[gazberg]

Did a similar scenario to this not happen with the owner of Birmingham City a few years ago? 
I seem to remember he was of Far Eastern extraction and somehow, they (whoever ‘they’ are) managed to extricate him from ownership which is exactly what we wish do replicate.

The guy is such a terrible owner I just can't see him being competent enough to add any value to the club ever.

[bidbaggie]

With more details surrounding the loan being uploaded we can see the 20m is secured against the ground etc as we would expect but it's also secured against the club badge, trademarks etc.


Can someone with more intelligence than me explain if this is normal? Surely the ground, middlemore road land etc would cover the 20m?

The full debenture (security document) can be found on companies house and read in all its 61 page glory if anyone is interested.

From a quick review (2 minute scan so please do not take this as read), it would seem that MSD have fixed and floating charges over everything the group own - whether that be property, IP, debt receivables etc - basically, in the event of a default, they can appoint administrators and will recover their remaining balance against these before anyone else gets a penny back (including Tax Man and employees of the club) although an amount will have to be set aside for non secured creditors but this will be a fraction

I don't have working knowledge of football finances but this is fairly standard when borrowing monies - security is normally separated out where you have more than one lender - ie you take out a mortgage on property from one institute but borrow monies against future sale proceeds from another. If there is only one lender of finance (i think this is the case with WBA), they normally take security over everything unless they are cock sure that the asset they have charged will return their investment in a default (ie like having a 70% loan to equity value mortgage against your house)

I can send a link to the document if people want to pm me

[gazberg]

The full debenture (security document) can be found on companies house and read in all its 61 page glory if anyone is interested.

From a quick review (2 minute scan so please do not take this as read), it would seem that MSD have fixed and floating charges over everything the group own - whether that be property, IP, debt receivables etc - basically, in the event of a default, they can appoint administrators and will recover their remaining balance against these before anyone else gets a penny back (including Tax Man and employees of the club) although an amount will have to be set aside for non secured creditors but this will be a fraction

I don't have working knowledge of football finances but this is fairly standard when borrowing monies - security is normally separated out where you have more than one lender - ie you take out a mortgage on property from one institute but borrow monies against future sale proceeds from another. If there is only one lender of finance (i think this is the case with WBA), they normally take security over everything unless they are cock sure that the asset they have charged will return their investment in a default (ie like having a 70% loan to equity value mortgage against your house)

I can send a link to the document if people want to pm me

Many thanks for your informative reply Bidbaggie!

[NJS]

Michael Dell would probably make a better manager than Guochuan; the computers I bought off him were OK.
(Still have two desktops that are straightforward to get inside and add memory and solid state disc.  Maybe he can upgrade Zohore's operating system)

[robnewbold]

Such a shame that the transformation on the pitch is taking place under this toxic background. I hope we can keep the momentum going despite the fact we have the worst owner in the Universe.
Keep protesting though until the loans are re-paid.

[baggiejohn]

The full debenture (security document) can be found on companies house and read in all its 61 page glory if anyone is interested.

From a quick review (2 minute scan so please do not take this as read), it would seem that MSD have fixed and floating charges over everything the group own - whether that be property, IP, debt receivables etc - basically, in the event of a default, they can appoint administrators and will recover their remaining balance against these before anyone else gets a penny back (including Tax Man and employees of the club) although an amount will have to be set aside for non secured creditors but this will be a fraction

I don't have working knowledge of football finances but this is fairly standard when borrowing monies - security is normally separated out where you have more than one lender - ie you take out a mortgage on property from one institute but borrow monies against future sale proceeds from another. If there is only one lender of finance (i think this is the case with WBA), they normally take security over everything unless they are cock sure that the asset they have charged will return their investment in a default (ie like having a 70% loan to equity value mortgage against your house)

I can send a link to the document if people want to pm me

Bit like reading French for me, I can understand certain words & phrases, but not the whole document.

It certainly looks as though all bases are covered, & although player registations are not specifically mentioned, there is a reference to "undertakings", could that be player registrations?

Also, it was mentioned by a forum member & myself earlier in the conversation, would a stake in the business & a seat on the board (in the event of default) give a better return to the lender than selling individual assets?

