[overseas baggie]

The Warmfront loan is an absolute doozy. The default interest rate is 5% per month (roughly equivalent of 75% apr) at that rate of accrual the value of Lai's shares are exceeded by the interest payments somewhere around year 4 and it needs to be remembered the original loan was only for £2m.

Fortunately for the day to day operation of the club it's assets are ring fenced by the charge on them by the MSD loan. So Lai cannot access them to repay the Warmfront loan. However the person who controls the loan in effect controls the club assuming Lai is not in a position to repay it (which seems to be the case)

When the loan is called in the club will have been sold for £2m plus a write off of interest which never was going to be paid. When the shareholding changes hands the persons concerned will be subject to EFL approval but not until then because they don't actually control the club.

The only route out of this for Lai is either he raises funds to repay Warmfront or the club is promoted this year. At that point the MSD loan could be settled and Lai could raid the club's coffers to repay the Warmfront loan which at the start of next season will have grown to over £6m.

That’s not correct.  The loan/equity conversion rate is/was only 2.35% of the issued share capital of Holdings. That conversation rate will have increased beyond 2.35% (I’ve read to just less 10% which might seem reasonable) but not beyond that.   There’s absolutely no chance that Yunyai will have put themselves at risk of selling their entire investment for £2m plus the loan write-off. 

The audited accounts signed in March 2023 only refer to the 2.35% conversion rate, and the Warmfront loan was apparently already in default by then, so no new conversion rate had been agreed by end of March otherwise it would have had to be noted as a post-balance sheet event.  Also, any significant change of UBO would be a trigger event under the MSD loan.

[hardtobeat]

So we are still well in the chyte it’s just the depth that may have varied !!

[overseas baggie]

Will Lai sell a business that is providing him and his Chinese associates handsome salaries every week. Loans and lump sums at regular opportunities.
Will Lai sell up losing a large sum of his initial investment.
Will any new owner take on Lai's debts.
Will any potential new owner pay Lai's asking price.
No no no no no.
So to service out debts and stay afloat more assets will have to be sold and continue to be sold. Until we have nothing left.
We're looking at Administration sooner or later. As for being sold the longer we continue to build up debts the tougher it gets to find a buyer. Currently we owe £32million and are losing £30million a year on operating costs. It doesn't take a genius to reach a simple conclusion we will have serious cashflow problems  very soon.

There are absolutely no loans or lump sums being taken out at regular opportunities. Completely impossible under the terms of the MSD loan. Nothing can leave the club except for bona fide club operations.  The two Chinese directors are employed and being paid for their roles.  I don’t think Lai is likely to be receiving much if indeed anything as he’s hardly “executive”.

[overseas baggie]

naughty word right off. No way???

Which cess pits has lai been looking for finance from?

I appreciate everything you do mate, but that information has made me physically sick.

Have you thought of looking for wba fans willing to fund a takeover?

In the olden days there were rumours of the Richardson brothers being wba fc fans.

This vile naughty boy has overpaid for his 2.35% imo.

That maguire £35m valuation, which looks to me as based on the Derby sale is more realistic than £60m.

Incomparable with Derby.  They had massive debts (they owed just under £200m to Mel Morris and had lots of other debts) and didn’t even own their own ground. 

We still have a positive balance sheet rather than a negative one of well over £200m which Derby had).

[SmethDan]

Not correct.  The club does NOT lose that £2m as it’s not a club loan and never was!  The £2m didn’t come out of the club in the first place - it was borrowed by Holdings from Warmfront.  The only loser is Yunyai whose shareholding in Holdings will have been reduced if the loan converts until equity.

“Follow the money” is always a useful starting point.

Any idea why Warmfront have the West Bromwich Albion club logo on the named partner list of their website instead of Yunyai? For the record I am not being confrontational, I just don't understand how they're linked to the club (Group) when it's supposed to be Yunyai's (Holding's) debt.

[baggiejohn]

That’s not correct.  The loan/equity conversion rate is/was only 2.35% of the issued share capital of Holdings. That conversation rate will have increased beyond 2.35% (I’ve read to just less 10% which might seem reasonable) but not beyond that.   There’s absolutely no chance that Yunyai will have put themselves at risk of selling their entire investment for £2m plus the loan write-off. 

The audited accounts signed in March 2023 only refer to the 2.35% conversion rate, and the Warmfront loan was apparently already in default by then, so no new conversion rate had been agreed by end of March otherwise it would have had to be noted as a post-balance sheet event.  Also, any significant change of UBO would be a trigger event under the MSD loan.

Can't copy & paste from a PDF, but in the accounts for Holdings it does say that the Warmfront loan has a default interest of 5% per month.

