£194,000,000 New investment ?

buz_not_buzz said:
As mentioned before, what you are calling FFP is really "Profitability & Sustainability" and is related to Profit & Loss. Investment has absolutely no impact on P&L as it is not revenue. Owners of any club are able to pump as much money into a club as they like but they cannot just spend it how they like because of the "FFP" rules. This is the financial reason why Newcastle aren't just going out and buying up the best talent in the world in one go (that they have been able to do as much as they have owes more to Ashley not spending in the years previously).

If the club have converted the substantial King Power Group loans into shares then on the balance sheet liabilities will be reduced increasing net assets due to an increase in called up share capital rather than increased profit.

Capital projects (training grounds, new stands etc.) also don't impact P&L as costs for those are capitalised as fixed assets (so cash goes down, fixed asset value increases, net change on the balance sheet 0). The depreciation on them is P&L (as the value of the fixed asset decreases) but is exempted from the calculation for "FFP".

I assume that if they have converted loans to shares then it will at least have the benefit on the "FFP" calculation of removing a good sized chunk of interest. Also though does remove a source of income for the KPG [edited from "from the KPG"].
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Cheers Buz, could you do my books for me please.
 
Can someone explain to this simpleton what this all means ?
Does it mean we can now give the slug a 15 year contract extension and pay him Ronaldo's wages.......
 
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Is it possible that Top has done the debt for equity swap, so that it might be easier to bring in an additional capital investor for say 10% of the now much larger equity? An optimistic take, I know....
 
TopFox said:
So KPI lent the club £190m-odd. Can someone explain why we also had to arrange big loans from the oz bank against transfer sales and TV monies, seemingly for the same purposes? Is it simply because we continue to live well, well above our means?
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Why we arranged loans from the Oz bank on top of the KPI loans or why KPI didn't just lend the club more?

Either way it is just about liquidity (I mean, regardless of FFP & amortisation an' all that you still need cash available to be able to buy Stoke centre-halves), we effectively "sell" some of our PL Cash & Outstanding Transfer fees to the bank in order to get the money in earlier. Bit of a larger version of a Payday loan really.

Why the Oz bank and not KPI? Could be all sorts of reasons; less interest (KPI would have needed to add it on top of their current loans before today), dealing with a lender that specialises in these sorts of arrangements, it makes more sense to extend lines of credits across multiple providers, PL rules regarding how central funds are treated (sorry, just making that up there as I want to stay away from the Finance sections of the PL handbook for a while 'cos they are beginning to hurt my small brain). I can imagine they certainly wouldn't allow KPI to do what MacQuarie do which is to be the direct receiver of PL funds, all sorts of issues with that.

I would say that generally they are low risk loans as it appears the amounts borrowed tend to be for known income and the club are just getting the cash early. I say "generally" as the fact that the bank took out a debenture in 2021 suggests that they wanted to further secure their interests against more of the club's assets (i.e. not just the PL money that were part of the agreements).

So, measured in P&L, yes we are probably continuing to live well above our means. Measured on the balance sheet then, following todays, events probably not... or at least not for the time being.
 
David_Nish said:
presumably they could take dividends to recoup he loss of interest on the loan, and more if they chose?
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I don't know but I think that is right. I know that the last few sets of accounts specifically mention no dividends being paid but as we were losing £millions that probably shouldn't be a surprise so unless we start making a profit might be hard to account for taking a dividend. But, honestly, I don't know. I could find out... but not tonight!!!
 
Bradnor said:
Is it possible that Top has done the debt for equity swap, so that it might be easier to bring in an additional capital investor for say 10% of the now much larger equity? An optimistic take, I know....
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I have to confess that this has been confusing me a little. I don't see that this is optimistic at all unless you still feel that the owners are unwilling or unable to carry on supporting the club financially to the extent that they have been or by [very] temporarily removing a reliance on some of the loans. What other benefit would there be? Whilst they would clearly still have the controlling interest it would surely just dilute their ownership for a one time injection of cash (and if I recall correctly they went to a lot of effort to buy out other interests from ownership)?

Surely a much better way to attract finance from external sources is to try and build relationships with external partnerships through commercial activities (as they did when they ended the King Power Shirt sponsorship & engaged with a commercial partner instead, though assuming KP were paying market rates for the privilege not a deal that in itself would improve revenue greatly)? There are of course limits on what commercial opportunities there are so these need to be expanded upon which is where things like ground expansions etc. come in.
 
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