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Update from Rob Couhig

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  • But any sensible new owner wouldn’t buy on that basis.

  • Didn't the Couhig's take on and pay off the debts the Trust built up?

  • @StrongestTeam said:

    @DevC said:
    Future “buyers” certainly are unlikely to take on the previous owners debt, that is true.

    The previous owner when he wants to sell has to write off debt or not sell.

    Or hold the new owners ransom for future earnings...

    Particularly loan sharks!

  • Third party debt has to be paid off Mr Middle. That’s the point. Third party debt bad owner debt largely irrelevant.

  • I wonder what will happen to the failed experiment in Milton Keynes, even before this tsunami Winkleman was looking for an exit .

  • @DevC said:
    Third party debt has to be paid off Mr Middle. That’s the point. Third party debt bad owner debt largely irrelevant.

    That’s exactly what happened with Steve Hayes isn’t it?

  • No @OxfordBlue .

    When Hayes wanted to sell with large amounts of debt owed to him, that debt was largely irrelevant. He wrote it off, as he always knew he would have to, because no buyer will take on the club with large amounts of debt outstanding to the owner. The only amount of debt that may be left in would be the amount that the buyer would pay for the club. ( if the club is worth £2m, the buyer isn’t much fussed whether he pays £2m for shares or £1 for shares but leaves £2m of debt).

    If Col U owe their £24m to their owner, then when that owner seeks to leave, the vast majority of that debt will not be repaid. There is no cash to do so.

    The problem Col U may face is the same as we faced. Not the debt , but how to very quickly reduce the spending going forward as there is no longer cash available to spend more than is earned.

  • @Right_in_the_Middle said:
    Didn't the Couhig's take on and pay off the debts the Trust built up?

    The point is would they have done that if the debts were £25m? and the club was worth 4or 5 or nothing? Nope. Did Hayes write off all he was owed? Nope. Dev talks about sensible owners, nobody sensible would touch a club that is losing money hand over fist and owes these obscene amounts. It'd be lovely if the current owners of some of these clubs agreed they'd messed up and they'd write off all debt and give control over to someone better placed to run it and maybe contributed a little more to help future outgoings that they committed too despite not being able to find them but this is rare, Sunderland possibly the only example at this level of debt, if you look at Burys and Blackpools it's chancers trying to squeeze out anything they put in. So yeah, debt to owners isn't irrelevant unless they are lovely people with huge pockets, in which case they probably don't need to loan the clubs money, they can just give it.

  • He didn’t write all the debt off Dev.

    To say the amount he didn’t write off was irrelevant or immaterial is revisionist history at best.

  • It’s all about future outgoings Strongest - that point is right. That and third party debt.

    There is nothing that a current owner can do to a club because he has debt owed to him than he can do if he doesn’t (including the Blackpool and Bury situations).

    Any new owner taking on a club with more debt than the club is worth is a fool.

    col U £24m debt (assuming all to owner) is irrelevant. The fact that they are presumably spending far more than they earn, funded by increased owner debt, may well become a major issue as soon as he is no longer prepared to fund tomorrows spending/income gap.

  • @OxfordBlue said:
    He didn’t write all the debt off Dev.

    To say the amount he didn’t write off was irrelevant or immaterial is revisionist history at best.

    Imagine he had, and that we were debt free or close to it when the Ibe money came in. Would have been a very different prospect.

    @DevC I know you like repeating a phrase but if large debt to an owner materially affects takeover attractiveness or an owners willingness to sell (as they try to claw money back via asset stripping that they won't get by selling) it isn't irrelevant, and if it isn't all written off then it certainly isn't irrelevant. If interest is being charged it isn't irrelevant. If it affects ability to borrow from other sources or get investment through share issue it isn't irrelevant. If it gives a false sense of security so clubs spend money beyond their means increasing future committed outgoings it isn't irrelevant.

  • if Col U have an intrinsic debt free value of say £2m, then the most debt that any rational new owner will accept is £2m and then only if purchase price is £1. Any current owner will know that (and if wishes to asset strip he doesn’t need debt to facilitate that.

    Let me try this a different way

    Club A owes £24m to its owner but now trades at break even
    club B has no debt but currently loses £1m per year

    Which of those two clubs would you say is at greater risk of insolvency?

  • -Its irrelevant
    -Here's 8 ways it isn't
    -Here's 2 it kind of could be in a way with a following wind

    Don't change, you're hilarious.

