Some of them definitely do that. Kieran Maguire for example follows every club. He’s not as close to the finer detail as some of us are on here. I’ve seen him on Twitter being corrected re the loans.
What will happen if/when Holdings defaults on the loan? We can only guess because the terms of any private agreement between Holdings and Warmfront are exactly that - private - until they are made public which won’t be until either the default actually happens or the audited accounts are published in March next year.
But it is hard to see anything other than Warmfront exercising its security and converting the loan to anywhere between a 2.35% and 9.9% shareholding in Holdings, which doesn’t affect anything at group or club level. That percentage will depend on what they have negotiated after the initial default. I don’t think Warmfront will want to own more than 10% as they’d have to go through the EFL owners test. What does that change? Nothing at all on the face of it - Yunyai will simply have diluted its ownership of Holdings.
However, there is a risk that Holdings may offer Warmfront to swap shares in itself for shares in Group, which could mean that Warmfront might then own around 9.9% of Group. It’s possible - if they’ve agreed such a deal between them. That possibly makes a sale of the club a bit more complicated because a buyer might then only be able to purchase around 79% rather than nearly 89%.
Until we know exactly what deal has been struck between lender and borrower it’s impossible to be more definitive. All of us can only be guessing until hard facts are known.
There has been a lot of discussion regarding Warmfront Holdings the past few days, mainly started from us. So I’m sharing this with you to try to explain why it’s so key and important.
Here’s why it’s clear to me if I were Hearn I’d be eager to restructure the loan deal, even if it wasn’t anything to do with other desirables.
Ok bear with, I’ll try to break down.
His debt in Feb will be over £4m OR 2.35% of holdings shares.
That ultimately means his shares are 88.6% of group. (S4A owns rest)
So, if the clubs market value is to be believed, Yunyi are willing to accept £30m
This means that the value of those shares based on this figure is £624,630.
(30m / 2.35% / 88.6%)
The share is a fixed amount, doesn’t rise.
So if you were Hearn, surely you would look at the likelihood that you are not going to get the money back, and say to the person you lent it to you need a bigger percentage of shares to signify the drop in value from when you loaned the money. As he’s defaulted, he could use this as a negotiating tactic. Preferably in club (I’m pretty sure Hearn thinks it’s club already - hence ‘affiliate’ on their website)
If I were him I’d be asking 15% of club shares (not Holdings) = £4.5m
However, this will not work for Lai, as he still needs to retain 75% to do what he wants (15% would take him to 73.66%) Therefore I’d expect there will be an attempt to do a deal at around 12% in exchange for ripping loan agreement up.
That’s why I think it’s so relevant. We could be having a person/s that will own a share of our football club only because our owner has defaulted on a loan. Hardly a commitment to make our club better that is it?
The problem is though, the club won’t have a clue if/when they’re negotiating as all Directors of Group and Holdings are all Chinese. An absolute disgrace the EFL allow this to happen
