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Parma Ham's gone mouldy

Mark Attanasio

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Here you go @nutty nigel

The Glazers used reverse leverage to use the existing equity inherent to Manchester United, to raise the funds to buy the company.

The equity win is now how they make a huge return on their investment (much of which they have extracted from the business itself). 

Delia will also receive such equity return - let’s say approximately £50m - upon any sale to Attanasio. 

The equity can therefore be used in any number of ways. It is also often a primary focus for any buyer-owner in terms of the ‘cash out’ day.

Parma 

This is from The Guardian today:
 

Nils Pratley on finance

Glazer’s supposedly reckless financial Man Utd gamble has proved a triumph

Malcolm Glazer’s purchase of the team was an enormous risk. As his sons prepare their exit, they appear on the precipice of victory

The Glazers, assuming they find a buyer, will depart Old Trafford as loathed by Manchester United fans as they were on arrival. They won’t give a damn, obviously. Malcolm Glazer, the penny-pinching patriarch who led the £800m takeover in 2005, was never hard to read and nor are his sons. They are interested in sporting success to the extent that it delivers financial success for them.

By the time Glazer died in 2014, the club’s equity was valued by the market at £1.5bn, which was a commercial triumph given the thin sliver of hard cash, as opposed oodles of debt, that supported the buyout. Leverage turned a good investment into an excellent one – for the Glazers, that is, rather than the club.

Strange as it now sounds, 17 years ago many thought the family would fall flat on its face. Yes, Rupert Murdoch’s BSkyB had bid £623m for Man Utd in 1998 (and been blocked by competition authorities) but the value of TV football rights, some argued, would deflate with the popping of the turn-of-the-century dotcom bubble. The club’s revenues in the 2003-04 financial year were only £169m, so £800m looked a severe overvaluation. In late 2002, shares in Man Utd fell as low as 100p; Glazer paid 300p.

To get the deal done, the American was forced to the limit. Irish property and horse-racing tycoons JP McManus and John Magnier held a combined 28.7% stake, and the duo never knowingly undersell anything. They rebuffed Glazer’s first bid and rolled over only when the price was improved. Financial pips squeaked as the buyer had to pay interest at 14.25% – paupers’ terms – on the notorious PIK, or payment-in-kind, a higher-risk tranche of debt. It took until 2010 to get the PIKs off the books.

The first half of the gamble, in effect, was that Sir Alex Ferguson would get the club into the Champions League every year, that Old Trafford would remain full, that merchandising revenues could be boosted and Premier League TV rights had further to rise. On all scores, Glazer was correct. The moment of maximum financial danger passed when a minority stake was sold by listing Man Utd in New York in 2012.

The second half of the Glazer years has been a quieter financial affair. Before Monday’s announcement of a sale process, the stock had gone roughly sideways for a decade. The hundreds of millions of pounds being paid by the club in debt interest payments, plus the post-Ferguson decline on the pitch, also weighed on the valuation.

The real game for Glazers, then, has always been about the exit. If the £4bn-plus speculation is to be believed, they are about to win for a second time. Their victory will feel dispiriting to many. But one has to concede that a supposedly reckless financial gamble has proved anything but. Football just keeps inflating, which only feels obvious with hindsight.

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Thanks Parma.

I understand that (I think). But it's not helping me understand how the city stand hasn't been rebuilt prior to Attanasio coming on the scene.

How could Michael and Delia have funded it? I keep asking but maybe I'm not understanding the answer. They had to do the South Stand and it nearly bankrupted the club. 

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1 hour ago, nutty nigel said:

Happy to change those words.

What I'm trying to understand is how the city stand could have been replaced by borrowing against hypothetical share values.

Do you remember how was the south stand loan secured?

 

I’ll hold my hand up here and confess to failing to recall the exact numbers, plus timing of the deal.

However, there was a legacy overdraft, from the Chase days, of circa £4m, which was effectively repayable to Barclays(?) on demand. The total debt securitisation deal realised about £15m, which was used to pay off the overdraft, fund the South Stand redevelopment, which cost about £7.5m and resulted in a surplus, of approximately £3.5m to be used as working capital at the time.

