Holdings, the investment firm of the US tech magnate Michael Dell, said to be approximately £60m. The loan is charged like a mortgage on Turf Moor and the club itself, which will have to repay it from its own revenues, with interest at a rate ALK has not yet publicly stated.

This is not really how you or I might envision “buying things,” but it’s a perfectly normal kind of private-equity deal. In the best-case version of the industry, this new management would unlock new sources of revenue and efficiencies. But Burnley now faces the worst-case scenario: relegation and demotion to a lower league. This is, in effect, what happens with many PE takeovers: The promise of loading a company up with debt against the idea that financial gurus will create greater returns and results (or, in this case, continue pulling off the heroic feat of staying in the Premier League) is running up against the fact that that is actually pretty hard to do.

Now, though, the stakes for Burnley going down are much higher. Since the club is already loaded up with debt it could put them in a real danger zone—that way lies more relegations, bankruptcy, and receivership; you look up one day and you’re at the bottom tier, kicking off in a cow pasture against Cockermouth FC. And Burnley’s arrangement, as it happens, is actually written in ways that raise the stakes of relegation. According to The Athletic, if the team is relegated, the loan repayment timeline accelerates, “with a significant proportion of the capital loan value required shortly after the end of the football season.”

As Conn noted, other American owners have taken similar approaches to Premier League teams. The Glazer family, which owns the NFL’s Tampa Bay Buccaneers, saddled Manchester United with huge debts in order to finance its own takeover, and the club has since had to make £1 billion in various payments related to that debt. Fans have literally taken to the streets to protest the Glazers. But while United hasn’t been as successful under the Glazers as it was before the Glazers, it is still one of the biggest brands in global sports; you can see why investors considered it as an asset worth mining. Burnley, as we’ve discussed, is Burnley. Short of a takeover by, like, the sovereign wealth fund of Hell, that’s never going to change.

Competing against some of the world’s richest and most successful clubs, Burnley’s margin for error has always been small, and this edition of the team has been putrid, hovering around the relegation zone all year. Last month, the chairman from ALK finally fired the club’s longtime manager, leading to a brief flurry of strong performances. It still might not be enough to stay up.

Burnley’s private-equity ownership did come up with one new source of cash though—last year they announced that they were teaming up with a blockchain company to produce a new “publicly traded digital security token” fans could own. “We’re excited to get our supporters involved on a whole new level,” Pace said in a statement at the time.

But maybe don’t put your retirement savings into Burnley-coin just yet. The tokens’ value, the team announced, would be linked to “club revenues.”

Chester Perry
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Re: Swiss Ramble on Burnley finances

Post by Chester Perry » Mon May 16, 2022 2:00 pm

aggi wrote:
Mon May 16, 2022 10:38 am
Obviously nothing new there but nicely presented. The one that stood out to me was this, we don't generate much income through player sales and it will be interesting to see if that changes going forward. There's definitely a few players who you would expect may end up leaving for decent money.

Image
Add that to the lack of non TV revenue growth and the actual growth in wages and it is clear why we have not had much to spend in the transfer market - as I have been saying for quite some time

RVclaret
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Re: Swiss Ramble on Burnley finances

Post by RVclaret » Mon May 16, 2022 2:13 pm

Chester Perry wrote:
Mon May 16, 2022 2:00 pm
Add that to the lack of non TV revenue growth and the actual growth in wages and it is clear why we have not had much to spend in the transfer market - as I have been saying for quite some time
There was still enough cash in the bank to justify spending more than we did (the £1m Dale Stephens window springs to mind the most).

Chester Perry
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Re: Swiss Ramble on Burnley finances

Post by Chester Perry » Mon May 16, 2022 2:23 pm

RVclaret wrote:
Mon May 16, 2022 2:13 pm
There was still enough cash in the bank to justify spending more than we did (the £1m Dale Stephens window springs to mind the most).
We needed the churn of player sales to justify that against the budget - The manager had the power of veto (something quickly removed by VSL) and used it - that stance from Dyche was at least as (I would say more, many wouldn't) restrictive to our ability to trade than the budget.

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Re: Swiss Ramble on Burnley finances

Post by ClaretPete001 » Mon May 16, 2022 2:49 pm

There are a couple of things I disagree with on the tweets from Swiss Ramble. One is the view that the accounts are not as bad as other in the PL.

The top 6 top performing financial PL clubs, according to SR, are Wolves, Leeds, Norwich, Man City, Sheffield United and Burnley.

Two of whom were are already relegated and another two are third and fourth from bottom of the PL.

Clearly, improving your bottom line by selling players, not investing in new ones and benefitting form the lower amortisation of a diminished squad is not a sign of a good set of accounts.

Only two current clubs have made a profit by player trading. One is already relegated, Norwich, and the other is Brentford with no PL tradition.

In my opinion, the only way for a club like Burnley to exist in the Premiership is to do what we have done, which is having a clear playing strategy and good fiscal management aligned to working very hard to find players to fit the playing style.

I don't think doing it the other way, finding nuggets and developing a playing style around them - will work in the long term.

And I agree with RV, we could have spent £20 million last season without breaking the bank. And given the ALK deal I see little merit to justify the view that caution informed MG and co when making the decision not to spend.

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Re: Swiss Ramble on Burnley finances

Post by ClaretPete001 » Mon May 16, 2022 2:53 pm

That should read financial not fiscal - no idea why I typed fiscal - my fingers are a law unto themselves.

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