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Haus

Derby Stadium

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So, ive just read that theyve taken out a loan against their stadium.  Didnt they sell their stadium the other year and get into loads of drama for it? 

 

Can someone with a better understanding than me explain how this is possible? 

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Owners bought the stadium from recollection to fund the club and get round FFP rules.

I suspect the club are now looking at ways to buy it back so as not to get a points deduction.

 

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Posted (edited)

Apparently they've also had a loan of £30 million from a company which Michael Dell is linked to (he owns 12% of Dell Technology and is 27th richest worldwide). Stinking rich but fails the Chinese test.

Edited by Nuff Said

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2 minutes ago, Nuff Said said:

Apparently they've also had a loan of £30 million from a company which Michael Dell is linked to (he owns 12% of Dell Technology and is 27th richest worldwide). Stinking rich but fails the Chinese test.

He should have bought Southampton

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18 minutes ago, keelansgrandad said:

He should have bought Southampton

If he had done that he would have to change his name to St. Mary.

 

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Im confused because, if they sold the stadium, they dont own it anymore, how can they take out a loan against it ?

 

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35 minutes ago, Haus said:

Im confused because, if they sold the stadium, they dont own it anymore, how can they take out a loan against it ?

 

You are confusing football finances with real life financial probity and regulation. The two are generally very different beasts.

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1 hour ago, Ivana_rubyatitz said:

You are confusing football finances with real life financial probity and regulation. The two are generally very different beasts.

 

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I believe the loan is held against the holding company who now own the ground. The latter will then loan it to Derby

What should be of concern is that another bank has been doing the same

'Macquaries have a portfolio of loans to English clubs which includes Bournemouth, Crystal Palace, Middlesbrough, Sheffield United, Southampton, Swansea City, Watford, West Brom and Wolves, with most of the loans they offer secured against future TV income.'

This is what wrecked the paupers a couple of decades back, and has seen clubs who fall out of the PL with loans to service, as well as high wages and staged transfer payments

The latter two are usually mitigated by player sales, but they still can be a huge drag on finances for years

..... but at least, sat in the gutter, they can claim to have shown 'hambition' 🙄

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Apparently the EFL are going to investigate Derby. Resulting in them receiving numerous points deductions next season. Same as Sheffield Wed, 12 point deduction next season. 

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Posted (edited)

Derby are arguing that they got permission from the EFL to do the sale and leaseback of their stadium. The sale being made to one of their owner's other companies. This much is probably true.

The issue seems to be the valuation of £80m odd which the EFL is viewing as somewhere between toppy and pure fantasy. As a result the EFL is commissioning a review of this figure. 

A valuation is a pretty subjective thing. The stadium is one of a kind in it's location. Does it have value as a stadium to anyone other than it's present owners? It's doubtful. Perhaps if it were in London one could make such a case- but not in Derby.

Valuations like these in particular are also subject to the fact that whoever pays the piper calls the tune. It's pretty easy to get a valuation of whatever you want. More so where the valuation is purely academic given that the stadium wasn't going to be sold on the open market.

In reality the truer open market value could be whatever the site is worth as building land and not as a stadium, because there is only one organisation that needs a stadium like that in Derby. However the site has no planning for housing and even if it did £80m is a big stretch. Another method of valuation might be what it would cost to buy the land and build the stadium.

On this basis estimates are easier to come by, for example Huddersfield's stadium cost about £40m to build. Pride Park is 33,000 verses 24,000 for Huddersfield but again we are well short of the £80m figure. This method has a major flaw however because the valuation cited in the accounts is the resale valuation- it is a value of the site to someone other than Derby County Football club which makes the build cost irrelevant. 

Derby will nonetheless stick to their guns and argue that they believed the valuation they had commissioned. 

The EFL will almost certainly commission some alternative valuations to compare to the £80m Derby have come up with.

Probably the only way to get near to a realistic £80m value and avoid a 12 point deduction is if Derby strike oil under Pride Park. 

 

 

 

Edited by Bonzo
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On 13/08/2020 at 09:26, Haus said:

Im confused because, if they sold the stadium, they dont own it anymore, how can they take out a loan against it ?

 

That is what they, Sheffield Wednesday and Villa have a problem. They sold it to their owners ( at inflated prices ) then put it in a trust fund ( owned by the club ), so they never really sold it. To then get around it I believe they then charge themselves peppercorn rent. To me it is always ridiculous that if you then get promoted, nothing can be done about you breaking the rules ie Villa.

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They should just freeze the time period over which the analysis is done for clubs that get promoted out of the EFL - or if they break the rules in the season they are promoted apply the penalty the first season they are back in the EFL again. Maybe they do this already?

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The fact is that the football authorities are out of their depth with finance. They should employ one of the top 4 accountants to act on their behalf with any transaction involving sale or refinancing of a stadium being agreed before the transaction takes place. If the transaction is considered not to be at arms length on a true market value the club concerned would be given a relegation notice if an unapproved transaction goes ahead 

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On 21/08/2020 at 14:17, Bonzo said:

...In reality the truer open market value could be whatever the site is worth as building land and not as a stadium, because there is only one organisation that needs a stadium like that in Derby. However the site has no planning for housing and even if it did £80m is a big stretch. Another method of valuation might be what it would cost to buy the land and build the stadium.