Again, from memory, interest and capital repayments were rolled up for a few years, so, by the time we were relegated to League One, the total debt was in excess of £23m.

It is probably misleading to assume that was totally down to the South Stand, but the level of debt certainly gave genuine cause for concern and probably focused D&M’s attention on debt reduction for a while.

What has also changed subsequently is the huge increase in media revenues, which, as a result of promotions to the Premier League, has enhanced whatever view outsiders have on the worth of the Club.

So, to answer your question in isolation, clearly that would have been highly unlikely, but not impossible.

What has definitely changed recently is the perception of share values in football, particularly from the US, which means that the whole game has changed. MF’s recent decision to sell, together with the huge question marks around the viability of our self funding model in the Premier League over the previous three seasons, probably means that D&M have reassessed their options.

I’ve tried to assess the situation, albeit from memory, and without revisionism or hindsight. Could they have played it differently? Yes, in my opinion, but we are where we are and, personally, and I can see the Club being taken private in the next 5 - 10 years.

Edited by GMF
Typo correction
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11 hours ago, nutty nigel said:

Thanks Parma.

I understand that (I think). But it's not helping me understand how the city stand hasn't been rebuilt prior to Attanasio coming on the scene.

How could Michael and Delia have funded it? I keep asking but maybe I'm not understanding the answer. They had to do the South Stand and it nearly bankrupted the club. 

Well you are deflecting to a side issue, though it once again reverts back to whether and how you use any equity. 

If you now have no cash - even though previously you could afford to buy a football club (house) in the first place - you don’t leverage the equity in the company  to build the new City stand because you haven’t got the cash to pay the monthly interest instalments. 

You do nothing with the equity and ignore it. 

You have no monthly payments to make, though the club has no new City stand. 
 

Then one day - upon selling -  the equity that you could have previously leveraged and didn’t (because you have no ongoing cash), then becomes a £50m win for you and your family. 

That you maybe don’t want, need or intend.

Though it would be equally daft to ‘give it’ to whoever comes next (and who probably does have the ongoing cash to leverage it).

It’s an unusual situation. 

Parma 

Edited by Parma Ham's gone mouldy
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Thanks @GMF and @Parma Ham's gone mouldy

@GMF The huge increase in media revenues is a double edged sword. Brilliant when you have them but the huge gulf to not having them makes future in planning an absolute nightmare. David McNally used to talk about how this made it so difficult to budget. And of course the gulf is much bigger since then.

@Parma Ham's gone mouldy I totally agree that if you don't have the cash to repay the loan don't take out the loan. That's not a criticism of anyone. The ones I would criticise would be those who take out the loan whilst being unable to make the monthly payments. Even more I would and do criticise those who allow people to take out loans they cannot really afford to service. 

So where are MWJ and Delia in all of this? I suppose it depends whether past executives really did try to find the investment the Webbers appear to have found now...

 

Edited by nutty nigel

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The other thing about equity in an asset that isn't your main residence is that when it's eventually passed on, however it's eventually passed on, it's taxable. If it's passed on to the nephew for nothing, IHT at 40% based on the market value at the time of the gift. If it's passed on in a sale, CGT at 28%. If it's passed on in a sale and then the cash goes to the nephew it gets taxed twice.

I raised this issue years ago but no one has been able to answer it and the Club have never addressed it. Are D & M's shares held in a Trust? If they're not, the tax position is very onerous. If they are, there may be conditions in the deed about how the assets can be "passed on" or sold and to who, which we won't know about.

And yes I get that even at 40% the £50m equity is worth £30m net, but HMRC has to have their money - so the only way nephew can raise the £20m is to sell the shares....

It makes absolutely no financial sense for 80 year olds to physically sell an asset for money - it would in all likelihood get the double tax hit. I can't believe they haven't had that advice so I don't see a straight sale to a third party as a possibility. 

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The quicker Smith and Jones take a long bow the quicker Norwich City move on. Their day was done quite a while ago but still it has to drag on for some reason. 

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It follows that as collateral to a loan, the £50m isn't actually £50m. It could be as low as £23m if it gets taxed twice. Not enough to build a stand anyway.

