96m in debt

[lake district canary 4,830]

I've seen this figure being mentioned around this forum. Is it accurate - and can anyone explain in simple terms how we have gone from self-sustaining to having a big debt?

Thanks.

[cambridgeshire canary 7,797]

Beacause to use Webbers own words against him

 

"Money was pissed up the wall"

 

(Although of couse Covid also played a big part)

[Terminally Yellow 2,614]

28 minutes ago, lake district canary said:

I've seen this figure being mentioned around this forum. Is it accurate - and can anyone explain in simple terms how we have gone from self-sustaining to having a big debt?

Thanks.

I think there's plenty of articles which do a good job of explaining this. Try this one.

[baldy09 196]

If we are in debt to that much 66m -then we can kiss goodbye to any near  future promotion - wonder why Webber made quick dash from the back door with a big fat pay check in pocket

[S_81 1,101]

Bye bye Sara and Rowe this summer. The debt level only further brings home the farcical situation of hanging on to Wagner for this long. Yes we have to pay him off - but the chance of premier league windfall via the play offs is worth far more. And will have zero chance of being achieved with him in charge. Longer he’s here the further it slips from reach. 

[Yobocop 1,444]

16 minutes ago, S_81 said:

Bye bye Sara and Rowe this summer. The debt level only further brings home the farcical situation of hanging on to Wagner for this long. Yes we have to pay him off - but the chance of premier league windfall via the play offs is worth far more. And will have zero chance of being achieved with him in charge. Longer he’s here the further it slips from reach. 

He’ll be gone on Monday 

[Google Bot 3,929]

21 minutes ago, S_81 said:

Longer he’s here the further it slips from reach. 

Whether he stays or goes, we'll still have a shortfall of strikers and rely incredibly on Sara.  We saw that pre-season the difference with and without is huge.

[S_81 1,101]

3 minutes ago, Google Bot said:

Whether he stays or goes, we'll still have a shortfall of strikers and rely incredibly on Sara.  We saw that pre-season the difference with and without is huge.

Agreed. But hopefully a coach comes in who realises Sara is of no use picking the ball up so deep. Pushing him further forward is obvious, but you’re right - what has he got to link up with in the absence of Barnes / Sarge.  And despite some posters on here sucking Wagner’s ar5e about it - a lack of decent defensive mid is still an absolutely glaring hole in our team. Hopefully we can fix that on loan in Jan 

[S_81 1,101]

11 minutes ago, Yobocop said:

He’ll be gone on Monday 

Damn well hope so. But won’t believe it til I read it 

[Davidlingfield 72]

50 minutes ago, baldy09 said:

If we are in debt to that much 66m -then we can kiss goodbye to any near  future promotion - wonder why Webber made quick dash from the back door with a big fat pay check in pocket

Although sadly, his wife is still in the building collecting hers.

[cambridgeshire canary 7,797]

Just now, Davidlingfield said:

Although sadly, his wife is still in the building collecting hers.

You do have to wonder if she's planning on staying. If anything the lack of any news about her is interesting

[MrBunce 282]

1 hour ago, lake district canary said:

I've seen this figure being mentioned around this forum. Is it accurate - and can anyone explain in simple terms how we have gone from self-sustaining to having a big debt?

Thanks.

Yes the club has around £96m of debt, this is broken down as follows:

• £31m short term loan secured on parachute payments, due to be repaid in full by March 2024, interest rate of 5.75%.
• £14m short term loan secured on transfer instalments, due to be repaid in full by September 2024, interest rate of 5.6%.
• £37m loans from Mark Attanasio (Norfolk FB Holdings LLC), due to be repaid at various dates (likely) between June 2023 and February 2024, interest rates not fully disclosed, but predominately at 11%.
• £900k loans from Delia, no terms disclosed.
• £10m C Preference Shares, held by Attanasio (Norfolk FB Holdings LLC), interest rate of 7%.
• £1.4m B Preference Shares, interest rate of 4.5%.
• £2.2m of Canary Bonds outstanding and not redeemed, no interest payable.

The majority of these debts are due to be repaid (and likely will be) by the end of this season:

• All £31m of the loans secured on parachute payments.
• £8.6m of the £14m of the loans secured on transfer fees.
• At least, £27m of the loans from Attanasio (£21m line of credit due for repayment on 30 June 2023, the convertible loan (£4.7m) and a loan for £1.6m due for repayment on 1 September 2023.

Some loans may be refinanced or the terms extended (for example, the line of credit).

The club incurred £3.2m in interest in 2022, £5.4m last season on some/all of these loans. I estimate a further £1.9m to £5.4m dependant on the repayment timing of these loans.

How did the club get in this debt?