[overseas baggie]

Any idea why Warmfront have the West Bromwich Albion club logo on the named partner list of their website instead of Yunyai? For the record I am not being confrontational, I just don't understand how they're linked to the club (Group) when it's supposed to be Yunyai's (Holding's) debt.

Nope - no idea other than that Lai probably good them they could as part of their loan deal.  As we know, Lai doesn’t pay much attention to detailed legal correctness !

[baggies_24]

I think this will drag on for another year or so (basically as close to the administrators coming in) there is absolutely no way anyone is paying £60m for the club with the various debts hanging over the clubs head, they would have to invest roughly £100m to get the club back onto the straight & narrow.

Lai is going to hold out until the very last minute, the club will continue to suffer & no doubt Carlos walks, who know what undesirables will be let through the back door in that time also, It’s a real mess.

[overseas baggie]

Can't copy & paste from a PDF, but in the accounts for Holdings it does say that the Warmfront loan has a default interest of 5% per month.

That’s correct.  The initial interest rate was 0.3% per month, with the default rate of 5% per month now applying.

The reference to 2.35% is the percentage of ownership that Warmfront receive in West Bromwich Albion Holdings Limited if the latter defaulted on the initial loan repayment date.

[overseas baggie]

I think this will drag on for another year or so (basically as close to the administrators coming in) there is absolutely no way anyone is paying £60m for the club with the various debts hanging over the clubs head, they would have to invest roughly £100m to get the club back onto the straight & narrow.

Lai is going to hold out until the very last minute, the club will continue to suffer & no doubt Carlos walks, who know what undesirables will be let through the back door in that time also, It’s a real mess.

Sorry - that doesn’t stack up.  What “various debts” are you referring to?  The only relevant one is the MSD £20m which seemingly hasn’t been spent yet (unspent funds still will sit as an asset on the balance sheet).  The other debts are trade creditors (transfer fees owed) which will be paid as they fall due (using the £20m as necessary) and from the Dara and other expected player sales.

We have a positive balance sheet and we own the ground.  Somewhere around £50m is probably about right.  We aren’t a hugely insolvent basket case financially - we are just low on cash flow.  Player sales will sort that.

Lai will be pushing very hard now for a sale.  I share your concern that new owners might not be any better and might even be worse…

[overseas baggie]

Just a few of things on this

1) The only relevant one is the MSD £20m which seemingly hasn’t been spent yet

What is this based on? Being as it was communicated the loan was taken out to meet day to day running costs, would have to imagine some % of this has been spent by now

2) (unspent funds still will sit as an asset on the balance sheet)

A totally unspent and unrepaid loan has 0 net effect on the balance sheet as you're increasing cash at bank (debtor), and increasing loan liability (creditor) by the same amount  (ignoring interest for simplicity)

3) You brought up player sales/purchases

Our most recent filed accounts made up to 30 June 22 just as an fyi had;

Amounts still due from player sales = £8.5 million
Amounts still due from player purchases = £21.4 million

1. Some of it may well have been, but it’s intended to see us through this season if we don’t manage player sales.  We’ve sold Dara so that helps.  I have no reason to think that much of it will have been used so far.  Remember that the EFL requires clubs to confirm that they have sufficient funding for the season ahead.  The £20m loan is intended for that.

2. Correct, other than the big difference in interest rate between what’s earned on deposit and what’s payable on the drawndown but so far unused loan.

3. Indeed.  These are already factored into the cash flow forecast when taking the £20m loan. 

[NJS]

That’s not correct.  The loan/equity conversion rate is/was only 2.35% of the issued share capital of Holdings. That conversation rate will have increased beyond 2.35% (I’ve read to just less 10% which might seem reasonable) but not beyond that.   There’s absolutely no chance that Yunyai will have put themselves at risk of selling their entire investment for £2m plus the loan write-off. 

The audited accounts signed in March 2023 only refer to the 2.35% conversion rate, and the Warmfront loan was apparently already in default by then, so no new conversion rate had been agreed by end of March otherwise it would have had to be noted as a post-balance sheet event.  Also, any significant change of UBO would be a trigger event under the MSD loan.

Sorry to be a pain OB, but I'm trying to get my head round this loan to equity conversion rate.
Does it mean that each £100 of debt can be redeemed for £2.35 worth of shares - in Holdings, not Group -  at the share price when the loan deal was struck?
Or
Does it mean that the £2M loan can be redeemed for 2.35% of WBA Holdings shares rising proportionally as the interest  on hte loan increases the amount to repay?

Maybe it nets out as roughly same thing?