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9 hours ago, nutty nigel said:

I understand that (I think). But it's not helping me understand how the city stand hasn't been rebuilt prior to Attanasio coming on the scene.

I think @Parma Ham's gone mouldy's point is the club never had the cash required to service the loan required to build the thing. e.g. they had a house, they wanted a new kitchen but the income didn't cover the loan. S&J have become asset rich but, relatively, cash poor through football club price inflation. Pretty common amongst their age group.

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22 minutes ago, BigFish said:

I think @Parma Ham's gone mouldy's point is the club never had the cash required to service the loan required to build the thing. e.g. they had a house, they wanted a new kitchen but the income didn't cover the loan. S&J have become asset rich but, relatively, cash poor through football club price inflation. Pretty common amongst their age group.

Yeah that's how I read it.

I also appreciate everyone ignoring the Number 1 Ipswich fan trolling on this thread 🙂

 

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49 minutes ago, BigFish said:

I think @Parma Ham's gone mouldy's point is the club never had the cash required to service the loan required to build the thing. e.g. they had a house, they wanted a new kitchen but the income didn't cover the loan. S&J have become asset rich but, relatively, cash poor through football club price inflation. Pretty common amongst their age group.

And on a wider point, there has been a distinct lack of stability at the club revenue wise so they haven't been able to invest against long term future income.  If we had stabilised in the Premier League for 4-5 seasons I'm certain that the new stand would have been built by now.

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11 hours ago, nutty nigel said:

How could Michael and Delia have funded it? I keep asking but maybe I'm not understanding the answer. They had to do the South Stand and it nearly bankrupted the club. 

They could have funded it by borrowing the money. The risk of this comes with the terms by which you borrow and your ability to repay the interest.

I recall City being short of money after the financial crisis, when a lot of fans allowed the club to keep the rebate to buy Grant Holt, against the urging of one supporter's group, but I am not sure whether we were ever close to bankruptcy or if this is just a myth that grew up. There were a pretty unique set of financial circumstances in 2008-9 with the entire banking system facing collapse at one point.

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Having read some of the comments about shares and their potential (past) valuations, I think two separate things are being conflated.

First, the shares are assets belonging to two individuals, not the Club, which do not produce any income in terms of dividends. Their ability to underwrite the costs associated with such funding was probably prohibitive.

Second, whilst it would be possible to charge the shares, with a guarantee against the Club’s income, that would have undoubtedly come with a significant risk premium. Additionally, the securitisation market headed South in the 2008-09, as a consequence of the banking crisis. What would have been an expensive form of funding at the time, due to the associated risk, would have become even more difficult, if not impossible, thereafter for a few years.

It probably became a risk that they weren’t willing to take.

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The implication of any comparison between Smith and Jones' relationship with Norwich and the Glazer's relationship with Man U is ridiculous.

Man Utd was a profitable business that the Glazers essentially purchased with the club's own money to extract all of the profits into their own pockets; Smith and Jones bought into a club struggling financially with their own money going into the club.

The Glazers are parasites; Smith and Jones are not, and neither is Attanasio based on his record at Milwaukee and the manner in which his involvement has started here.

Edited by littleyellowbirdie
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11 minutes ago, littleyellowbirdie said:

The implication of any comparison between Smith and Jones' relationship with Norwich and the Glazer's relationship with Man U is ridiculous.

Man Utd was a profitable business that the Glazers essentially purchased with the club's own money to extract all of the profits into their own pockets; Smith and Jones bought into a club struggling financially with their own money going into the club.

The Glazers are parasites; Smith and Jones are not, and neither is Attanasio based on his record at Milwaukee and the manner in which his involvement has started here.

Absolutely right. A completely different risk profile in comparison to NCFC and a company that was paying dividends 

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Borrowing against equity to purchase a non-depreciating asset is often a profitable thing, especially in times of low interest rates (sadly now behind us). For example, taking a second mortgage to build that extension probably adds more value to the property than the overall cost of the borrowing. The same was probably true of building a new City Stand (in 2016 when building costs and borrowing costs were much lower). 