[bidbaggie]

I would guess that player registrations would be covered under the IP/other assets part so would assume that those are tied up as well!

I think that a key thing to remember is that no lender wants the borrower to default unless you are borrowing off some shady backstreet chancers who are just lending money so they can pull the plug and get the assets on the cheap - clearly MSD are not one of these. As a general rule, lenders don't lend money unless they are confident that it will be paid back and there will have been a huge amount of financial modelling to justify that this is the case including different scenarios and stress testing. As MSD have lent, i would assume that the club have passed the relevant credit approval tests on these!

A stake and a seat might give a better return but is a longer term strategy than just realising their investment through sale/recovery of assets. It is also possible that they want someone in attendance at board meetings in a non exec role to keep an eye on things anyway.

Don't forget, over half the debt can be recovered from one place - all they need to do is find the pot of gold at the end of the rainbow where the debtor has hidden it...

[overseas baggie]

I would guess that player registrations would be covered under the IP/other assets part so would assume that those are tied up as well!

I think that a key thing to remember is that no lender wants the borrower to default unless you are borrowing off some shady backstreet chancers who are just lending money so they can pull the plug and get the assets on the cheap - clearly MSD are not one of these. As a general rule, lenders don't lend money unless they are confident that it will be paid back and there will have been a huge amount of financial modelling to justify that this is the case including different scenarios and stress testing. As MSD have lent, i would assume that the club have passed the relevant credit approval tests on these!

A stake and a seat might give a better return but is a longer term strategy than just realising their investment through sale/recovery of assets. It is also possible that they want someone in attendance at board meetings in a non exec role to keep an eye on things anyway.

Don't forget, over half the debt can be recovered from one place - all they need to do is find the pot of gold at the end of the rainbow where the debtor has hidden it...

I think one extra consideration is that football-related debts take priority in an actual (Company Law) insolvency, but I’m not sure if that’s the case where a borrower defaults and security is enforced without a formal insolvent administration (although technically a company is insolvent if it can’t pay its debts as they fall due).

For MSD this is a low-risk loan in reality, because even though the risk of default might not be too low, the security is ample.  An interesting question - do you think MSD will also have taken a charge over Holdings’ 88% shareholding in Group?  That wouldn’t show up in the MSD debenture which relates to Group (and below), and I suspect only would be covered in the loan agreement (which we are unlikely to see).   I would be surprised if Lai & Co have not had to put that up as security, in lieu of a personal guarantee.

[bidbaggie]

Do you know whether football related debts are just for transfer fees or whether it also covers wages owed to players to fulfil contracts as well?

Looking at the 30/6/21 accounts (appreciate a lot has probably changed since then to the 30/6/22 set), it appears that the club owes 27m for player registrations - 12m in less than a year so have been paid by now and 15m greater than 1 year (KG I presume). Can't think of anyone we have bought for any great money in the last year so that means we would owe around 15m as at now. For context, the club was owed 1.5m less than a year and 700k more than a year.

If that whack was to be paid before MSD in the event of an insolvency it would take out a large amount of their security, but as you say, there seems ample anyway - fixed assets are in the books at 77m so a 20m loan is in effect approx a third of the book value

If you do have factor in player contract payments ahead of loan, then this would change the landscape somewhat as the annual wage bill was 77m (although that would look to halve as this is the prem figure)

To answer your question about charge over holdings shares, given the fact that the owners reside 5000 miles away in a very restrictive country and there is a history of loans being given at low rates and not paid back i would also be surprised if something hasn't been put in place. Maybe not with any real intention of having to call it in but mainly to stop any silly bollox going on with respect to dividends/loans being paid to effectively take the £20m back out!

[Albionic]

The full debenture (security document) can be found on companies house and read in all its 61 page glory if anyone is interested.

From a quick review (2 minute scan so please do not take this as read), it would seem that MSD have fixed and floating charges over everything the group own - whether that be property, IP, debt receivables etc - basically, in the event of a default, they can appoint administrators and will recover their remaining balance against these before anyone else gets a penny back (including Tax Man and employees of the club) although an amount will have to be set aside for non secured creditors but this will be a fraction

I don't have working knowledge of football finances but this is fairly standard when borrowing monies - security is normally separated out where you have more than one lender - ie you take out a mortgage on property from one institute but borrow monies against future sale proceeds from another. If there is only one lender of finance (i think this is the case with WBA), they normally take security over everything unless they are cock sure that the asset they have charged will return their investment in a default (ie like having a 70% loan to equity value mortgage against your house)

I can send a link to the document if people want to pm me

Only bit that sounds wrong there is before the revenue, I understood they have first dibs in all cases written into law.