Principally, because the club has made operating losses of £82m over the past three seasons. After accounting for player trading, the club has made a loss of £19m. This figure is £41m over the past two seasons, after a significant reduction in player trading profits, £3.6m. Over the last two seasons the club has spent £72m cash on player transfers and received £46m (a deficit of £26m).

The main reason for this is that the club loses money when it is promoted to the Premier League due to reduced broadcast income and player wages plus larger promotion bonuses. This is usually made up with large profits in Premier League seasons, however last time out the club lost money due to spending a very large amount on player wages (£118m vs £134m revenue). This has been compounded by relegation to the Championship (thus lower revenue) resulting in operating losses plus a reduction in player sales.

[lake district canary 4,830]

3 minutes ago, MrBunce said:

Yes the club has around £96m of debt, this is broken down as follows:

• £31m short term loan secured on parachute payments, due to be repaid in full by March 2024, interest rate of 5.75%.
• £14m short term loan secured on transfer instalments, due to be repaid in full by September 2024, interest rate of 5.6%.
• £37m loans from Mark Attanasio (Norfolk FB Holdings LLC), due to be repaid at various dates (likely) between June 2023 and February 2024, interest rates not fully disclosed, but predominately at 11%.
• £900k loans from Delia, no terms disclosed.
• £10m C Preference Shares, held by Attanasio (Norfolk FB Holdings LLC), interest rate of 7%.
• £1.4m B Preference Shares, interest rate of 4.5%.
• £2.2m of Canary Bonds outstanding and not redeemed, no interest payable.

The majority of these debts are due to be repaid (and likely will be) by the end of this season:

• All £31m of the loans secured on parachute payments.
• £8.6m of the £14m of the loans secured on transfer fees.
• At least, £27m of the loans from Attanasio (£21m line of credit due for repayment on 30 June 2023, the convertible loan (£4.7m) and a loan for £1.6m due for repayment on 1 September 2023.

Some loans may be refinanced or the terms extended (for example, the line of credit).

The club incurred £3.2m in interest in 2022, £5.4m last season on some/all of these loans. I estimate a further £1.9m to £5.4m dependant on the repayment timing of these loans.

How did the club get in this debt?

Principally, because the club has made operating losses of £82m over the past three seasons. After accounting for player trading, the club has made a loss of £19m. This figure is £41m over the past two seasons, after a significant reduction in player trading profits, £3.6m. Over the last two seasons the club has spent £72m cash on player transfers and received £46m (a deficit of £26m).

The main reason for this is that the club loses money when it is promoted to the Premier League due to reduced broadcast income and player wages plus larger promotion bonuses. This is usually made up with large profits in Premier League seasons, however last time out the club lost money due to spending a very large amount on player wages (£118m vs £134m revenue). This has been compounded by relegation to the Championship (thus lower revenue) resulting in operating losses plus a reduction in player sales.

Thank you Mr Bunce!

So if I am reading this right, the debt figure, although seemingly huge, is not actually a huge burden to the club and that a lot of this debt will be paid off in due course, meaning that the club will still be ok financially, although we will need to sell some players on in the next year or two. 

Is this a fair summation?

Thanks

 

[vos 176]

Mr Bunce gives an excellent breakdown. At first sight the debt in simplistic terms looks pretty horrific but in reality it is nothing like as bad as it looks. 45m is guaranteed to be repaid in the short term, providing neither Sky or a football club goes bust, and the remaining 50m odd is investment from the owners. Even the top sides such as Man Utd, Chelsea, Spurs have massive loans outstanding and are kept afloat by an assortment of investors from all parts of the globe. Man Utd are a classic example whereby despite consistently losing money and running up debt the Glaziers can still make a profit on selling some of their existing holdings. Abramovich lost 100's of millions at Chelsea. The basic problem is that unlike normal business many Football Clubs somehow survive on paying out more in wages than their income. So the balloon will not go up at Carrow Road for a while but there will be a lot of hot air on this site if we lose at Cardiff !!!

[MrBunce 282]

19 minutes ago, lake district canary said:

Thank you Mr Bunce!

So if I am reading this right, the debt figure, although seemingly huge, is not actually a huge burden to the club and that a lot of this debt will be paid off in due course, meaning that the club will still be ok financially, although we will need to sell some players on in the next year or two. 

Is this a fair summation?

Thanks

 

That's right. 

Given the player sales in the summer, plus some more belt tightening the club will likely have the cash to cover all the debt. Though it may have chosen to use that money to invest off the pitch and to enhance the squad this summer (as mad as it might seem right now). It will mean, however, that the club will have a limited player transfer budget (as seen this summer). 

The main issue is that, all told, the club will have shelled out some £10 to £15m in interest expenses over the past few seasons. With a tight budget, that's a lot of money to be missing out on when, it's fair to say, the returns from spending that borrowing have been disappointing. 