In any case, the (potential) equity in the majority shareholding has no particular relevance to the club itself unless/until the shareholders decide to take out that mortgage and use it to buy assets for the club.

Maybe people are hoping for an act of generosity where the equity is somehow gifted to the club, but it's hard to imagine how that would work in practice. Say Attanasio puts up that £50m price tag, how would Delia inject that back into the club? 

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1 hour ago, Badger said:

They could have funded it by borrowing the money. The risk of this comes with the terms by which you borrow and your ability to repay the interest.

I recall City being short of money after the financial crisis, when a lot of fans allowed the club to keep the rebate to buy Grant Holt, against the urging of one supporter's group, but I am not sure whether we were ever close to bankruptcy or if this is just a myth that grew up. There were a pretty unique set of financial circumstances in 2008-9 with the entire banking system facing collapse at one point.

This is how I see it.

In 2008-09 it was because the club's bankers decided to rationalise their portfolio and in particular reduce their exposure to risky lending like to football clubs in response to HM Govt asking banks to improve their solvency ratios. Like you I do not think we were in danger of falling over completely financially, but the relationship with the bankers had practically reached a nadir, which was demonstrated by a quick change of bankers thereafter.

The Co-op who up to that point had more exposure to football clubs than any other bank, also reduced their exposure drastically (although not quick enough to prevent them from having real problems a couple of years later). Leeds Utd and Wednesday were amongst those hit similarly, interesting they both took the route of seeking external and ultimately overseas investors, one has recovered the other is only just showing signs of recovery.

I've seen the discussion about the club being cash poor although asset heavy and accept that has been the club's position and why Smith & Jones are fixated on maintaining positive cashflow. They are "frit" of it all coming back on them and they lose their wealth. Who can blame them, but ultimately this model has led to stagnation at the club. 

By the middle of the last decade, the lending market was extremely competitive with ever increasingly innovative and relatively cheap products. The funding of the improvements at Colney showed how popular these products could be. Despite the high voucher rate offered to lenders, the positive return on the pitch in the end actually ensured the project was delivered relatively cheaply. Wimbledon achieved a brand-new ground cheaply with a similar product aimed at fans. Essentially both projects were delivered with a sharing of risk and reward across the whole supporter base (and in Norwich's case I would argue well beyond). 

 A less conservative ownership would have seen the success of the Colney bond and immediately turned to support the City Stand re-build with a combination of a similar bond combined with more traditional lending products. The time was then but have we missed out totally. Looking forward, sure interest rates have seen a large hike recently, but Petriix they are already reducing, mortgage rates are already back below 6% which is less than the rate on the Colney bond! Yesterday's news filtering out was that UK Plc was actually performing better than many commentators had thought, the pound has already clawed back half its recent losses against the dollar, the Govt's desire to dampen demand now known to be mainly a wage suppression tactic, as from March inflationary pressures from fuel etc. will go into a strong reversal unless hostilities in Ukraine spill over into other territories. 

Indeed, I can see Attanasio now rubbing his hands at the thought of taking control in 12 to 24 months' time and taking advantage of a return to a competitive lending market. The difference from him doing this compared to Smith & Jones will be due to what Parma & Purple have discussed about Attanasio - he will extract the fullest value possible from the new asset, whereas Smith & Jones may well have failed to spot how to do that, resulting in supporters paying ever more in ways they would never have contemplated in the past to the club. 

All to play for financially still?

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@shefcanary personally, I think that the conservative approach can be argued both ways. On the one hand it has undoubtedly resulted in a high degree of stability for the Club, to the point where the outside perception within the game is that the Club is very well run. Four promotions to the Premier League in the past 12 years would support that view.

The flip side, which is where I suspect that you are coming from, is that they have been too cautious, too happy with the status quo and, arguably, not progressive enough to take the Club forwards.

Again, personally, I don’t think that the non-executive directors have challenged the executive team enough over recent years. It was only just before Ben Kensell departed that there was talk of a stadium plan.

 This all seems to be about to change with the Attanasio appointment.

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5 minutes ago, GMF said:

@shefcanary personally, I think that the conservative approach can be argued both ways. On the one hand it has undoubtedly resulted in a high degree of stability for the Club, to the point where the outside perception within the game is that the Club is very well run. Four promotions to the Premier League in the past 12 years would support that view.