[bidbaggie]

Only bit that sounds wrong there is before the revenue, I understood they have first dibs in all cases written into law.

Hi

My understanding is the rank goes

Secured creds with a fixed charge
Administrators fees
Preferred creds (employees first, then HMRC)
Creds with floating charge
Unsecured creds
Connected unsecured creds

Shareholders get what's left

[Albionic]

Hi

My understanding is the rank goes

Secured creds with a fixed charge
Administrators fees
Preferred creds (employees first, then HMRC)
Creds with floating charge
Unsecured creds
Connected unsecured creds

Shareholders get what's left

Ok, I had that wrong then, thanks for the clarification

[Standaman]

The charge is a catch all. It is really simple if we default on it the club will be in administration and we are in a fire sale situation and whatever we might think our assets will be very quickly consumed by the loan, administration costs and any other debts we might have.

It is imperative that we do not default no matter what it means in terms of selling players. 

This is a very sorry state for us to be in. It is not entirely obvious that an unlikely promotion fixes the situation as long the charge is sitting there and there is a chance of default (our owner has technically already defaulted on loans from the club) we have cloud hanging over us.

The best case scenario is for Lai to sell up. According to reports the club has been up for sale for a little with no firm interest and that was when it was unencumbered by debt. A £20m loan to cover operating expenses does not make it any more attractive to a potential buyer particularly if the club's asset base has been eroded to service the loan.

[baggiejohn]

Do you know whether football related debts are just for transfer fees or whether it also covers wages owed to players to fulfil contracts as well?

Looking at the 30/6/21 accounts (appreciate a lot has probably changed since then to the 30/6/22 set), it appears that the club owes 27m for player registrations - 12m in less than a year so have been paid by now and 15m greater than 1 year (KG I presume). Can't think of anyone we have bought for any great money in the last year so that means we would owe around 15m as at now. For context, the club was owed 1.5m less than a year and 700k more than a year.

If that whack was to be paid before MSD in the event of an insolvency it would take out a large amount of their security, but as you say, there seems ample anyway - fixed assets are in the books at 77m so a 20m loan is in effect approx a third of the book value

If you do have factor in player contract payments ahead of loan, then this would change the landscape somewhat as the annual wage bill was 77m (although that would look to halve as this is the prem figure)

To answer your question about charge over holdings shares, given the fact that the owners reside 5000 miles away in a very restrictive country and there is a history of loans being given at low rates and not paid back i would also be surprised if something hasn't been put in place. Maybe not with any real intention of having to call it in but mainly to stop any silly bollox going on with respect to dividends/loans being paid to effectively take the £20m back out!

Yes it was Grant (£15 million over 6 years) so probably down to £10 million now.

Just had a look at the fixed assets, tangible assets together with investment property are valued at £20.5 million. That & savings from not replacing players out of contract would probably cover the loan (including interest)

[baggie82]

Yes it was Grant (£15 million over 6 years) so probably down to £10 million now.

Just had a look at the fixed assets, tangible assets together with investment property are valued at £20.5 million. That & savings from not replacing players out of contract would probably cover the loan (including interest)

It should be noted that ALL transfer signings have fees paid over the several years, not just Grant. Every season we will have X amount due on previous signings and sales.

[baggiejohn]

It should be noted that ALL transfer signings have fees paid over the several years, not just Grant. Every season we will have X amount due on previous signings and sales.

Except they don't, there is no evidence from our accounts or other clubs of similar size that this is common practice.
There is evidence that payments are structured for the bigger clubs and larger transfer fees.

[LiamTheBaggie]

If Corberan does achieve a miracle and gets this club promoted this season then the first thing this club should do prior to buying any players is to pay off this rancid loan. This is the last thing we need hanging round our necks.

[gazberg]

If Corberan does achieve a miracle and gets this club promoted this season then the first thing this club should do prior to buying any players is to pay off this rancid loan. This is the last thing we need hanging round our necks.

