O/T West Brom Owner loaned himself £5m

[Icecream Snow 777]

Apologies if there's an open thread on this already

https://www.bbc.co.uk/sport/football/61992838

Championship club West Brom gave a loan of £4.95m to a company owned by chairman and owner Guochuan Lai to help it through the coronavirus pandemic.

The details of the loan are contained in West Brom's accounts to June 2021, released on Thursday.

Lai says he will return the money, with £50,000 interest, by 31 December 2022 after the initial repayment date was moved from 15 September.

"I will repay the loan in full," he told the club website.

The news will come as a shock to West Brom fans as it took money out of the club that could have been used for transfers both last summer and this, as the club tries to return to the Premier League.

[astro 423]

I read this earlier today but couldn’t decide if it was detrimental to the club or not. Obviously it was not good in the short term in terms of strengthening the squad, but then I wondered what the long term implications would be to the club if the owner’s other businesses struggled. 

[PurpleCanary 6,384]

I wonder if the WBA forums have had threads asking where has the money gone…

[Ulfotto 798]

Slightly unbelievable that the interest payments on a 5 million loan are only 2750 pounds a month.

Very dodge 

[hogesar 10,762]

8 hours ago, PurpleCanary said:

I wonder if the WBA forums have had threads asking where has the money gone…

Hey! Plenty on here would have happily taken West Broms owners..

[Herman 11,136]

"How much did Guochuan Lai wallet?" doesn't have the same ring to it.

[1902 1,167]

23 minutes ago, Herman said:

"How much did Guochuan Lai wallet?" doesn't have the same ring to it.

Maybe not for you Herman. Personally I think it just rolls of the tongue. 

[1902 1,167]

57 minutes ago, Ulfotto said:

Slightly unbelievable that the interest payments on a 5 million loan are only 2750 pounds a month.

Very dodge 

I was shocked by that too initially but and (someone can correct me if my maths is wrong) that's about 0.7% interest give or take. Now, given what interest rates looked like at the mid point in the pandemic that's probably not as ridiculous as it initially seems. 

The issue is the opportunity cost it represents given that football costs rise disproportionately year on year and whether his other businesses were just pandemic effected or are structurally weak.

Still I'd be jarred off as a baggies fan.

[If wed kept Howie.. 300]

Its a company... and companies do this all the time..

Also this is a commercial loan to another company (not to him personally)..

Its not really shocking unless it doesn't get paid back.

[shefcanary 2,951]

Must also avoid some level of taxation as well, but not sure in which country?! #fpathoughts

[hogesar 10,762]

2 minutes ago, If wed kept Howie.. said:

Its a company... and companies do this all the time..

Also this is a commercial loan to another company (not to him personally)..

Its not really shocking unless it doesn't get paid back.

It's not shocking in the normal business world but this isn't the normal business world, it's football. And fans of West Brom have a right to be angry that instead of putting the money towards strengthening the team they put it towards the self-interest of one of the owners.

Put it this way, if we didn't sign anyone in January but loaned Delia £5 million to help release another book I think many posters on here would  be bursting blood vessels left right and centre...

[Nuff Said 5,960]

1 hour ago, Herman said:

"How much did Guochuan Lai wallet?" doesn't have the same ring to it.

Also, does he have a hambag?

[Capt. Pants 5,008]

Looking very quickly at the West Brom forums I can't see much about it?

Lai says it will be paid back and available for spend in the Jan transfer window.

 

[Bert 236]

30 minutes ago, If wed kept Howie.. said:

Its a company... and companies do this all the time..

Also this is a commercial loan to another company (not to him personally)..

Its not really shocking unless it doesn't get paid back.

The concept of inter company loans will pass most people by on this forum. I wouldn’t bother even explaining 

[hertfordyellow 462]

22 minutes ago, Bert said:

The concept of inter company loans will pass most people by on this forum. I wouldn’t bother even explaining 

What about the interest level?

[Wings of a Sparrow 1,708]

2 hours ago, Herman said:

"How much did Guochuan Lai wallet?" doesn't have the same ring to it.

I bet he's got a manbag though.

[hogesar 10,762]

34 minutes ago, Bert said:

The concept of inter company loans will pass most people by on this forum. I wouldn’t bother even explaining 

Ah, so you have no problem with the club loaning £5 million to Delia to publish a new book then, I presume?

[Herman 11,136]

7 minutes ago, Wings of a Sparrow said:

I bet he's got a manbag though.

Around the waist or off the shoulder? 😀

[shefcanary 2,951]

31 minutes ago, hertfordyellow said:

What about the interest level?

As said above, it will be pitched to ensure the largest reduction in corporation tax across the jurisdictions that his companies operate in.  By using the BoE rate, I would assume he will achieve a greater saving in the borrowing company.

[hertfordyellow 462]

53 minutes ago, shefcanary said:

As said above, it will be pitched to ensure the largest reduction in corporation tax across the jurisdictions that his companies operate in.  By using the BoE rate, I would assume he will achieve a greater saving in the borrowing company.