The flip side, which is where I suspect that you are coming from, is that they have been too cautious, too happy with the status quo and, arguably, not progressive enough to take the Club forwards.

Again, personally, I don’t think that the non-executive directors have challenged the executive team enough over recent years. It was only just before Ben Kensell departed that there was talk of a stadium plan.

 This all seems to be about to change with the Attanasio appointment.

You have read me very well @GMF. I have nothing against Smith & Jones personally, they have done a brilliant job, but perhaps been lucky that we have achieved so much over the past 15 years without them having to sweat their assets, or potentially unlucky in that the on-pitch performance has raised expectations beyond what they can possibly support. As you conclude my main argument is that the club (as a collective) has not sweated its' assets, resulting in us being behind the curve in the new financial reality that is coming. To not have future proofed stadium income and off field revenues to their full extent looks a very poor strategy. As for non-executive challenge and corporate governance, it has been somewhat (cough) lacking.

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On 22/11/2022 at 16:18, Parma Ham's gone mouldy said:

Indeed @GMF


I have referred multiple times in the past to ‘the elephant in the room’ of the asset gain - intentional or otherwise - of Delia & Michael’s shareholding. 

I am in the corporate finance world and this was always going to be an issue. One way or the other. 

They had either:

1. made a paper fortune and not leveraged it even for a new training ground 

2. decided to ‘hand it on’ as a trustee type, without ‘claiming the gain’ , though thus leaving the benefit for the new incumbent to win 

3. at the same time diluted everybody else’s value  via their ‘generosity’

I imagined a mechanism whereby had they realised the gain, they might have incorporated some form of fan ownership or Barca membership-style scheme. 
 

This would have been a wonderful legacy, though fabulously generous and not at all expected or obligated. 

Taking full whack would look like profiteering - particularly while Tifosys bonds had to be issued and funded by the fans to replace the training ground portacabins. 

These paper gains can be leveraged. 

Or you take a halfway house of ‘not a huge sum’ though someone ‘with the interests of the club at heart’ who will ‘drive it forwards’ (what else would you say?). 

You wait 25 years for another Delia, then none come along at once.

Parma 

I think the last ten years has shown us that the Barca membership style scheme is NOT what any club wants... it becomes a popularity contests and wannabe presidents promising the earth and therefore leaving the club in masses of debt, purely because they wanted to play president...

I am not a financial expert, nor are the vast majority of Norwich fans. Whilst I think it would be nice to have more fan input on the club as a whole, I would not trust a system that relied upon fans voting in a popularity contest for a president... I would think this forum is a good enough reflection of why that could be disastrous. 

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48 minutes ago, shefcanary said:

Indeed, I can see Attanasio now rubbing his hands at the thought of taking control in 12 to 24 months' time and taking advantage of a return to a competitive lending market. The difference from him doing this compared to Smith & Jones will be due to what Parma & Purple have discussed about Attanasio - he will extract the fullest value possible from the new asset, whereas Smith & Jones may well have failed to spot how to do that, resulting in supporters paying ever more in ways they would never have contemplated in the past to the club. 

This is still a huge question, not a certainty. As others have said, when it comes to Milwaukee Brewers, he didn't jump off the deep end. In fact, in interviews he has stressed that and has said he takes much pleasure of his longstanding relationship with them and the way in which they changed the club.

Now, I am sure he would expect to do that quicker with us if he wants to see the same sort of change, I say that because as others have done, rightly, he is 65.

I also think that he is taking his time to get to know this market better. I'm sure he already has done a lot of homework, it wouldn't surprise me if he has glanced at this forum once or twice, social media etc... to see what value there is left to be squeezed out of the norms.

What that also means though is that this is exactly why he is saying that the model and the way the club are run is good. Player trading comes into that, the cost effectiveness of the academy comes into that. Therefore so does the quality and breadth of scouting.

It really is worth noting at this point too, that he has also said on several occasions that he is friends with the Liverpool owners and sought their advice/views on things frequently.

