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It's been a while folks, but here's another "at least we are not Southampton" article...

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Interesting that the reason Wyatt says that these clubs are in trouble is a lack of "working capital", which our friends the accountancy moaners like Canary Nut etc claim should be used in our case for all manner of things like new players or to pay off that loan that''s due soon.  Wyatt seems to suggest that having no working capital is a bad thing.  Maybe one of these accountancy types could explain to me why using working capital for these things would be a good idea ?

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BBB,

Ok, I will have a go at explaining this.

If HBOS dont roll over the loan, we will have to find £2.5M before the enbd of the month. This can be financed from of the following sources:

1. Overdraft - hugely unlikley as converting one form of debt for another

2. Fresh equity - unlikely when the club is up or sale

3. Use of working capital - essentially using liquid assets (in this case debtors) to cover for a liability (i.e. the loan)

4. Liquidiate other assets (essentially players or buildings)

Assuming we rule out 1 and 2, option 3 is less painful than option 4.

The question is if we use £2.5M of working capital, would it leave the club dangerously exposed. The question is no, becuase as Canary Nut has pointed out, there is over £4M which can be liquidated from working capital. In this respect, the use of working capital is a misnomer, since most of the figure Canary Nut refers to is deferred transfer receipts and is completely distinct from ordinary working capital that is used to finance day to day operations (i.e. paying bills/wages etc). In a sense, the working capital that Canary Nut is referring is essentially surplus funds over and above those needed for day to day operations.

The most probable worst case scenario is that the debt is not rolled over and the club has to use £2.5M of ''working capital'' is used to the bank off. This leaves the clubs overall net asset (i.e. real worth) completely unchanged since it is cancelling out a liability with a reduction in assets. However, if this is the case, I woudl doubt that there is any spare cash for players. On the other hand, if the loan is rolled over (with likely higher covenants and interest rate margin), the club should have money to fund acquisitions in January or the summer.

I know this sounds a bit complicated, but either way the impact of the loan rollover is not going to cause immediate financial difficulty as it will only impact upon our ability to add to the squad.

Furthermore, the club has sufficient working capital. Problems may arise next year if season ticket sales fall - then we will have a working capital problem.

 

 

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[quote user="Delia S. Tickers"]Good article, puts our "problems" into context.[/quote]That is exactly what it does not do and yet again an article from that site quite deliberately so fails in my opinion.

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Thanks prisoner, high finance is an area I find myself getting nosebleeds in.

On the basis of the above, is Mr Foulgers'' suggestion that there will be cash available for players an implicit admission that the loan has been rolled over ? 

Or have the directors dug into their pockets to give Roeder something to play with ?

I guess the answer to this is unknowable.

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BBB,

See my post above. I would guess that the loan has ben rolled over unless Foulger is referring to free transfers or selling our high value players and replacing them with lower cost players. However, if there is any truth in the Bell/Ward saga, it could suggest that the loan has not been rolled over.

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[quote] However, if there is any truth in the Bell/Ward saga, it could suggest that the loan has not been rolled over[/quote]

I''m happy to believe that was agent talk until it''s proven otherwise.  My eyes are used to sand though.

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[quote user="Desert Fox"]

I know this sounds a bit complicated[/quote]

Actually you made it make sense - usually these financial posts go over my head so thanks for putting it into clear language!

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