96m in debt

[PurpleCanary 5,571]

12 hours ago, shefcanary said:

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.

Shef, along with Mr Bunce you are doing sterling work, but you seem not to have grasped the crucial point. All this "things are reasonably under control" commonsense just doesn't fit with the gleeful catastrophism narrative of the fans who want the club to be in a uniquely awful financial mess and on the verge not of administration but of being wound up and ceasing to exist.

[GMF 754]

1 minute ago, PurpleCanary said:

Shef, along with Mr Bunce you are doing sterling work, but you seem not to have grasped the crucial point. All this "things are reasonably under control" commonsense just doesn't fit with the gleeful catastrophism narrative of the fans who want the club to be in a uniquely awful financial mess and on the verge not of administration but of being wound up and ceasing to exist.

It’s all about cash flow, @PurpleCanary. The size of the debt is of lesser importance than your ability to repay it (or refinance it) when it falls due for repayment.

[essex canary 497]

2 minutes ago, GMF said:

It’s all about cash flow, @PurpleCanary. The size of the debt is of lesser importance than your ability to repay it (or refinance it) when it falls due for repayment.

It's OK if the river flows so why don't we just ignore the climate change warning signs?

[lake district canary 4,540]

25 minutes ago, PurpleCanary said:

Shef, along with Mr Bunce you are doing sterling work, but you seem not to have grasped the crucial point. All this "things are reasonably under control" commonsense just doesn't fit with the gleeful catastrophism narrative of the fans who want the club to be in a uniquely awful financial mess and on the verge not of administration but of being wound up and ceasing to exist.

You can almost feel their disappointment as this has all been explained.

[Mark .Y. 352]

15 hours ago, PurpleCanary said:

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.

Love the thought of that, we are one tough crowd. Look on and tremble, Millwall.  🤣🤣

[duke63 543]

The club is in debt because players across the game are paid ludicrous wages that the majority of clubs cannot afford.

Football depserately needs a salary cap.

[king canary 7,624]

1 hour ago, PurpleCanary said:

Shef, along with Mr Bunce you are doing sterling work, but you seem not to have grasped the crucial point. All this "things are reasonably under control" commonsense just doesn't fit with the gleeful catastrophism narrative of the fans who want the club to be in a uniquely awful financial mess and on the verge not of administration but of being wound up and ceasing to exist.

To be fair we're not all accountants and £96m debt is an eye popping figure for a club that boasted about being debt free not long ago. A bit of panic at those headlines is understandable surely?

Certainly the explanations provided by the posters you mention should help set minds at ease. Hopefully the pinkun/edp folks will publish similar soon to reach a wider audience.

[Badger 2,407]

14 hours ago, shefcanary said:

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.

Whilst I agree with the main thrust of your point - the club is unlikely to face a serious financial crisis and become unable to meet its liabilities. However, the simple fact that we are paying large amounts of interest means that we have either to spend less on wages/ transfers and/or increase revenue from player sales.

We would clearly be much better of without the external debt and the director's loans/ preference shares for which interest is charged. A market-based rate of interest could see most of our gate revenue taken up by interest payments and we are likely to be paying more than our rivals. The debt weakens our competitive position and makes promotion less likely over the next few years.

Edited November 9, 2023 by Badger
Added graphs + extra commentary

[shefcanary 2,435]

6 minutes ago, Badger said:

Whilst I agree with the main thrust of your point - the club is unlikely to face a serious financial crisis and become unable to meet its liabilities. However, the simple fact that we are paying large amounts of interest means that we have either to spend less on wages/ transfers and/or increase revenue from player sales.

We would clearly be much better of without the external debt and the director's loans/ preference shares for which interest is charged. A market-based rate of interest could see most of our gate revenue taken up by interest payments and we are likely to be paying more than our rivals. The debt weakens our competitive position and makes promotion less likely over the next few years.

I do not disagree Badger, keep charging above market rate of interest versus investment in the squad - a conundrum for Attanasio.

