NUFC Debt

[Kid Dynamite 5876]

226 Guests by the way.

 

That cant be right

[Guest alex]

Anyway, Am I getting this right, he borrowed the money to buy us, and now he is selling off assets to get that money back? Meaning in 5 years or whatever the club will be effectively free for him and he can still make £100+mil when he sells uo?

If I've read it right, he (potentially) set up a company (SJH) to buy the club, then loaned the company in question the money in order to buy NUFC. SJH then directly owns the club but owes MA the money. By reducing costs and turning a profit NUFC / SJH can then repay Ashley the money over a period of time. The net result being that (if it goes to plan) MA will get back all the money he paid out to buy the club, in effect getting it for nowt. It's not so much selling off assets (although Carroll would fit into that) it's more that the overall operating costs are less than the money coming in over a long enough period of time.

 

SJH being the name of a company or are we talking about Sir John Hall still owning the club ?

Sorry, it's St. James' Holdings (iirc) not Sir John Hall.

 

I understand now. I do a similar thing with pinball machines being the entrepreneur that I am. I buy one for £1000, sell it for £1500. Buy another for £1500 and sell it for £2000. Making £1000 for nowt

Don't really think that analogy works like. And if it's what I said, it doesn't really need an analogy, does it? - In case you're taking the piss.

[ChezGiven 0]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

Which i can accept so my two questions are why is the figure included in our gross debt? Why is this being paid back in 2009 i.e. why is it reduced to £132m? If it was just a financial vehicle, surely this would remain at the same level of debt until a time when the club was sold.

[Kid Dynamite 5876]

Anyway, Am I getting this right, he borrowed the money to buy us, and now he is selling off assets to get that money back? Meaning in 5 years or whatever the club will be effectively free for him and he can still make £100+mil when he sells uo?

If I've read it right, he (potentially) set up a company (SJH) to buy the club, then loaned the company in question the money in order to buy NUFC. SJH then directly owns the club but owes MA the money. By reducing costs and turning a profit NUFC / SJH can then repay Ashley the money over a period of time. The net result being that (if it goes to plan) MA will get back all the money he paid out to buy the club, in effect getting it for nowt. It's not so much selling off assets (although Carroll would fit into that) it's more that the overall operating costs are less than the money coming in over a long enough period of time.

 

SJH being the name of a company or are we talking about Sir John Hall still owning the club ?

Sorry, it's St. James' Holdings (iirc) not Sir John Hall.

 

I understand now. I do a similar thing with pinball machines being the entrepreneur that I am. I buy one for £1000, sell it for £1500. Buy another for £1500 and sell it for £2000. Making £1000 for nowt

Don't really think that analogy works like. And if it's what I said, it doesn't really need an analogy, does it? - In case you're taking the piss.

 

I am But it does work. Whatever I sell the next pinball at is pure profit now. When Ashleys debt is paid off he can name his price for the club safe in the knowledge 100% of it will be going back into his pocket

[Guest alex]

He doesn't really care if the club makes a profit in the lower league, or in the premiership, although he may have realised that the myth of 50,000 Geordies at every game is precisely that - a myth, a myth that he bought into, like many people across the country.

 

It wasn't a myth before Ashley arrived.

 

it was, tbh. We were getting nowhere near those crowds the last time we had a shite owner/board who sold our best players too.

 

They only come because they are attracted to the club by its own actions.

 

Blah blah blah, I agree whole heartedly

 

DON'T

 

Ok, I'm not an accountant either, and Chez's post is quite interesting, but you don't need to be an accountant to have seen Mike Ashley's original intentions for the football club.

Just saying he bought the club to make money means nowt in reality though. You need to analyse the hows whens and whys imo. The asset stripping argument doesn't really making any sense when applied to a football club, for example. Or not this one, since the obvious effect would be to lose money, given what he paid upfront and so on.

[Kid Dynamite 5876]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

 

Nothing wrong legally. Just adds more credence to the belief that he is in this purely for the money rather than any great desire to see his club do well.