Is the interest set in stone/'upfront' with these type of commercial loans or can we save interest by repaying it early does anyone know?

[overseas baggie]

Except they don't, there is no evidence from our accounts or other clubs of similar size that this is common practice.
There is evidence that payments are structured for the bigger clubs and larger transfer fees.

Sorry - not correct. Probably at least 50% of transfers at Championship level are paid installments, with many selling clubs then factoring those transfer fees via the likes of Macquarie.

[LiamTheBaggie]

Is the interest set in stone/'upfront' with these type of commecial loans or can we save interest by repaying it early does anyone know?

I have no idea - but given it’s £5m per year then I’d like to think there’s an avenue of escape should we get promoted this season.

[gazberg]

I have no idea - but given it’s £5m per year then I’d like to think there’s an avenue of escape should we get promoted this season.

I agree we should but even if we get promoted we need Lai to sell up for long term safety. I'm assuming he's realised taking 20m out in the form of the loan will reduce any potential offers he may receive in the event of promotion.

Good grief Lai, what a mess you have made.

[overseas baggie]

Do you know whether football related debts are just for transfer fees or whether it also covers wages owed to players to fulfil contracts as well?

Looking at the 30/6/21 accounts (appreciate a lot has probably changed since then to the 30/6/22 set), it appears that the club owes 27m for player registrations - 12m in less than a year so have been paid by now and 15m greater than 1 year (KG I presume). Can't think of anyone we have bought for any great money in the last year so that means we would owe around 15m as at now. For context, the club was owed 1.5m less than a year and 700k more than a year.

If that whack was to be paid before MSD in the event of an insolvency it would take out a large amount of their security, but as you say, there seems ample anyway - fixed assets are in the books at 77m so a 20m loan is in effect approx a third of the book value

If you do have factor in player contract payments ahead of loan, then this would change the landscape somewhat as the annual wage bill was 77m (although that would look to halve as this is the prem figure)

To answer your question about charge over holdings shares, given the fact that the owners reside 5000 miles away in a very restrictive country and there is a history of loans being given at low rates and not paid back i would also be surprised if something hasn't been put in place. Maybe not with any real intention of having to call it in but mainly to stop any silly bollox going on with respect to dividends/loans being paid to effectively take the £20m back out!

I’m not sure of the exact definition (will look it up later) but transfer fees and obligations to players are definitely included. 

Any charge over the shares would be surely a charge given by the new (clean) Jersey holding company over its 88% shareholding in Group (UK company), which makes it really easy to structure and enforce.  I suspect this was the real reason for forming and interposing that new Jersey company.

[overseas baggie]

The charge is a catch all. It is really simple if we default on it the club will be in administration and we are in a fire sale situation and whatever we might think our assets will be very quickly consumed by the loan, administration costs and any other debts we might have.

It is imperative that we do not default no matter what it means in terms of selling players. 

This is a very sorry state for us to be in. It is not entirely obvious that an unlikely promotion fixes the situation as long the charge is sitting there and there is a chance of default (our owner has technically already defaulted on loans from the club) we have cloud hanging over us.

The best case scenario is for Lai to sell up. According to reports the club has been up for sale for a little with no firm interest and that was when it was unencumbered by debt. A £20m loan to cover operating expenses does not make it any more attractive to a potential buyer particularly if the club's asset base has been eroded to service the loan.

I disagree.  A default gives MSD the right (but not the obligation) to put the company into administration.  In practice, they would exercise their security, take control, inject extra funds of their own and look to sell the club outside of administration at a price which gets them their money owed, while Yunyai take a huge haircut.  It would not be in MSD’s interests at all to put the club into administration if they are only owed less than £30m and there are buyers out there for in excess of that sum.

[overseas baggie]

Is the interest set in stone/'upfront' with these type of commercial loans or can we save interest by repaying it early does anyone know?

All of MSD’s loans are at fixed rates, linked to the coupons payable on loan notes listed on The International Stock Exchange (the Channel Islands exchange). 

[gazberg]

All of MSD’s loans are at fixed rates, linked to the coupons payable on loan notes listed on The International Stock Exchange (the Channel Islands exchange).

Thanks OB