[baggiejohn]

Sorry to be a pain OB, but I'm trying to get my head round this loan to equity conversion rate.
Does it mean that each £100 of debt can be redeemed for £2.35 worth of shares - in Holdings, not Group -  at the share price when the loan deal was struck?
Or
Does it mean that the £2M loan can be redeemed for 2.35% of WBA Holdings shares rising proportionally as the interest  on hte loan increases the amount to repay?

Maybe it nets out as roughly same thing?

That's an interesting observation, asking from another angle.......
Is the 5% per month interest on the £2 million or is it on the 2.35%? So after 12 months of default, the share becomes 4.22%?

[Standaman]

Holdings has no assets other than the Yunyai shareholding in the club.

The initial loan was taken out at an effective annual rate of 20% but with a default annual interest rate of 75%. If the borrower does not pay the initial loan plus interest then it moves to the default rate. The loan was secured at a conversion rate of 2.35% (an implied valuation of £85m).

At the default rate the balance outstanding doubles roughly every 14 months. Even if the value of the underlying equity was stable the loan very quickly exceeds the total value of the assets. In a situation where the value of equity is falling, Yunyai are very quickly wiped out.

If Lai and associates could settle the £2m plus interest they would have  avoided the living hell of 5% per month interest. They didn’t so therefore it is reasonable to assume they can’t settle a far bigger sum now or in the future. 

Fairly quickly they will be in a position of selling and handing over the bulk of the funds to Warmfront. At what point do Warmfron pull the plug on the loan? What is the implication for the club if Holdings goes into administration?  As for the Wisdom Smart Loan loan being guaranteed by holdings and therefore returnable when Holdings is sold, not much use if holdings has been sold largely to pay Warmfront.

I cannot be sanguine about this position we are rapidly falling into a situation where we attract the absolute worst type of ownership imaginable e.g. Farnell and his rag bag of associates.

[Albion79]

Not sure if this is the same issue as the recent days  owner rumours but it also comes back to Lai and the ownership.

I was told yesterday that our playing budget that was agreed the end of last season has changed since middle of July, much to Carlos disgust.

Apparently we had a budget to work too and a percentage from wages freed up from sales / loans would be additional to that (i assume that means O'shea, Grant, Ashworth, Button and Faal) Carlos was quite happy to work with that but something has changed, it would seem we dont have as much as first agreed and also the percentage from outgoing business has dropped alot.

There were concerns weeks ago as we had agreed a deal with a centre half but took ages to complete due to us delaying and he went elsewhere, i am not sure if thats why Pieters was then resigned instead.

We are also shopping in a different loan and free market than we were six weeks ago, clubs usually want a loan fee and contribution to the players wages, we can barely afford most loan fees and are offering a very small contribution to the players wages so most clubs arent interested in doing business with us.

We got Sarimento because we have agreed to plenty of game time and as we did well for them in regards to Matt Clarke (who got sold for nearly 3m on the back of his spell with us as he hardly played for Brighton, and us buying Moloumby) they have been generous in terms of what we are paying for Jeremy.

Maja is supposedly on quite a low wage considering his age, pedigree and being on a feee and they know we can probably sell him on for a fee at a later date.

But those two signings along with the budget cuts have left us very very short and we will be calling in favours and goodwill for further signings, we apparently will sign two more but its what clubs help us, of course it may change and more significant wages are freed up from future sales but it wont be anything major based on past deals.

[overseas baggie]

Sorry to be a pain OB, but I'm trying to get my head round this loan to equity conversion rate.
Does it mean that each £100 of debt can be redeemed for £2.35 worth of shares - in Holdings, not Group -  at the share price when the loan deal was struck?
Or
Does it mean that the £2M loan can be redeemed for 2.35% of WBA Holdings shares rising proportionally as the interest  on hte loan increases the amount to repay?

Maybe it nets out as roughly same thing?

Good question - it depends on what they’ve negotiated between them

[overseas baggie]

Holdings has no assets other than the Yunyai shareholding in the club.

The initial loan was taken out at an effective annual rate of 20% but with a default annual interest rate of 75%. If the borrower does not pay the initial loan plus interest then it moves to the default rate. The loan was secured at a conversion rate of 2.35% (an implied valuation of £85m).

At the default rate the balance outstanding doubles roughly every 14 months. Even if the value of the underlying equity was stable the loan very quickly exceeds the total value of the assets. In a situation where the value of equity is falling, Yunyai are very quickly wiped out.

If Lai and associates could settle the £2m plus interest they would have  avoided the living hell of 5% per month interest. They didn’t so therefore it is reasonable to assume they can’t settle a far bigger sum now or in the future. 

