96m in debt

[The Real Buh 3,480]

We’re in so much trouble guys.

[Corbs1 90]

Ta for the stats. Odd how I worry about the budget, guess I’m an ambition and prudence type of guy, except I have limited ambition. I don’t want to open old wounds but my impression is we’ve been over ambitious of late, by that I mean the Board. In a strange sort of way we are in a good position to push on, new era, but it all depends on personnel, off and on the pitch, and having a plan . 

[lake district canary 4,545]

2 minutes ago, The Real Buh said:

We’re in so much trouble guys.

Except we're not, it just needs careful management.

[The Real Buh 3,480]

Just now, lake district canary said:

Except we're not, it just needs careful management.

This club is, in every sense, in the midst of an existential crisis my man.

[essex canary 505]

34 minutes ago, shefcanary said:

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? 🙂 

So why is this 'equity' shown as a 'loan' in the Accounts?

[essex canary 505]

38 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. 

Whilst it may have been interest free for the past 3 years presumably the original interest and promotion bonus is integrated within the figure?

My theory is the Webbers. A ploy for cash flow purposes.

[PurpleCanary 5,580]

1 hour 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. 

Thanks to Mr Bunce and Shef. Just to refer to shef’s last paragraph, I can’t resist making the debating point that getting into debt was in reality what many fans advocated, and now we’ve done that there is an outbreak of horrified pearl-clutching…

To be more serious, leaving aside the fact that many Championship clubs have large debts, one difference with some of them is that this seems mainly to be internal/friendly debt. So there is also a significant difference from the last time we had potentially restrictive debts (although compared to these numbers they now seem small beer), back 12 or 13 years or so.

Then it was mainly to external lenders - AXA and Bank of Scotland - and although as it happens they were happy enough to agree to a needed refinancing with a long repayment schedule they might not have been.

[essex canary 505]

58 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.

 

They are very good at extracting money from the public relative to the standard of football dished up. The public is gullible but the risk is not as gullible as they believe.

[hogesar 9,736]

16 minutes ago, The Real Buh said:

This club is, in every sense, in the midst of an existential crisis my man.

Not financially though. We are, typically, where we usually are as a championship club.

[Sufyellow 223]

2 hours 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.

I can't see how we pay all that debt off by next summer,  when we are still losing money,  and needed to sell players to fill a hole this season. How are we paying the Americans as well , where is that money coming from ? 

[Sufyellow 223]

1 hour ago, vos said:

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 !!!

Abramovich , would have made a billion at least,  Chelsea are valued at a few billion,  something norwich could never be. 

[Sufyellow 223]

19 minutes ago, hogesar said:

Not financially though. We are, typically, where we usually are as a championship club.

I can't remember being in so much debt for a long while.  I also can't see any way possible of paying off the Americans debt. With parachute money gone and  player Money coming in gone ,I expect the 17 million player sales covers running costs . The season ticket money virtually pays for interest and running the academy. So what pays player wages and other running costs ? I doubt barnes , Duffy,  Stacey,  Batth have come here for peanuts . We will be selling again in the summer 

[yellowrider120 783]

2 hours 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. 

You have provided an excellent breakdown of the various components of the 'debt' but forgive me if I dont share your high degree of optimism. How on earth is NCFC going to be able to achieve the statement you made (above)??. That means repaying just short of £100 MILLION. There is more chance of man landing on Mars in the next 12 months than us repaying 'all' (your word) that money.

I have no doubt that you are far more of an expert in accountancy than me (and I mean that without any degree of sarcasm I can assure you) but just one simple example surely suffices to the eyes of a layman (like me!)

On page 63 of the Accounts our main sources of income were (variously) - Gate receipts £10M, tv £48M and Commercial / Catering / Sponsorship £13M. Now we know that we have spent something like £40nOWE .

  

[shefcanary 2,446]

1 hour ago, essex canary said:

So why is this 'equity' shown as a 'loan' in the Accounts?

A sign of the lack of joined-upness in the club?

[yellowrider120 783]

Just now, yellowrider120 said:

You have provided an excellent breakdown of the various components of the 'debt' but forgive me if I dont share your high degree of optimism. How on earth is NCFC going to be able to achieve the statement you made (above)??. That means repaying just short of £100 MILLION. There is more chance of man landing on Mars in the next 12 months than us repaying 'all' (your word) that money.

I have no doubt that you are far more of an expert in accountancy than me (and I mean that without any degree of sarcasm I can assure you) but just one simple example surely suffices to the eyes of a layman (like me!)

On page 63 of the Accounts our main sources of income were (variously) - Gate receipts £10M, tv £48M and Commercial / Catering / Sponsorship £13M. Now we know that we have spent something like £40nOWE .

  

Sorry - pressed 'submit' too soon!

We have already spent the c£45M from the future TV money already. IF (as in theory it should be), this next tranche (last parachute payment) is used to repay that loan, then that leaves us with main income of c£23M does it not? Yet our 22/23 staff costs were £56M!! That means huge cost savings and / or player sales t cover just that shortfall let alone 'repay' the other components of debt?

Please clarify.  