[Christmas Tree 3997]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

 

My thoughts tbh given my limited financial understanding.

 

Is it not in our interest that he reduces his debt at some point allowing a sale for a realistic price to go ahead?

[Tom 13804]

CaulkinTheTimes George Caulkin

@

@toonlowdown to be honest, those figures go over my head, but will try to study when get a free moment.

 

 

George Caulkin

CaulkinTheTimes George Caulkin

@

@toonlowdown sat down with Llambias for last financial results - says no interest being charged on loans or money going out of club.

 

Caulkin is going to have a look!

[Gemmill 34151]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

 

Nothing wrong legally. Just adds more credence to the belief that he is in this purely for the money rather than any great desire to see his club do well.

 

Which adds weight to the argument that the fans need to wake up and pull the rug out from under the prick by not just auto renewing tickets every year.

[Ketsbaia 0]

I've had a response from Brian McNally

 

McNallyMirror Brian McNally

@dr_tennant Ashley buyout & his loans something I have investigated. Seemed strange to me but financial gurus advised me it was OK & legal

Leverage buyouts are "OK & legal" in the UK as far as I'm aware, this just makes him a much bigger cunt than we initially thought.

[Craig 6284]

@McNallyMirror Brian McNally

@dr_tennant Many #nufc fans now view Ashley regime as morally bankrupt after the Carroll double talk on reinvesting the £35m.Used yet again

[Gejon 2]

Disgusting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I thought a pinball machine would be £200 tops.

[ewerk 26118]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

Which i can accept so my two questions are why is the figure included in our gross debt? Why is this being paid back in 2009 i.e. why is it reduced to £132m? If it was just a financial vehicle, surely this would remain at the same level of debt until a time when the club was sold.

 

You're just looking at company debts?

 

Overall the group debt to MA increased by £5m between 08 and 09.

[Matt 0]

Lots of debate in this thread, but in reality the 'debt' is simply a useful way of putting money into the business.

 

The ultimate beneficial owner of NUFC, SJHL, MASH Holdings is Mike Ashley. When he purchased the club he will have set up a bid vehicle (SJHL) which purchased the shares on NUFC. The funds to purchase were loaned to SJHL from Ashley (later restructured to be via MASH) and subsequently Ashley was required to inject further cash to repay maturing debt and also significant working capital to keep the club able to pay the wage bill.

 

The confusion arises because all of the cash involves was placed by way of shareholder loan. This has a number of advantages, if the club were to make a profit, Ashley could choose not to waive the interest as in the past, this would reduce pre-tax profit and hence improve the overall return. Tax deductibility varies on the type of structure and juristiction, but essentially gives a benefit not enjoyed by cash. In some cases of insolvency, the loans will also rank alongside other creditors (though any type of bank / institutional debt will always rank ahead of the shareholder loan)- equity always comes out last.

 

All the risks and rewards of these loans rest with the same man who owns the club, therefore for practical purposes should be considered as equity- you can simply remove them from the debt total. If you do that, you will see that in fact external debt has fallen as Ashley has replaced this with his own funds.

 

I cannot see the funds coming from anyone other than Ashley for two reasons- firstly he had just cashed in on the Sports Direct flotation and had some £800m floating around so why pay to borrow, secondly that the LBO structure would not allow non-payment of interest and let Ashley maintain control.

 

There are some similarities to an LBO, Ashley is trying to turn the club into something which generates a stable cash flow (because stability can be sold) by keeping wages down, generating net transfer income and maintaining a place in the PL (17th or above is fine each year).

[ewerk 26118]

Matt, do you have any idea why the loan was changed from repayable on sale in 2008 to repayable on demand in 2009?

[AgentAxeman 81]

So he lends himself the money, then uses the profit from outgoing transfers to pay off his own debt (ie. the club debt) thereby over the course of a few years hes actually bought the club for nothing?

 

Certainly shady but legal nonetheless.

[ChezGiven 0]

I don't see what's wrong with MASH lending £138m to a subsidiary to purchase the club. Isn't that also how Abramovich did it? The £138m had to come from somewhere so it was either a loan or capital added. I don't think it's a big deal.

