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Can anyone explain this?

(9 Posts)
upthegills Tue 12-Jul-11 22:11:34

I have namechanged as letting slip my club will absolutely identify me, but I'm on here loads.

the club I love

As I understand it, 3 years ago the club was in serious financial difficulties and the ground was sold to a holding company, owned by the chairman, for c. £10m. The Club's debt at the bank was reduced by £10 making interest payments easier to meet and the club rents the ground from the holding company for a token rent. I've never fully understood it, how does the holding company pay the loan for example and why did the bank agree to ring-fence it and transfer a loan of much more than the ground is worth to a company with no other assets? I always suspected that it was a ploy to enable the chairman to sell the ground for development at some point in the future, when property prices have picked up.

Anyway, it now seems the club is to buy it back for £1m? Why would that be acceptable to the bank? What will happen to the other £9m of debt and why would the chairman agree to sell it for such a lot less than he paid?

I am very confused and scared that there are dodgy dealings going on at a club that is very dear to me. Can anyone explain?

fatandknackered Tue 12-Jul-11 22:18:17

I'm not expert but as a saddo accountant-type I felt strangely compelled to comment. Just don't sue me!!!

Sounds to me like the chairman has bailed out your club. His company has bought the land for £10m, enabling the club to repay £10m to tbe bank. His company is also not (by the sound of things) charging a full market rent to the club for using his land. If the club can now buy the land back for £1m then this sounds very generous - ie the chairman guy is happy to sell at a loss and hence he and/or his company must have the funds/other assets to cover the shortfall.

I don't understand your question about the "other £9m of debt" - if the bank debt was originally £10m then the club could have repaid it with proceeds from the chairman's company when it sold the land in the first place.

In short sounds like the chairman had lots of (his own?) money/assets and hence could bank roll the club.

PPPop Tue 12-Jul-11 22:27:28

I agree, sounds like the bank were about to call in the overdraft which would have potentially made the club go bust, so the club sold it's largest asset the ground for 10m, looks like 9m was used by the club to pay off the o/d and the rest for other purposes. Club rented at nominal rent which helped it's cash-flow.

The club may be buying back the ground cheaply, but that's of benefit to the club, not the company that's selling it. Unless the bank has a charge over the ground, then as long as the club can continue to operate within it's existing and much reduced facility they will be happy.

upthegills Tue 12-Jul-11 22:27:58

Thank you. See it all sounds plausible (and generous) until you get to the other £9m of debt. The chairman didn't come up with £10m cash, the club's bankers transferred £10m of debt from the clubs name into the holding company's name, so there is a £10m mortgage against the ground.

The chairman is notoriously short of cash having had some trauma and poor decision making in his personal life. He was sued for personal debts last year. He did once own a sucessful business outside of football, but now (apparently) has no income other than his salary from the club.

PPPop Tue 12-Jul-11 22:28:19

Sorry for it's and its errors, bloody iPad.

PPPop Tue 12-Jul-11 22:32:28

Ah. If they are just moving the same assets and debt around a few companies and the bank retains a charge over the ground wherever it sits, it's still at risk if the debt conditions are not met. They may have restructured the terms of the debt at some point to make it less likely the club would default?

upthegills Tue 12-Jul-11 22:35:31

Yes, there was a restructure of debt, that's how this all came about, but why would the bank let them move the ground back to the club, leaving £9m of debt in another company? And why would the chairman want to leave the £9m debt in his company with no assets?

PPPop Tue 12-Jul-11 22:50:29

I don't know, highly unusual as the financial expert in the article says! You need to find out What the terms of the special resolution are so you understand all the facts. The bank won't forgo its security on the borrowings though, so you would need to understand what it's secured on before and after the proposed transaction. Doesn't sound like the full facts are clearly explained at the moment.

upthegills Tue 12-Jul-11 23:06:58

Yes, clearly a lot we don't know. Do they have to publish terms of the Special Resolution ahead of the AGM? I know shareholders...

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