[shefcanary 2,950]

Well that's saved me a job, thanks to Mr Bunce and Mr Vos - forgive me for posting the following, but I was drafting it anyway and it should provide further comfort to people on this MB. My accounts literally only arrived in the post this afternoon (some heavy duty paper they've printed them on BTW), I was waiting for the physical entity before providing the analysis above. It is just a shame the club did not produce such reassurance themselves in the accounts in simple terms, it might have taken some of the heat off them!

One further comment I make on the origin of the debts is that contrary to public statements from the club, not all players contracts had the punitive salary adjustments on relegation that were reported as existing. We know that both Gibson and Pukki remained on their EPL salaries, others may have done too. Still, it was pleasing to see the salary cost reduce so substantially last year, and with Pukki and others now off the payroll the likelihood is a similar rate of decline in the current season which should bring operating performance in at a break-even position.

I reported in the Accounts thread that the debt of £96m is not that frightening a burden, because it was generated in the past and some was "covered" by income from future media rights. However this has stifled any new investment in the squad since then which is what  parachute payments are in part meant to allow (that's another argument).

Future income guaranteed of £45m and the net result of this past summer's transfer activity of £17m will clear the bulk of it, the latter to repay most of Attanasio's scheduled debt. The remainder of the debt is owed to Director's in some form or other, with only £4m of B preference shares / Colney bonds owed to third parties (which are unlikely to be called for immediately anyway). Why Smith & Jones provided £1m of cash is unclear, perhaps a very short term cash crisis for the payment of a month's taxes to HMRC?  The rest is owed to Attanasio. Of this £10m is not due to be repaid until 2029, £5m will be converted to equity in the next month or so and won't need any cash.

Attanasio's line of credit is likely to be renegotiated to cover any operating losses that may arise in the current season, but with a fair wind and a repeat of last years financial restructuring a balanced budget before player trading & related amortisation should be possible.

So debts by the end of this season will not look frightening in comparison to many other Championship clubs . As Lakey has surmised, the sale of a couple of players in January potentially could clear all the remaining debt if needed, but what then of the club's chances on the pitch? I don't think Attanasio will go there at this stage. 

Edited November 8, 2023 by shefcanary

[MrBunce 282]

Is there an echo in here? Haha

[Davidlingfield 72]

15 minutes ago, shefcanary said:

Well that's saved me a job, thanks to Mr Bunce and Mr Vos - forgive me for posting the following, but I was drafting it anyway and it should provide further comfort to people on this MB. My accounts literally only arrived in the post this afternoon (some heavy duty paper they've printed them on BTW), I was waiting for the physical entity before providing the analysis above. It is just a shame the club did not produce such reassurance themselves in the accounts in simple terms, it might have taken some of the heat off them!

One further comment I make on the origin of the debts is that contrary to public statements from the club, not all players contracts had the punitive salary adjustments on relegation that were reported as existing. We know that both Gibson and Pukki remained on their EPL salaries, others may have done too. Still, it was pleasing to see the salary cost reduce so substantially last year, and with Pukki and others now off the payroll the likelihood is a similar rate of decline in the current season which should bring operating performance in at a break-even position.

I reported in the Accounts thread that the debt of £96m is not that frightening a burden, because it was generated in the past and some was "covered" by income from future media rights. However this has stifled any new investment in the squad since then which is what  parachute payments are in part meant to allow (that's another argument).

Future income guaranteed of £45m and the net result of this past summer's transfer activity of £17m will clear the bulk of it, the latter to repay most of Attanasio's scheduled debt. The remainder of the debt is owed to Director's in some form or other, with only £4m of B preference shares / Colney bonds owed to third parties (which are unlikely to be called for immediately anyway). Why Smith & Jones provided £1m of cash is unclear, perhaps a very short term cash crisis for the payment of a month's taxes to HMRC?  The rest is owed to Attanasio. Of this £10m is not due to be repaid until 2029, £5m will be converted to equity in the next month or so and won't need any cash.

Attanasio's line of credit is likely to be renegotiated to cover any operating losses that may arise in the current season, but with a fair wind and a repeat of last years financial restructuring a balanced budget before player trading & related amortisation should be possible.

So debts by the end of this season will not look frightening in comparison to many other Championship clubs . As Lakey has surmised, the sale of a couple of players in January potentially could clear all the remaining debt if needed, but what then of the club's chances on the pitch? I don't think Attanasio will go there at this stage. 

How are the current year’s player wages being paid, given that all parachute payments are taken up repaying debt - player sales, presumably??

[lake district canary 4,830]

19 minutes ago, MrBunce said:

That's right. 

Given the player sales in the summer, plus some more belt tightening the club will likely have the cash to cover all the debt. Though it may have chosen to use that money to invest off the pitch and to enhance the squad this summer (as mad as it might seem right now). It will mean, however, that the club will have a limited player transfer budget (as seen this summer). 