  • I notice you avoided the question and moved to abuse instead. Ho hum

  • @DevC said:
    I notice you avoided the question and moved to abuse instead. Ho hum

    Phase 2 Dev, ignore the counter points raised, demand answers to your own completely separate questions, claim abuse when pointed out. Every. Time.

    Your scenario might interest you but doesn't add to the original question of whether large owner debt is irrelevant as you suggested. I have set out why I think it isn't, feel free to disagree.

  • @DevC said:

    Let me try this a different way

    Club A owes £24m to its owner but now trades at break even
    club B has no debt but currently loses £1m per year

    Which of those two clubs would you say is at greater risk of insolvency?

    You know very well that there us no way of knowing that without far more information. Stick to quizzes with actual answers

  • Lets abandon the abuse and continue a rational discussion. Far more interesting in my view. I thought I had answered your points but if you would prefer me to do point by point (my bits in bold) - Ok here goes. Perhaps then you would answer my question too.

    @DevC I know you like repeating a phrase but if large debt to an owner materially affects takeover attractiveness
    It will not. The club is has an entrerprise value of whatever the buyer and seller judges. If they meet, a deal can be done, if not it will not. Debt and share price are the same thing. If the buyer thinks th club is worth £2m, he will pay £2m for shares or £1 plus £2m in debt or some combination in between. If the seller thinks it is worth £5m either debt free or £5m of debt no deal can be done. **
    or an owners willingness to sell (as they try to claw money back via asset stripping that they won't get by selling) it isn't irrelevant
    ** if an existing owner wishes to asset strip, he can asset strip with or without any debt
    ,
    and if it isn't all written off then it certainly isn't irrelevant. If interest is being charged it isn't irrelevant
    ** any interest charged on shareholder debt is simply the owner charging himself interest. It makes no difference whatsoever**.
    If it affects ability to borrow from other sources**
    it doesnt. Any new loaner (and they are very hard to find) would simply insist that his loan ranked higher than shareholder debt - standard practise)**
    or get investment through share issue
    same point as full sale above
    it isn't irrelevant. If it gives a false sense of security so clubs spend money beyond their means increasing future committed outgoings it isn't irrelevant
    **on that we agree. The issue is not shareholder debt, it is how do you fund any losses currently being incurred when the shareholder becomes unwilling to fund them going forward. Which brings me back to the question I asked you Club A owes £24m to its owner but now trades at break even
    club B has no debt but currently loses £1m per year

    Which of those two clubs would you say is at greater risk of insolvency?**.

  • Ok. I screwed up the bolding. Hopefully you can see which bits are yours and which mine

  • Far too many ifs in there.

    "If they can meet and a deal can be done"

    My whole point is that it makes it far more difficult and expensive for all involved if there is debt to clear .

    Good luck finding a significant loan or investment from someone prepared to be way down the bottom of any potential CVA also, and debt on top of loans is often responsible for things spiralling out of control. Asset stripping can of course be done at any time but is far more likely when an owner has lost a fortune already, aggrieved and potentially in financial difficulty.

    In your slightly odd scenario comparing apples and pears club B is effectively Wycombe - if someone like the Couhigs think they can arrest the debt they can have a good go for 3 or 4 years and maybe look at a personal loss of £3-4m if they couldn't sort it out. They will have weighed up their chance of success and ability to fund any more money needed.

    Scenario A is more like Bristol Rovers, whilst the owners are prepared to fund losses you are ok but only up to the point that they find themselves unable or unwilling to do so, (see lots of clubs where a benefactor has died or their other business takes up more time and money, or they've got fed up funding losses whilst being told to sod off ) then to sort that out you'd need a huge write off from the current owners, a massive reduction in outgoings and new owners with deep pockets.
    This scenario Could also be Man Utd or Liverpool a few years ago where despite underlying profitability the owners use profits to reduce their debt or worse saddle the club with debt from purchase and make them pay for the privilege of being owned by chancers who take their management fees as well.

    In short it might not kill your club but it's hardly irrelevant. If you can't admit anything in any of these points that might be atleast a concern we aren't really debating and I'm wasting my (admittedly underused) time.

  • Any takeover has ifs in it @StrongestTeam . There is always a question of whether the two parties can agree a deal. shareholder debt is really not a expensive or complicated factor to resolve in such situations - it is either written off or the purchase price adjusted down.

    External loans to football clubs are extremely difficult to find, certainly at lower levels. The probability of being paid back is low and the negative PR if any enforcement action is taken too high. But if those loans are available shareholder debt is entirely irrelevant to the external loaner. He will invariably structure his loan such that it ranks higher in an CVA than shareholder debt. That is standard practice in far more industries than just football.