I think trying to second guess anything at this point, before we know better, is a bit foolish. People that are good at business know that different businesses follow different models and using a cookie cutter approach often leads to failure. This is actually evidenced in his interview where he talks about there being "some" areas that the Brewers and NCFC can share approaches such as player conditioning, nutrition etc but again, says they cannot be compared directly. 

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14 hours ago, nutty nigel said:

Thanks Parma.

I understand that (I think). But it's not helping me understand how the city stand hasn't been rebuilt prior to Attanasio coming on the scene.

How could Michael and Delia have funded it? I keep asking but maybe I'm not understanding the answer. They had to do the South Stand and it nearly bankrupted the club. 

Earlier on in this thread it was stated that D&M were horrified at converting their loans into shares which apparently they wanted to be worthless. That begs the question of why they didn't simply write them off as donations to the Club?

As can be seen from contributors above the issues concerning ground expansion are complex. It seems that the Webber's, like McNally before them, are too dominant with no one holding them to account and that they largely simply follow what advice they are given.

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5 minutes ago, essex canary said:

Earlier on in this thread it was stated that D&M were horrified at converting their loans into shares which apparently they wanted to be worthless. That begs the question of why they didn't simply write them off as donations to the Club?

Of course they could have done that but flipping debt to equity strengthens the balance sheet and also gives them some to sell, if a friendly American arrives in the parish. 

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1 hour ago, shefcanary said:

This is how I see it.

In 2008-09 it was because the club's bankers decided to rationalise their portfolio and in particular reduce their exposure to risky lending like to football clubs in response to HM Govt asking banks to improve their solvency ratios. Like you I do not think we were in danger of falling over completely financially, but the relationship with the bankers had practically reached a nadir, which was demonstrated by a quick change of bankers thereafter.

The Co-op who up to that point had more exposure to football clubs than any other bank, also reduced their exposure drastically (although not quick enough to prevent them from having real problems a couple of years later). Leeds Utd and Wednesday were amongst those hit similarly, interesting they both took the route of seeking external and ultimately overseas investors, one has recovered the other is only just showing signs of recovery.

I've seen the discussion about the club being cash poor although asset heavy and accept that has been the club's position and why Smith & Jones are fixated on maintaining positive cashflow. They are "frit" of it all coming back on them and they lose their wealth. Who can blame them, but ultimately this model has led to stagnation at the club. 

By the middle of the last decade, the lending market was extremely competitive with ever increasingly innovative and relatively cheap products. The funding of the improvements at Colney showed how popular these products could be. Despite the high voucher rate offered to lenders, the positive return on the pitch in the end actually ensured the project was delivered relatively cheaply. Wimbledon achieved a brand-new ground cheaply with a similar product aimed at fans. Essentially both projects were delivered with a sharing of risk and reward across the whole supporter base (and in Norwich's case I would argue well beyond). 

 A less conservative ownership would have seen the success of the Colney bond and immediately turned to support the City Stand re-build with a combination of a similar bond combined with more traditional lending products. The time was then but have we missed out totally. Looking forward, sure interest rates have seen a large hike recently, but Petriix they are already reducing, mortgage rates are already back below 6% which is less than the rate on the Colney bond! Yesterday's news filtering out was that UK Plc was actually performing better than many commentators had thought, the pound has already clawed back half its recent losses against the dollar, the Govt's desire to dampen demand now known to be mainly a wage suppression tactic, as from March inflationary pressures from fuel etc. will go into a strong reversal unless hostilities in Ukraine spill over into other territories. 

Indeed, I can see Attanasio now rubbing his hands at the thought of taking control in 12 to 24 months' time and taking advantage of a return to a competitive lending market. The difference from him doing this compared to Smith & Jones will be due to what Parma & Purple have discussed about Attanasio - he will extract the fullest value possible from the new asset, whereas Smith & Jones may well have failed to spot how to do that, resulting in supporters paying ever more in ways they would never have contemplated in the past to the club. 

All to play for financially still?