[vos 155]

5 minutes ago, shefcanary said:

A sign of the lack of joined-upness in the club?

 

1 hour ago, essex canary said:

So why is this 'equity' shown as a 'loan' in the Accounts?

Modern business jargon. Sounds better than they "loaned" the money.

[shefcanary 2,446]

45 minutes ago, Sufyellow said:

I can't see how we pay all that debt off by next summer,  when we are still losing money,  and needed to sell players to fill a hole this season. How are we paying the Americans as well , where is that money coming from ? 

Tge short answer is we aren't going to pay all the £96m off by then. Mr Bunce, vos and I have focussed on the short term debt, which we have explained carefully above how it could be paid off. I think we are all in agreement the club will still have £20 to 40m to pay off next year-end (depending on player trading on the interim) if the club achieves a break-even trading position. Most importantly all that remaining short term debt is only owed to Attanasio and "friendly" shareholders. The likelihood is that Attanasio's loans will have been renegotiated soon so that his debt will not be short term debt. I would be surprised if next year-end the club has moved from net current liabilities to a net current assets position. The club is now no different to the majority of English clubs whose owner has leant them money that they are not seeking immediate repayment I.e. no longer self-funding.

[shefcanary 2,446]

11 minutes ago, yellowrider120 said:

Sorry - pressed 'submit' too soon!

We have already spent the c£45M from the future TV money already. IF (as in theory it should be), this next tranche (last parachute payment) is used to repay that loan, then that leaves us with main income of c£23M does it not? Yet our 22/23 staff costs were £56M!! That means huge cost savings and / or player sales t cover just that shortfall let alone 'repay' the other components of debt?

Please clarify.  

I apologise, my explanation above of how the club can do this above is obviously not clear enough. I expect the wage bill will fall further now Pukki, Aarons and Cantwell have departed. I expect the wage bill to be closer to £40m in the current season. We have already earned a cash injection of £17m from the net result from summer transfer trading that will be in the current years accounts. A break even trading result, season ticket renewals at previous year levels, with the wage reduction and summer transfers will provide the cash cover required to absorb the parachute payments already accounted for.

The challenge for the club is to increase commercial income and ensure season ticket renewals at previous season levels in order to provide some money for squad improvement otherwise that will only be achieved by generating cash from other transfers or by borrowing more from Attanasio.

[vos 155]

1 hour ago, Sufyellow said:

Abramovich , would have made a billion at least,  Chelsea are valued at a few billion,  something norwich could never be. 

When Abramovich left the Club, it was sold to an American consortium for 2.3 billion BUT this was after Mr. A wrote off a 1.6 billion loan. Rather interestingly Keiran Maquire has stated that Mr. A lost an average 900k a week for his 19 years in control at Stamford Bridge.

[vos 155]

18 minutes ago, shefcanary said:

The challenge for the club is to increase commercial income and ensure season ticket renewals at previous season levels in order to provide some money for squad improvement otherwise that will only be achieved by generating cash from other transfers

Obviously dear old Robert Chase was ahead of the game !!!!!

[If wed kept Howie.. 209]

debt schmebt

half of those liabilities are covered by sums due.. 

calm the fu(k down

[yellowrider120 783]

1 hour ago, shefcanary said:

I apologise, my explanation above of how the club can do this above is obviously not clear enough. I expect the wage bill will fall further now Pukki, Aarons and Cantwell have departed. I expect the wage bill to be closer to £40m in the current season. We have already earned a cash injection of £17m from the net result from summer transfer trading that will be in the current years accounts. A break even trading result, season ticket renewals at previous year levels, with the wage reduction and summer transfers will provide the cash cover required to absorb the parachute payments already accounted for.

The challenge for the club is to increase commercial income and ensure season ticket renewals at previous season levels in order to provide some money for squad improvement otherwise that will only be achieved by generating cash from other transfers or by borrowing more from Attanasio.

You may be right and to add to your list of players departed there was also the boy Krul who some speculated earned even more than Pukki! That said many others have been added to payroll- Fisher, Long, Stacey, Forshaw, Fassnacht, Barnes and of course the Old Duffer. Oh and the invisible Batth as well! Now some of these will be on pretty 'low' wages I assume but some most definitely will not be. The Old Duffer is rumoured to be on c£30k per week. No idea if that's true but bearing in mind who negotiated his contract on our behalf I can well believe it. Batth also will be on a fair whack (which The Mackems couldn't afford apparently but good old Norwich apparently could. Except we most clearly can't of course!!). Your anticipation of a c30% reduction in overall payroll may happen but I wont be holding my breath.

[Morph 19]

Can I ask a naive question, and be prepared to be shot down, but could the Norfolk group write off the loans in exchange for shares taking them to a majority shareholding?

[hertfordyellow 460]

4 hours ago, MrBunce said:

£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%.

No one has brought this up so I'm sure I've missed something, but Attanasio is charging a much rhigher rate of interest on the loan than others who have no affiliation with the club. Is this him taking the proverbial because we are desperate? Surely this is counterproductive because the less money we have to spend on wages etc the less likely we are to secure promotion which is where he wants to be? 