The main issue is that, all told, the club will have shelled out some £10 to £15m in interest expenses over the past few seasons. With a tight budget, that's a lot of money to be missing out on when, it's fair to say, the returns from spending that borrowing have been disappointing. 

Brilliant, thanks so much for explaining, I'm sure I'm not the only one who hadn't grasped the situation!

 

[Mutley 167]

18 minutes ago, shefcanary said:

Why Smith & Jones provided £1m of cash is unclear, perhaps a very short term cash crisis for the payment of a month's taxes to HMRC? 

After trawling the annual report earlier, I think they contributed towards the revamped bar in the Barclay Stand. Sorry, I cannot now find what page that I saw the information. 

[nutty nigel 7,902]

5 minutes ago, Mutley said:

After trawling the annual report earlier, I think they contributed towards the revamped bar in the Barclay Stand. Sorry, I cannot now find what page that I saw the information. 

That's not nearly so exciting. Perhaps @MrBunce has a handle on it.

Also who didn't claim their bonds and presumably the interest owed?

[vos 176]

In the very expensive and glossy 75 page book they have just sent us explaining how good they all are - apart from the players - its on Page 30.

 

[nutty nigel 7,902]

5 minutes ago, vos said:

In the very expensive and glossy 75 page book they have just sent us explaining how good they all are - apart from the players - its on Page 30.

 

Thanks VOS. I hadn't opened mine yet. I'll leave it til this evening. I'm like that at Christmas too. Always like to keep a present back until after dinner....

[shefcanary 2,950]

5 minutes ago, Davidlingfield said:

How are the current year’s player wages being paid, given that all parachute payments are taken up repaying debt - player sales, presumably??

I am not privy to enough information to definitively answer this but I'll give a for instance ...

Net current liabilities in June were £76m, of which £5m will be converted to equity, £5m is owed to "friendly" shareholders and £32m owed to Attanasio. A net £17m was received from transfer trading in the summer, with £11m being season ticket sales received in advance, leaving a further "real" exposure of only £6m. Whilst problematic, if a break-even operating performance can be achieved and season ticket renewals are similar to past years (currently a big if), this exposure can be managed through careful working capital management. But one has to assume the Board will decide in the short term between renegotiating Attanasio's line of credit or selling a couple of the better performing squad players to cover current year's working capital needs. Knapper as well will have a view, but my assumption is that Attanasio will take up the slack rather than force us into further weakening the squad.

So yes, your presumption is definitely high on the list of options, but not necessarily the one the board goes with.

But who knows ...

[MrBunce 282]

16 minutes ago, nutty nigel said:

That's not nearly so exciting. Perhaps @MrBunce has a handle on it.

Also who didn't claim their bonds and presumably the interest owed?

Thanks to @Mutley and @vos for the reference - it'd passed me by.

I can't recall how the bonds worked now. But it was probably along the lines of needing to fill out a form to get your principal back and those individuals not requesting repayment for whatever reason (forgetfulness, generosity, who knows). Either way, that money is interest free for the club. 

[shefcanary 2,950]

15 minutes ago, vos said:

In the very expensive and glossy 75 page book they have just sent us explaining how good they all are - apart from the players - its on Page 30.

 

To quote "Delia and Michael contributed to the equity injection needed by the club to open a new pub [...] the Lion & Castle". One assumes they paid the contractor directly then. But is the repayment of this "equity" injection dependent on a return from the pub - perhaps this is why Delia is always first in there, leading from the front? 🙂 

Edited November 8, 2023 by shefcanary

[MrBunce 282]

Is there a sherry tap on the beer wall? 

[nutty nigel 7,902]

6 minutes ago, MrBunce said:

Thanks to @Mutley and @vos for the reference - it'd passed me by.

I can't recall how the bonds worked now. But it was probably along the lines of needing to fill out a form to get your principal back and those individuals not requesting repayment for whatever reason (forgetfulness, generosity, who knows). Either way, that money is interest free for the club. 

Thanks

Also I seem to remember B prefernce shares interest is always there but never claimed?

[shefcanary 2,950]

1 minute ago, nutty nigel said:

Thanks

Also I seem to remember B prefernce shares interest is always there but never claimed?

Us B share holders are frankly, very generous and forgiving. I even donate my dividend to the CSF every year as well, rather than allow the club to absorb it. (Its only £4 before anyone shouts).

[nutty nigel 7,902]

Just now, shefcanary said:

Us B share holders are frankly, very generous and forgiving. I even donate my dividend to the CSF every year as well, rather than allow the club to absorb it. (Its only £4 before anyone shouts).

Forgiveness is overrated. I forgave Frederickstad for letting me down last week and they promptly let me down again this week. There's no way I'm forgiving that.

Frederick's dad can kiss my butt...