Fairly quickly they will be in a position of selling and handing over the bulk of the funds to Warmfront. At what point do Warmfron pull the plug on the loan? What is the implication for the club if Holdings goes into administration?  As for the Wisdom Smart Loan loan being guaranteed by holdings and therefore returnable when Holdings is sold, not much use if holdings has been sold largely to pay Warmfront.

I cannot be sanguine about this position we are rapidly falling into a situation where we attract the absolute worst type of ownership imaginable e.g. Farnell and his rag bag of associates.

I follow your logic but a few queries and comments:

1. When was the initial loan at a rate of 20%?  Wasn’t it 0.3% per month?

2.  At that rate of compound interest, Yunyai would refinance elsewhere at whatever rate is possible without risking losing a much bigger percentage of their shareholding.  They may be idiots but maybe not complete imbeciles!

3. I doubt they’ll ever get beyond the 10% of equity level.  Why not? Because then the EFL will have to approve Warmfront & Co, and because Yunyai will have done everything possible to sell by then.

4. The shareholding owned by Holdings, even a year from now with no progress, is unlikely to be worth less than £30m.  Even in administration that sort of price would be obtained because the club has only modest debt.  Therefore Holdings would probably get £27m (gross) in a forced sale - enough to pay Holdings’ debts including the Warmfront loan (plus interest) and the Wisdom Smart guaranteed loan.  But it may leave very little left for Yunyai - hence they’ll sell before then. 

[Standaman]

Sorry my bad on the initial APR something like 3%.

 However if you are looking for a test of imbecility defaulting on the loan in the first place if alternatives are available is wholly adequate in my view. Therefore I am assuming cash or refinancing is not readily available because they would have pulled that lever before now.

The debt will eventually compound to a value of Holdings but long before that Warm Front have effective control because were the loan to be called in there is no way of repaying it.

This should prompt a sale but the problem is it should have done so already. That means either there just aren’t buyers for a slightly battered Championship club and or the owners' demands are still unreasonable. Another year in the Championship and another year closer to the MSD debt being repaid or refinanced isn’t going to make the club anymore valuable.

None of this should blow back into the Club itself but my fear is that should the situation in Holdings look increasingly unstable that might prompt MSD to pull the plug on the loan.

[overseas baggie]

Sorry my bad on the initial APR something like 3%.

 However if you are looking for a test of imbecility defaulting on the loan in the first place if alternatives are available is wholly adequate in my view. Therefore I am assuming cash or refinancing is not readily available because they would have pulled that lever before now.

The debt will eventually compound to a value of Holdings but long before that Warm Front have effective control because were the loan to be called in there is no way of repaying it.

This should prompt a sale but the problem is it should have done so already. That means either there just aren’t buyers for a slightly battered Championship club and or the owners' demands are still unreasonable. Another year in the Championship and another year closer to the MSD debt being repaid or refinanced isn’t going to make the club anymore valuable.

None of this should blow back into the Club itself but my fear is that should the situation in Holdings look increasingly unstable that might prompt MSD to pull the plug on the loan.

I’m sure it’s because their demands have been unreasonable to date.  That is inevitably going to change.  But I’m not sure that MSD will be too concerned about what happens up at Holdings level as it doesn’t impact on MSD’s security.  MSD might however be concerned about a material change of ownership, which the loan terms would enable them to take a view on triggering a repayment demand.

[mulliganstired]

The problem is that where millions are involved it becomes worth paying lawyers and accountants hundreds of thousands to find ways of moving money around in "creative" but legal ways that no-one else really understands.  I worry that this is happening to us under the radar.

[liverbaggie]

If someone whose owed money by us calls that loan in and we can't pay it, we go bust dont we?

[overseas baggie]

The problem is that where millions are involved it becomes worth paying lawyers and accountants hundreds of thousands to find ways of moving money around in "creative" but legal ways that no-one else really understands.  I worry that this is happening to us under the radar.

I don’t.  But I did until the MSD loan!

[lewisant]

Can somebody summarise the last few pages of info in massive layman’s terms as I have I kind of blindness to this kind of thing.

Not as simple as “we’re fudged” as I’d like to have a basic grasp of what is going on 🤣

[Topman]

Can somebody summarise the last few pages of info in massive layman’s terms as I have I kind of blindness to this kind of thing.

Not as simple as “we’re fudged” as I’d like to have a basic grasp of what is going on 🤣

I will second that. I haven’t a clue what’s going on. Just reading about blues and thier takeover leaves me as jealous as hell. Can someone please give me a nugget of confidence to tell me the Chinese will soon be gone and we’ll have someone in who actually talk to us let alone invest etc

[paulosull]

Can someone clue me in here? The MSD loan are repayments being made every year or  is the full amount including interest being paid after 4 years?