On this basis estimates are easier to come by, for example Huddersfield's stadium cost about £40m to build. Pride Park is 33,000 verses 24,000 for Huddersfield but again we are well short of the £80m figure. This method has a major flaw however because the valuation cited in the accounts is the resale valuation- it is a value of the site to someone other than Derby County Football club which makes the build cost irrelevant. 

Derby will nonetheless stick to their guns and argue that they believed the valuation they had commissioned. 

The EFL will almost certainly commission some alternative valuations to compare to the £80m Derby have come up with.

Probably the only way to get near to a realistic £80m value and avoid a 12 point deduction is if Derby strike oil under Pride Park. 

I live about 20 minutes away from Pride Park. The Derby Arena/Velodrome (picture below) is next to it, was opened in 2015 and apparently cost £27 million to build. A BBC news report says it’s worth £31 million (again in 2015).

Given that it seats up to 5,000 people, you could argue that Pride Park is worth considerably more, although since it doesn’t have a roof and probably isn’t as suited to multi-use I doubt you could simply multiply its value by 6.5 (Pride Park seats 33,597). £80 million is probably generous, but is it massively inflated? In a grey area at best I’d say.

 

 

3CD6F2D0-8749-4ADA-BC72-6C077C17B514.jpeg

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Wait for appeals then... a £40 million overvaluation swept under the carpet it would seem. 

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As far as I can see they are an investment company set up to manage Dell's wealth. they have lent money to Sunderland and Southampton as well. My guess (and it's only that) is that they will lend money where banks may not. In the case of Derby, at least, the club itself is secured against the loan - I'd be very surprised if the ground wasn't part of this guarantee. 

The rumour is that they are struggling to survive and that the loan is needed to help them buy time. After pouring in a large part of his fortune the Chairman, Mel Morris, has been trying to sell the club for over a year, but the coronavirus crisis has left them even more vulnerable and they are looking at ways to pay the player's wages.

Some details here - but it is the Daily Mail, so big health warning...

https://www.dailymail.co.uk/sport/football/article-8165737/Derby-talks-30m-loan-Championship-club-battles-survive-amid-coronavirus-crisis.html 

Extra details from another, perhaps more reliable paper - but not as "juicy" - factual.

"MSD have long been mooted to be potential investors in Derby, with this latest charge – registered at Companies House on August 6 – an indication that they see value in providing financial assistance to football clubs. 

While the specifics of the deal with Derby, including the amount invested by the group, remains unclear, the charge is registered against the club itself – meaning the Rams will fall into the hands of MSD UK Holdings if the loan is defaulted upon. This is a similar arrangement to that struck between FPP Sunderland and the Black Cats."

https://www.sunderlandecho.com/sport/football/sunderland-afc/michael-dell-and-msd-uk-holdings-continue-invest-english-football-derby-county-loan-year-after-sunderland-afc-talks-2939713

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The EFL valuation of Derby's stadium was £49m. Derby apparently argued that the League had made a mistake themselves in signing off Derby's financial declarations. 

It seems that given their ruling that the league has agreed with the arguments made by Derby. This means that Derby might have breached FFP and been allowed to do so due to the incompetence of the EFL. 

If this is the case then it may leave the league open to a legal action from any club which incurs a loss as a result of the league's ruling in the Derby case.

In other words the EFL failed to enforce their own FFP rules due to their own incompetence.

Sheffield Wednesday might already have a case.

Questions that might be asked are;

How can FFP be fair unless it is applied equally to all clubs? 

How is that fair play exactly?  

Furthermore if Derby get promoted then the league could get sued for a significant amount of money as in £100m plus. 

What happens if the league gets sued for £100m plus and who pays for this? 

 

 

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The point here is that like Bmouth these clubs are not borrowing to fulfil some absurd 'hambition; they are borrowing to meet the debts of previous 'hambition'

Which begs the question of were Derby trying to over inflate the value of their ground so as to have more money to 'invest' - or that was the amount needed to keep them afloat ?

https://www.theguardian.com/football/2020/feb/11/premier-league-clubs-australian-bank-macquarie-loans-tv-earnings

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2 hours ago, Bonzo said:

The EFL valuation of Derby's stadium was £49m. Derby apparently argued that the League had made a mistake themselves in signing off Derby's financial declarations. 

It seems that given their ruling that the league has agreed with the arguments made by Derby. This means that Derby might have breached FFP and been allowed to do so due to the incompetence of the EFL. 

If this is the case then it may leave the league open to a legal action from any club which incurs a loss as a result of the league's ruling in the Derby case.

In other words the EFL failed to enforce their own FFP rules due to their own incompetence.

Sheffield Wednesday might already have a case.

Questions that might be asked are;

How can FFP be fair unless it is applied equally to all clubs? 

How is that fair play exactly?  

Furthermore if Derby get promoted then the league could get sued for a significant amount of money as in £100m plus. 

What happens if the league gets sued for £100m plus and who pays for this? 

 

 

It sounds like a procedural issue - "got off on a technicality" as we tend to say (I think man City did likewise). Probably a mistake by one individual saying the wrong thing or giving the wrong advice. The Price of Football podcast will probably explain all at some stage.

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I do hope they didn't inflate the value of their property assets for the purpose of getting a loan, and simultaneously deflate the value of those same assets for tax purposes.... that would be shady, reprehensible and also potentially illegal. 

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