The financial challenges of the Championship: Bristol City lose £14.4m

[Dick Knights Mumm]

Can one of you accountanta explain what is the position on the £100+m for the Amex ? I originally understood that somehow it was to be converted into shares and ownership of the club, which did not seem to make financial sense but what do I know.

It is an interest free loan isn't it ? But is Tony wanting the capital paid back ? And over what sort of period ?

 

[deletebeepbeepbeep]

Can one of you accountanta explain what is the position on the £100+m for the Amex ? I originally understood that somehow it was to be converted into shares and ownership of the club, which did not seem to make financial sense but what do I know.

It is an interest free loan isn't it ? But is Tony wanting the capital paid back ? And over what sort of period ?

I thinks that's all discussed at length in the link I posted.

 

[deletebeepbeepbeep]

Any road, the important point is that this loan is very generous, being unsecured and interest free. This is crucial for the club, as commercial interest rates on a loan of this magnitude would have been prohibitively expensive. The fact that the loan is unsecured is also critical, as this means that Bloom has no guarantee of repayment, because there is no security on the money. The £80 million he has pledged is repayable in 2023, but again there is nothing mysterious about this, as a convertible loan requires a returnable date. If the money is not available, Bloom could convert the loan into shares, as have many owners at other clubs, or the loan could simply be refinanced.

...

But why would Bloom want to invest in Brighton, apart from football reasons? He would probably only get a return on his money if the club reaches the promised land of the Premier League, which is not impossible, but the odds are a lot longer than a professional gambler would appreciate. At the moment, the only “positive” financially is that he may well be able to write-off the loans to the loss-making football club against profits in other parts of his business organisation in order to reduce tax. Similarly, he might be able to utilise the £5 million deferred tax asset at some stage in the future, if the club starts making profits.

 

[Dick Knights Mumm]

I thinks that's all discussed at length in the link I posted.

Doh. Just reading it now. It is not certain TB wants the capital back.

The £80 million he has pledged is repayable in 2023, but again there is nothing mysterious about this, as a convertible loan requires a returnable date. If the money is not available, Bloom could convert the loan into shares, as have many owners at other clubs, or the loan could simply be refinanced.

 

[deletebeepbeepbeep]

There is always some concern with the benefactor model, which works just fine as long as the owner remains dedicated to the football club, but can be problematic if his circumstances change. Bloom himself admitted that he had to “make a bigger commitment than I would have envisaged”, because of the difficulties in securing credit.

The other worry is the sheer size of the debt, which is approaching twenty times the club’s annual turnover. Unless the loans are converted into shares, there has to be a possibility of repayment at some stage, though this would presumably only be likely if Bloom were to fall on hard times. Considering their experiences with Bill Archer, the fans would be justified in feeling nervous about a repeat performance. As one fan memorably put it, “we don’t want to have all our eggs in one bastard.”

On the face of it, Tony Bloom is cut from a different cloth and has hastened to assure fans that he is nothing like Archer. Indeed, there are strong family ties to Brighton and Hove Albion, as his uncle Ray is also a director, while his grandfather Harry was vice-chairman when the club reached the old first division in 1979. You could say that the Albion is in his blood and Bloom himself is a lifelong supporter.

...

This is clearly not some fancy toy for the chairman, which he has reinforced by bringing in two of his long-time associates as directors: Adam Franks, the finance director for all his companies, and Marc Sugarman, an equity analyst for Citigroup. He will also have to continue to cover losses for a number of years before the club can stand on its own two feet, while building a solid legacy in the form of bricks and mortar (and steel and glass). Finally, if Bloom were simply looking to make money on his investment, there are many other better opportunities around.

 

[tinycowboy]

From the 2011 accounts, although it's not totally conclusive, it looks as if there is no intention/requirement to start paying back the loan, at least in the short term, but, unless TB is happy to just sit back, there may come a time when the directors need to choose between repaying tranches of the loan or spending that money on operations (ie mostly on players). The loan is now less than 10 times turnover, but that's still a very high gearing rate, so we really are in the hands of TB, unless we get to the Premier League and spend our cash on repaying him (instead of on strengtening the squad), although I think we all knew that anyway....

 

[churley1]

Steve Browett told us Palace fans that despite cutting costs and making a considerable profit on transfers this season, we're still making a pretty big loss. The bit that shocked me was that he said even if we had 25,000 in the door each week, we'd still probably post a loss (in The Championship of course).

Considering your wage bill is probably higher than ours with the likes of Vicente, Bruno, CMS and Kuszczak on your books, I bet even yourselves aren't making much of a profit and that just goes to show what a fantastic chairman Bloom has been for you.

The Championship is out of control once again.

 

[Acker79]

Coventry are now in a bit of bother, apparently.

League One Coventry's existence could be under threat if they do not pay rent owing on the Ricoh Arena | Sky Sports

An annual rent of £1.28m. League one average is 170,000 (championship average is 290,000).