[Graham Paddons Beard 2,449]

4 hours 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. 

Correct. The Lion and Castle was very much Delias idea. Lots of contention within the club. Many would rather the funds been directed elsewhere.  

[chicken 2,642]

4 hours ago, shefcanary said:

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).

It's not really an argument. But the original concept of parachute payments wasn't to provide transfer funds.

The main reason was to enable clubs to sign players on bigger wages in the premier league by reducing the financial burden on them when they were relegated. In an effort to stop them going bust and to bridge the wage gap owing to the vast differences in wealth between the EPL and the Championship.

In a sense, that was also with the idea that not all of those players would want to jump ship to follow the money either. Essentially to soften the blow of relegation by helping clubs to retain players and to not go bust in a season if those same players say, became injured or no buyers were found happy to meet their wage demands (eg Naismtih). 

So the examples of Pukki and Gibson are good for this and precisely what the parachute payments were for, well, less Pukki, more Gibson by the sounds of it. Pukki was only on those wages to the one year option we took up (which in hindsight was not the correct decision).

So in a sense, there really isn't an argument to had. Parachute payments had their original purpose but over time people have sometimes used them in addition to player sales to reinvest to completely or partially rebuild their sides. Arguably, despite what some people try to say on here, we didn't really do that after the first promotion and only really with Sara, with Nunez being virtually a straight swap in fees for Lees-Melou.

I totally agree with what is being said though, it's not an amount of debt I'd be worried about the vast majority of it is already accounted for and as you point out, we have raised more funds through player trading since that set of accounts was released.

I do chuckle that people think it will mean Sara 'HAS' to be sold. I think the reality is any team that has a player like Sara in it will be hard pressed to keep them if they fail to achieve promotion unless two things can be mitigated 1) Money, 2)Ambition. 1 will depend upon how much money the player believes they are able to demand, well, that or their agent. 2 will have a great bearing on 1 as it will depend upon what level the player believes they should be playing. So if Sara has dreams of representing Brazil, he'll know he needs to be playing in a higher ranked top tier.

Mitrovic is a good example of a player that could simply be bought because his national side wasn't good enough to be able to only select players from Europe's finest top tiers. Fulham could also offer him a lot of money to stay. Probably underlined by the fact that when offered a lot more money for a virtually unrecognised league, he took it and left.

I still think we have a fair few decent enough young players coming through that need time, something the older pro's have been brought in to mitigate and also help with. The balance has been hard because of the injuries and the managers apparent lack of ideas of how to work ways around the injuries outside of playing around with the top two positions, IMHO. Anyone who thinks this team shouldn't be doing better really needs to sit down and calm down for a moment. 

[Tetteys Jig 830]

3 hours ago, The Real Buh said:

We’re in so much trouble guys.

Not really… regression to the mean of being a lower half tier 2 club. Until the next Lambert/Farke turns up and works a miracle, Norwich will just be a provincial feeder club to the bigger and more ambitious clubs out there.

We will consistently get 16th place and at least 20k of you will enjoy it. Into football wilderness we go.

Sara gone in summer for £15m, Rowe for £10m should he continue his good form and a lower prem/newly promoted side fancy a punt. That pays for another season treading championship water.

[shefcanary 2,446]

3 hours ago, Morph said:

Can I ask a naive question, and be prepared to be shot down, but could the Norfolk group write off the loans in exchange for shares taking them to a majority shareholding?

Yes. It is speculation on my and Norfolkngood but we can see a situation where Delia & Michael sell their shares to Attanasio in consideration of the write off of his debt plus a contribution to a charitable trust that protects ordinary fan interest in the club. Delia has said she does not want to be seen to profit from her majority ownership of the club, this is one way to achieve it. There are other ways so who knows though. 

[shefcanary 2,446]

3 hours ago, hertfordyellow said:

No one has brought this up so I'm sure I've missed something, but Attanasio is charging a much rhigher rate of interest on the loan than others who have no affiliation with the club. Is this him taking the proverbial because we are desperate? Surely this is counterproductive because the less money we have to spend on wages etc the less likely we are to secure promotion which is where he wants to be? 

Only if he takes the interest as it falls due as cash. He might just allow the interest to roll up, thus leaving the club more on the hook to him, accelerating his eventual takeover. In the end, when he finally gains control, the interest just becomes a virtuous circle (money laundering in nature?) as he is just charging himself for the pleasure of running a football club. 

In short, there is only one outcome to the present arrangements (unless the EFL do not allow Attanasio to be a controlling director), so let's gerronwiit.

[essex canary 505]

12 hours ago, shefcanary said:

A sign of the lack of joined-upness in the club?

Whilst many Championship Club's are massively in debt to their owners the likes of Boro, Blackburn and Preston aren't charging 11% interest though. One advantage we have over them is a much stronger commercial base largely funded by our supporters and local population. With the 11%, the Club now effectively want to impose a hefty tax on it. Is there any evidence of growth potential at the margin either? Sagging actual match attendance and increased drinking opportunities could suggest otherwise.

Edited November 9, 2023 by essex canary