Which i can accept so my two questions are why is the figure included in our gross debt? Why is this being paid back in 2009 i.e. why is it reduced to £132m? If it was just a financial vehicle, surely this would remain at the same level of debt until a time when the club was sold.

 

You're just looking at company debts?

 

Overall the group debt to MA increased by £5m between 08 and 09.

 

There are 2 loans, one to NUFC and one to SJH Ltd to buy the club. Its not clear from the graph what happened to the loan from NUFC but £6m of the loan from MA to SJH Ltd, used to buy the club, was paid off in 2009. If MA lent the holding company money and the holding company is paying that back from NUFC money, its the same principle a leveraged buy-out. The vehicles are different but its essentially using the core business to pay off a debt that was accumulated to purchase the club. Possibly....

[Toonpack 6763]

I've had a response from Brian McNally

 

McNallyMirror Brian McNally

@dr_tennant Ashley buyout & his loans something I have investigated. Seemed strange to me but financial gurus advised me it was OK & legal

Leverage buyouts are "OK & legal" in the UK as far as I'm aware, this just makes him a much bigger cunt than we initially thought.

 

If it was a leveraged buy out, which it's not.

 

Ashley is the sole creditor, the holding company is simply a vehicle as Matt states. He bought the club with his own money and holds that debt in the holding company.

 

The Glazers borrowed the money from a bank and then put the debt onto the club (with asssociated interest) so they to all intents and purposes got the club for free. At the end of the NUFC chain the money came out of Ashley's pocket.

 

This is not new information to be honest.

[snakehips 0]

If a bloke buys a garage for £50k and he then makes a £5k profit every year - as well as paying himself a salary - he eventually gets all his money back. What's wrong with that? Maybe I can't see the wood for the trees in all this ??

 

Perhaps it's just supporters' expectations of what LardAsh should do with the 'profits' year-on-year. I guess the majority would want it reinvested in players etc. Whether we like it or not it's his money, after all.

 

As I said a long time ago, perhaps those putting their hard earned into the club see it as the sooner he breaks even the sooner he's likely to sell up and fuck off. However, what if he sees it as a nice little cash cow year-on-year and doesn't sell up? That's what frightened me.

[ChezGiven 0]

The questions still remain, why do we owe this money and why is he paying it off? If i borrow money to buy a business then use profits to reduce my debts, then i didnt pay for it out my own pocket. If i lend myself money and then pay this back out of the business, then i didnt pay for it out my own pocket.

 

In this case i bought the club out of the future income of the club and used a bridging loan to facilitate it. Its not an LBO but the principle is the same and should be, if true, recognised as such by the financial and football community.

[Christmas Tree 3997]

The questions still remain, why do we owe this money and why is he paying it off? If i borrow money to buy a business then use profits to reduce my debts, then i didnt pay for it out my own pocket. If i lend myself money and then pay this back out of the business, then i didnt pay for it out my own pocket.

 

In this case i bought the club out of the future income of the club and used a bridging loan to facilitate it. Its not an LBO but the principle is the same and should be, if true, recognised as such by the financial and football community.

 

Does this explain it....? from N/O

 

 

There was no leveraged buyout of Newcastle.

 

Ashley set up a company called St James Holdings and has put his own money into it to fund what he has done at Newcastle. The only way it would be a leveraged buyout is if he had borrowed the money to put into St James Holdings, he hasn't done that as he's used his own cash.

 

Based on the latest information Ashley has put about £278 million into St James Holdings. £138 million of that was used to buy the club and the remaining £140 million or so has been used to fund this loan that everyone has heard of. So the club owes Ashley £140 million, it does not owe Ashley £278 million. However purely from an accounting viewpoint St James Holdings is showing that it owes Ashley the full £278 million, but I stress that does not mean the club does. If the club was sold tomorrow Ashley has no legal right to receive anything other than the £140 million loan. Of course he won't sell under those terms and will be looking to get a value that clears the purchase price and the debt .i.e. more than £278 million at the last count.