    We are largely in agreement I think that the biggest risk to clubs is the ongoing risk if they are trading at a loss of what happens in the immediate aftermath of the owner ceasing to finance those losses. That is exactly what happened to Wycombe when Hayes left and many other clubs for that matter.

    But Wycombe's situation then really wouldn't have been any different whether the loan at that stage to hayes was £5m or £50m. It wasn't the loan that was the problem, it never is. it was paying the next months bills.

    Exactly the same applies to Col U. It doesn't matter whether the loan to its owner is £4m or £24m, the club will never pay that loan off. When the owner decides he has had enough, he has two choices - sell it off and recover what ever he can from his "investment" or shut it down and get nothing.

    At some clubs he has a third option - asset strip the ground. But he has that option anyway whether or not he has unrecovered loans. You say human factors may make him more likely to asset strip out of frustration if he has lost lots of money - maybe. Alternatively if he has lost lots of money he may be more inclined to say f*ck it and get out as quickly as possible. Human factors are very hard to rationalise. They can always be argued either way.

    Going back to my question. The answer, all other things being equal, is clear. Club B, if the owner pulls the plug cannot pay next months bills. Club A can. club A is therefore under far less threat than B notwithstanding the paper debt.

  • You could look at it this way:

    Wycombes biggest single income item I believe is the Ibe money, one similar fee, cup run or sale could keep us going for years and knock out several years of debt if the debt is kept at low manageable levels.

    Bristol Rovers record sale was around £2.5m. They'd have to sell every outfield player at that level to be clear of debt.

  • obviously it is better to run at break even most seasons if that is possible and then use any windfalls after they have arisen. It is virtually impossible to do in practise though. Maybe that will change after this crisis.
    BR and Col will never be debt free unless the existing owners write if off
    Assuming the debt is all to it’s owners, that doesn’t really matter.
    What does potentially matter is whether they are currently operating at a loss and if they are, do they have contingency plans in place for how to finance that loss if the owner stopped doing so?
    It doesn’t matter whether col u debt to its owner is currently £3m or £30m. It does potentially matter if they are increasing it significantly each season.

  • Sorry to come late to this...but if Mr Hayes wrote off his losses...were we just paying him off for a couple of years at great expense to the playing budget etc out of the goodness of our hearts?

  • I was wondering this as well @Wendoverman. Glad you asked 1st so I will at least share the "tut, the answer is obvious, its' because . . .. ". At least I can split the "load" of blame with you, though not my bag of cheese & onion!

  • Some of the posts in this thread allied with my very low attention span help me to understand why I should never go into business and why I should never buy a football club. I'll bring my own potato products @EwanHoosaami as we are sent to stand facing the wall in the thicko corner.

  • A very busy corner it will be @Wendoverman, as I feel we are far from alone!

  • @Wendoverman said:
    Sorry to come late to this...but if Mr Hayes wrote off his losses...were we just paying him off for a couple of years at great expense to the playing budget etc out of the goodness of our hearts?

    As I understood it when SH came along we had debts of £n. He covered those and put in £m.

    When he left he wrote off the £m he had “put in” but we had to repay the original £n.

    Don’t know the figures but understood this to be the principle.

  • Although @carrickblue has answered the specific history re Hayes, let me just answer the wider question re Colu.

    Let us say that a buyer ("A") believes the value of Col U debt free is £2m

    Col U has debts of £24m

    So if Col U owner ("B") wishes to sell , he has no chance of recovering his £24m.

    So there are really two choices

    1) if B has cash, B writes off the £24m debt , A buys B shares for £2m cash. Deal done. Or possibly if more efficient tax wise, B writes off £22m of debt, A buys B shares for £1m. Co issues new shares of £2m to A for cash, Co uses cash from shares to pay off remaining £2m of debt.

    2) if B has no cash, B writes off £22m in debt and sells shares to A for £1. £2m of debt to A left in business. A hopes that at some stage in the future Co will generate enough cash to pay off debt.

    Option 2 is essentially what happened when the Trust bought the shares from Hayes.

    remember that what nearly killed WWFC was not the debt that had accrued to Hayes. It was the fact that we were spending more than we were earning and once the Trust owned the club and Hayes hasn't there to fund the difference, there wasn't cash available to pay that months bills as a result

  • Why can't he write off £23m?

    Oh sorry. 'There are really two choices'.

    I leave it to the experts

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