PS: I posted my "free" subscribers post of Swiss Ramble's analysis (I don't pay to subscribe to him, I have way too many other subscriptions) but I see you probably do have access to the full post. I posted my "free" element in the accounts thread, could you add the rest? I'd be eternally grateful.  

[essex canary 497]

The Club has the highest minimum season ticket price in the Championship to finance the highest level of interest payments to an American multimillionaire. The socialists great legacy. 

Still when Wenber reverts back to Ward all will be solved.

[Davidlingfield 63]

8 minutes ago, essex canary said:

The Club has the highest minimum season ticket price in the Championship to finance the highest level of interest payments to an American multimillionaire. The socialists great legacy. 

Still when Wenber reverts back to Ward all will be solved.

Only if it’s Ashley Ward….

[shefcanary 2,435]

Given the questions raised by some on this MB, I've just done a bit more modelling of what the debt picture might look like next year-end, allowing for a prudent amount required to cover trading cash requirements in the current season. This assumes operating break-even (a big assumption: I assume further reduction in salary bill in year to match the reduction in parachute payments and season ticket sales and admission income won't change much), and cash requirement for interest payments and to cover working capital requirement in line with last years £11.6m. 

I anticipate total debts to halve from £96m to £48m. The source of the reduction is: £18m from the summer transfers, £5m for the conversion of part of Attanasio's loan to equity, £9m from net past transfer instalment settlement and the remaining £16m from half of the parachute payments (leaving the balance of this to cover current trading). I can see this being achieved without having to sell players (Knapper may want to), although this means any incomings would have to be funded by outgoings. At this stage Attanasio would not need to provide further finance in this year, other than to cover working capital peaks. 

Of the £48m I anticipate £38m will be owed to Attanasio (the club will require his full line of credit of £28m mainly due to interest on the loans (!), plus the preference share loan of £10m). The terms of the line of credit will be renegotiated before the year-end and should be treated as falling due after one year. I anticipate short term debts will thus be £10m, but half of this will be owed to "friendly" shareholders, so in effect won't be truly payable in less than a year. Unlike what I hypothesised before the club will have net current liabilities. 

The club will still owe a lot, but nearly 90% will be to Attanasio and other shareholders. Attanasio may of course authorise a busy transfer window funded by further loans from him, the position could look very different. That is not his normal MO however. 

This is purely my own modelling, but hopefully it gives a sense that the panic button doesn't need to be pressed yet. Knapper will have to earn his corn through transfer dealing if he wants to change the squad.

[BigEars 12]

I could also see the debt falling by that amount and would assume that all of it would be to MA.  But the huge assumption is that we can get wages under control, which is probably a bigger challenge than the debt.  Without parachute payments the income will be £35-40m and with unspecified operating costs of £18m (presumably to run the Club) plus interest of £6m, the total available for wages is £11-16m.  Last year wages were £56m.  
 

We probably saved some with the transfers over the summer, although the incomings would also have quite high wages.  There will need to be a lot of player sales as we transition to a much different looking squad to get anywhere close to break even.  Is it even possible to run a squad at that level?  Am i missing something?

[essex canary 497]

11 hours ago, BigEars said:

I could also see the debt falling by that amount and would assume that all of it would be to MA.  But the huge assumption is that we can get wages under control, which is probably a bigger challenge than the debt.  Without parachute payments the income will be £35-40m and with unspecified operating costs of £18m (presumably to run the Club) plus interest of £6m, the total available for wages is £11-16m.  Last year wages were £56m.  
 

We probably saved some with the transfers over the summer, although the incomings would also have quite high wages.  There will need to be a lot of player sales as we transition to a much different looking squad to get anywhere close to break even.  Is it even possible to run a squad at that level?  Am i missing something?

Your concern must be on the right lines.

Perhaps a bit better than you paint as they can possibly reduce operating and interest expenses to a degree, Championship TV contracts are still going north and they will hope to make some profits each year on player sales.

Nonetheless they could be doing well to afford £25 million per season Wages which is comparable to say Blackburn and Preston whilst the NCFC public is contributing about 3 times as much as the supporters of these clubs.