 

That's a fairly simple view of the situation as it was the last time we had sight of any finances. However there are a number of other factors to take into account. Since that information was published the debt the club owes to Ashley may well have decreased with some of the Carroll money being used for that purpose. I'm not going to say it definitely has because I genuinely don't know if it has, but it's certainly a distinct possibility. Secondly there is a point that has been raised on here about Ashley at some point in the future being in a position where he owns the club but the debt has been paid off. The sums involved are as I said above. To clear the debt he needed total repayment of £140 million as at June 2010, if he wanted to also recover the purchase price of the club then he would need to find a way of taking money out to a value of a further £138 million. This would have to be done by charging interest on the loan, paying dividends, renting an asset to the club or taking a salary - he hasn't done any of those so far. I have to say if he's looking to get £278 million out of the club's cash flow to cover the loan and the purchase price then it might take some time...

[Guest Your Name Here]

It matters not if it was, or was not, technically a leveraged buyout. The main purpose of corporate accountancy is to make working out wtf is going on as difficult as possible. What matters is this.

 

1) The supporters were led to believe the money used to buy the club was non repayable, is this true?

 

2) Is money being taken out of the club to repay money loaned to the club since FMA bought it?

Edited September 1, 2011 by Your Name Here

[Christmas Tree 3997]

If a bloke buys a garage for £50k and he then makes a £5k profit every year - as well as paying himself a salary - he eventually gets all his money back. What's wrong with that? Maybe I can't see the wood for the trees in all this ??

 

Perhaps it's just supporters' expectations of what LardAsh should do with the 'profits' year-on-year. I guess the majority would want it reinvested in players etc. Whether we like it or not it's his money, after all.

 

As I said a long time ago, perhaps those putting their hard earned into the club see it as the sooner he breaks even the sooner he's likely to sell up and fuck off. However, what if he sees it as a nice little cash cow year-on-year and doesn't sell up? That's what frightened me.

 

 

I agree with a lot of that but dont think a small operating profit would be enough to keep him involved with us if he could get rid. Chicken feed to him.

 

Ego might make him want to "do it his way", but as people keep saying he is not even turning up any more, maybe his interest is long gone and its all about getting out as fast as possible.

[Matt 0]

The questions still remain, why do we owe this money and why is he paying it off? If i borrow money to buy a business then use profits to reduce my debts, then i didnt pay for it out my own pocket. If i lend myself money and then pay this back out of the business, then i didnt pay for it out my own pocket.

 

In this case i bought the club out of the future income of the club and used a bridging loan to facilitate it. Its not an LBO but the principle is the same and should be, if true, recognised as such by the financial and football community.

 

We don't owe the money, really. It's like taking a tenner out of one pocket and putting it in another. NUFC, SJHL etc, it's all 100% Ashley. There is no evidence to suggest he borrowed money to buy the club and his personal cicumstances at the time of purchase make this highly unlikely. Also important to note that NUFC owes the cash, NUFC has not lent the cash up to shareholders.

 

Why is he paying it off? Probably because he feels he has a better use than leaving it knocking around in NUFC and rather than declare a taxable dividend, he can just partly repay the shareholder loan.

 

Your underlying point is 'Are the fans paying Ashley the cash back' and the answer is quite clearly yes. He realised he has screwed up but after realising he wouldn't get his money back decided the best thing would be for the fans and TV stations to extricate him from his woeful return on investment.

[ChezGiven 0]

Thanks for your posts Matt. My basic view is this; by lending another company the money to buy us, Ashley hasnt spent a thing. The debt is owed to him. By paying back the debt of the holding company to himself from the core business he is returning the money he paid to himself by making it appear that its a debt obligation of the club.

 

That graph basically says that whats happening. SJH Ltd owes £6m less to Ashley in 2009 from 2008, how and why?

 

If you read my OP again, i argue that the Carroll money covered all the losses of relegation effectively meaning there was no relegation in a financial sense. With a higher TV revenue and a lower wage bill, why cant we spend any money? Incompetence? Luck? Or because we are financially stangled by debt?