The City Stand is pretty much a red herring in this debate. Ticket sales are no longer the most significant revenue stream for top level clubs. Much less marginal ticket sales e.g. the additional capacity that redevelopment of the City Stand would enable. However beneficial the rates would have been it would have increased the operational run rate of the club. In addition revenues would have been reduced for probably two seasons of reduced capacity. All this at a time when the major criticism was not enough was being spent on the team. The club didn't have the cash or the certainty of revenues to fund this, constrained as they were by the economic fundamentals, some of which were self imposed.

MA may or may not take a different approach. Like @GMF I would expect him to take the club private as soon as the opportunity is ripe. I would also expect him to hive the ground and other fixed assets into a separate company. Through this company he might choose to leverage the assets to fund ground expansion separate from the financials of the football side. To use @Parma Ham's gone mouldy's analogy the house will no longer be owned, but rented, and the landlord would be refurbishing it in order to raise the rent.

 

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7 minutes ago, BigFish said:

The City Stand is pretty much a red herring in this debate. Ticket sales are no longer the most significant revenue stream for top level clubs. Much less marginal ticket sales e.g. the additional capacity that redevelopment of the City Stand would enable. However beneficial the rates would have been it would have increased the operational run rate of the club. In addition revenues would have been reduced for probably two seasons of reduced capacity. All this at a time when the major criticism was not enough was being spent on the team. The club didn't have the cash or the certainty of revenues to fund this, constrained as they were by the economic fundamentals, some of which were self imposed.

MA may or may not take a different approach. Like @GMF I would expect him to take the club private as soon as the opportunity is ripe. I would also expect him to hive the ground and other fixed assets into a separate company. Through this company he might choose to leverage the assets to fund ground expansion separate from the financials of the football side. To use @Parma Ham's gone mouldy's analogy the house will no longer be owned, but rented, and the landlord would be refurbishing it in order to raise the rent.

 

Ticket sales are outstripped by TV income in the top flight, but when in the Premier League we have traditionally been right at the bottom of the TV income ladder. Greater capacity would make a difference in comparison to our mid- and bottom-table rivals, not least because larger crowds bring in extra revenue from catering and commercial. There is a reason why clubs with incomes way above what we have ever achieved still want to increase capacity. 

There is also the valid argument that the lack of casual tickets  when he team is doing well (and this has applied in the Championship as well as in the EPL) risks losing a generation of new fans.

It is true that when Bowkett gave some figures at least ten years ago now for redeveloping the City Stand the assumption was the whole thing would be knocked down, with a start from scratch. But recently, given the purchase of the old Carrow Road, the club has talked about the possibility of building a second tier on top of the existing one.

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1 hour ago, shefcanary said:

You have read me very well @GMF. I have nothing against Smith & Jones personally, they have done a brilliant job, but perhaps been lucky that we have achieved so much over the past 15 years without them having to sweat their assets, or potentially unlucky in that the on-pitch performance has raised expectations beyond what they can possibly support. As you conclude my main argument is that the club (as a collective) has not sweated its' assets, resulting in us being behind the curve in the new financial reality that is coming. To not have future proofed stadium income and off field revenues to their full extent looks a very poor strategy. As for non-executive challenge and corporate governance, it has been somewhat (cough) lacking.

I wondered when the luck card would be played. Really lucky that other clubs have been 'soooo unlucky' during this time. Double fortune cookies! You can't beat that...

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@PurpleCanary As you infer, it’s far more nuanced (just for you @nutty nigel 😉) than just the ticket revenues from the extra seats. A significant proportion would be premium seats, possibly with corporate hospitality associated with them, which could drive revenues up significantly.

The Club could also limit the number of season tickets, which would enable them to charge a higher price from casual sales. 

The existing lounges are dated and could be refurbished to generate yet more revenue. The possibilities are endless.

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2 hours ago, shefcanary said:

This is how I see it.

In 2008-09 it was because the club's bankers decided to rationalise their portfolio and in particular reduce their exposure to risky lending like to football clubs in response to HM Govt asking banks to improve their solvency ratios. Like you I do not think we were in danger of falling over completely financially, but the relationship with the bankers had practically reached a nadir, which was demonstrated by a quick change of bankers thereafter.