That isn't the BoE rate though. 50k is 0.9%. Are you saying if it was higher, then West Brom would pay more Corporate tax so would technically make less money on the deal? 

[shefcanary 2,951]

11 minutes ago, hertfordyellow said:

That isn't the BoE rate though. 50k is 0.9%. Are you saying if it was higher, then West Brom would pay more Corporate tax so would technically make less money on the deal? 

This all gets complicated.  The rate was slightly higher than the BoE rate when the loan was made last year - to be at it or just below it would be deemed to be non-commercial by tax authorities and thus not allowable for tax.  I assume any tax avoidance would be in the overseas group company - the UK has a a low rate of corporation tax compared to most, so would expect the loan was engineered to be taken on by a country where Corporation tax was higher than the UK, then cash channelled to where it was most urgently required (or where costs of borrowing were highest). 

It's all conjecture on my part, just giving an example of what Bert was highlighting that WBA are part of a wider international conglomerate, and thus are used as a financial "football" as much as being a football club per se!

Edited July 1, 2022 by shefcanary

[All the Germans 1,239]

3 hours ago, hogesar said:

It's not shocking in the normal business world but this isn't the normal business world, it's football. And fans of West Brom have a right to be angry that instead of putting the money towards strengthening the team they put it towards the self-interest of one of the owners.

Put it this way, if we didn't sign anyone in January but loaned Delia £5 million to help release another book I think many posters on here would  be bursting blood vessels left right and centre...

I agree that they would be bursting a blood vessel, but disagree with the "they have a right". No, they don't. They may feel that they have a right, but they entirely do not.

[hertfordyellow 462]

55 minutes ago, shefcanary said:

This all gets complicated.  The rate was slightly higher than the BoE rate when the loan was made last year - to be at it or just below it would be deemed to be non-commercial by tax authorities and thus not allowable for tax.  I assume any tax avoidance would be in the overseas group company - the UK has a a low rate of corporation tax compared to most, so would expect the loan was engineered to be taken on by a country where Corporation tax was higher than the UK, then cash channelled to where it was most urgently required (or where costs of borrowing were highest). 

It's all conjecture on my part, just giving an example of what Bert was highlighting that WBA are part of a wider international conglomerate, and thus are used as a financial "football" as much as being a football club per se!

It’s tricky treating a football team as part of a business conglomerate, even if they are a business. This is a pr nightmare. Even if there are legitimate accounting decisions being made, the average fan won’t get it or want to get it.

[Bert 236]

3 hours ago, hogesar said:

Ah, so you have no problem with the club loaning £5 million to Delia to publish a new book then, I presume?

If it generated £20 million of sales and she paid that back into the club great.

invest your free capital in where you get the greatest return on equity employed don’t leave it sitting not making a contribution 

[essex canary 622]

4 hours ago, hogesar said:

It's not shocking in the normal business world but this isn't the normal business world, it's football. And fans of West Brom have a right to be angry that instead of putting the money towards strengthening the team they put it towards the self-interest of one of the owners.

Put it this way, if we didn't sign anyone in January but loaned Delia £5 million to help release another book I think many posters on here would  be bursting blood vessels left right and centre...

Sounds reasonable. That said I wasn't delighted when NCFC spent nearly £2 million interest and bonuses to borrow £5 million for a year.

[Herman 11,136]

6 minutes ago, essex canary said:

Sounds reasonable. That said I wasn't delighted when NCFC spent nearly £2 million interest and bonuses to borrow £5 million for a year.

Why didn't you say? I'm sure it could have been sorted out if you hadn't kept so quiet.

[Commonsense 802]

8 hours ago, 1902 said:

I was shocked by that too initially but and (someone can correct me if my maths is wrong) that's about 0.7% interest give or take. Now, given what interest rates looked like at the mid point in the pandemic that's probably not as ridiculous as it initially seems. 

The issue is the opportunity cost it represents given that football costs rise disproportionately year on year and whether his other businesses were just pandemic effected or are structurally weak.

Still I'd be jarred off as a baggies fan.

Do you really think commercial loan rates fell to 0.7%?
There’s a vast difference between a loan rate and the base rate.

[Commonsense 802]

7 hours ago, If wed kept Howie.. said:

Its a company... and companies do this all the time..

Also this is a commercial loan to another company (not to him personally)..

Its not really shocking unless it doesn't get paid back.

It’s appalling. He has basically taken the clubs money to support his own income, via his companies. He’s already extended the pay back time. It is frankly pathetic the excuses people make on here for the practices of other clubs owners, because they have their own little agenda.

[TIL 1010 5,246]

18 hours ago, PurpleCanary said:

I wonder if the WBA forums have had threads asking where has the money gone…

I wonder what the WBA forums Fag Packet Accountants have had to say about it. 😜

[1902 1,167]

19 minutes ago, Commonsense said:

Do you really think commercial loan rates fell to 0.7%?
There’s a vast difference between a loan rate and the base rate.

I'm aware, which is why I said that "it wouldn't seem as ridiculous" rather than it was the going rate. However the base rate was 0.1% at this point in time, money was insanely cheap at that particular moment for basically any borrower.