The Co-op who up to that point had more exposure to football clubs than any other bank, also reduced their exposure drastically (although not quick enough to prevent them from having real problems a couple of years later). Leeds Utd and Wednesday were amongst those hit similarly, interesting they both took the route of seeking external and ultimately overseas investors, one has recovered the other is only just showing signs of recovery.

I've seen the discussion about the club being cash poor although asset heavy and accept that has been the club's position and why Smith & Jones are fixated on maintaining positive cashflow. They are "frit" of it all coming back on them and they lose their wealth. Who can blame them, but ultimately this model has led to stagnation at the club. 

By the middle of the last decade, the lending market was extremely competitive with ever increasingly innovative and relatively cheap products. The funding of the improvements at Colney showed how popular these products could be. Despite the high voucher rate offered to lenders, the positive return on the pitch in the end actually ensured the project was delivered relatively cheaply. Wimbledon achieved a brand-new ground cheaply with a similar product aimed at fans. Essentially both projects were delivered with a sharing of risk and reward across the whole supporter base (and in Norwich's case I would argue well beyond). 

 A less conservative ownership would have seen the success of the Colney bond and immediately turned to support the City Stand re-build with a combination of a similar bond combined with more traditional lending products. The time was then but have we missed out totally. Looking forward, sure interest rates have seen a large hike recently, but Petriix they are already reducing, mortgage rates are already back below 6% which is less than the rate on the Colney bond! Yesterday's news filtering out was that UK Plc was actually performing better than many commentators had thought, the pound has already clawed back half its recent losses against the dollar, the Govt's desire to dampen demand now known to be mainly a wage suppression tactic, as from March inflationary pressures from fuel etc. will go into a strong reversal unless hostilities in Ukraine spill over into other territories. 

Indeed, I can see Attanasio now rubbing his hands at the thought of taking control in 12 to 24 months' time and taking advantage of a return to a competitive lending market. The difference from him doing this compared to Smith & Jones will be due to what Parma & Purple have discussed about Attanasio - he will extract the fullest value possible from the new asset, whereas Smith & Jones may well have failed to spot how to do that, resulting in supporters paying ever more in ways they would never have contemplated in the past to the club. 

All to play for financially still?

I enjoy reading the posts from all you finance wizards. But I come from a different angle where I follow what's said and what happens. Where as you see what could have happened I see what did happen. I have learned much from your finance/accounting input. But I think you could couple that great knowledge with the realities of what happened. There's no doubt that Michael, Delia and their advisors understood much of this. Which is why from Bowkett onwards they searched for new investment and owners. Which is why we finally got Attanasio.

None of this just happened and unless successive execs have lied there was no opportunity to do this earlier. None of the realities point to any reluctance on the part of our owners. Except the reluctance to sell to unsuitable people. Such a reluctance can only come from a position of strength. The  only real unknown is whether we'd be better placed now if they'd taken more of a chance with the chancers. A quick look at other clubs suggests the odds are against it.

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39 minutes ago, GMF said:

@PurpleCanary As you infer, it’s far more nuanced (just for you @nutty nigel 😉) than just the ticket revenues from the extra seats. A significant proportion would be premium seats, possibly with corporate hospitality associated with them, which could drive revenues up significantly.

The Club could also limit the number of season tickets, which would enable them to charge a higher price from casual sales. 

The existing lounges are dated and could be refurbished to generate yet more revenue. The possibilities are endless.

GMF, I am unfamiliar with that posh part of the ground! But seriously, I remember that when Bowkett was talking about this he said one of the arguments for knocking the whole stand down was that the facilities there were outdated and it might be better to start from scratch. However if it is now thought feasible to build on top I assume that is what they would do, but with that refurbishment you are talking about.

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Perhaps there’s an alternative perspective @nutty nigel, as I don’t think anyone is actually accusing someone of lying.

There has, historically, been a reluctance to sell, often because the approaches were unsolicited and either weren’t genuine, or lacked sufficient financial backing to generate interest. 

What has changed however, for the first time in over a quarter of a century, is that the second largest shareholder decided to sell. MF, rightly in my opinion, decided to involve D&M in the process. That in itself was the trigger for movement in the dial, which hadn’t existed previously. 

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