[Archived] Financial Weekly

[Majiball]

http://www.wikio.com/video/713276

Love it. I won't comment on Banks I'll get banned.

But if a player has a contractual release clause that obliges the selling club to accept any offer of, say, £18m.

Then the buying club has nothing to gain by offering any more than £18m.

If a club meets the amount then it must be accepted, surely. If man utd bid 25M and city 18M then surely he can speak to both and then decide.

However any club that bids above a release clause must be run by Idiots.

RSC's agent will let them all know if there is one thats in effect now surely.

If its 18M thats the best we will get.

[BiggusLaddus]

I dont think any release clause amount, can go beyond that unless a club ups the bid,to beat off competition for the players signature. Eg if Roque has an 18 mill release clause, Man City meets that amount,but Man United says we will offer 25 mill. Is it right to accept the higher amount,or is it about the initial release clause amount being met? Can anybody shed some light on that scenario?

Both.

The only reasons any club would bid higher than a release clause is if they didn't know it was there or thought it was higher than it is. If Manchester Utd really wanted to buy Roque then I am fairly certain that they would magically find out the required number needed to trigger the clause. Just like Liverpool did with Bellamy (inc the time limit).

[Iceman]

What i was trying to find out,was if 2 clubs had bid at the same time,1 came in at the release clause amount,the other at higher,what does the selling club do? Surely it would be the 1st club,and 2ndly if the player wants to go to that club? Financially Rovers would say well,we need the money,lets go with the highest bidder irrespective of the release clause amount. I hope im making any sense here. Lol

[PAFELL]

But if a player has a contractual release clause that obliges the selling club to accept any offer of, say, £18m.

Then the buying club has nothing to gain by offering any more than £18m.

So it then comes down to silly season with contracts. The club who offers the player the best contract would get the player. That contract would therefore have to be a lot better than the one the player already has with the selling club. So there will never be a credit crunch on players wages - which there should be.

Therefore RSC could, for arguments sake, hold any interested buying club to ransom for the best contract. But a club by offering the selling club more than the release clause, would reduce the players contract 'barginning' slightly.

[Majiball]

What i was trying to find out,was if 2 clubs had bid at the same time,1 came in at the release clause amount,the other at higher,what does the selling club do? Surely it would be the 1st club,and 2ndly if the player wants to go to that club? Financially Rovers would say well,we need the money,lets go with the highest bidder irrespective of the release clause amount. I hope im making any sense here. Lol

I do get what your saying.

I guess any bid that meets or goes above a stipulated release clause has to be accepted, otherwise the club would be in breach of contract surely.

I'm not convinced the club could decline a bid above the amount because a higher bid was on the table.

A release clause removes the auction side of a bidding war.

[RevidgeBlue]

It's quite straightforward as I see it, if a release clause for 18m were hypothetically in effect then presumably Rovers can't refuse anyone bidding that amount or above permission to talk to RSC. Below that amount they can reject any bid out of hand and refuse the bidding club permission to speak to the player. Howevever the player doesn't have to move if he doesn't want to, even if the trigger fee is met.

There isn't a great deal of point any club bidding above the trigger amount because the player is entitled to move for that amount. If there was more than one club involved presumably it would simply boil down to who was offering the best personal terms.

By the same token there is also nothing stopping Rovers attempting to improve RSC's terms further in an attempt to persuade him to stay. Sadly that didn't happen when the Chelsea bid came in for Duff.

[JAL]

It all comes down to what the trustees want for BRFC. At the end of the day,they could easily accomodate any day to day expenses and afford to give the manager a substantial amount to spend. Its in their best interests to see the club maintain its top flight status, in order for them to sell to any potential buyer/s. So why are they the trustees not willing to commit enough transfer money?

I'd have thought and its been mentioned many a time that the trustees see Rovers as... a self financing stand alone business..should that not be the case Iceman?

Having a multi milion pound overdraft in a time of global economic downfall is something any business would not want to have around its neck - should it ?

[RevidgeBlue]

Trust me, there is a clause in Rockys contract but it does not apply till the summer.............

Interested to hear that view seeing as it was you that tipped everyone off to the existence of Dan Williams!

If that were indeed the case I would imagine there might be a bit of pressure exerted on the manager in certain quarters to try and get an extra couple of mill up to the magic 20m mark this month.

[Iceman]

Agree completely Jal,but for how long can we still afford to maintain the club,without being financially secure. Its interesting,that the credit crunch seems to have hit the rich clubs more than the clubs with less financial muscle. In that, its become almost a level playing field in terms of spending. Or am i completely losing it,for saying that?

[JAL]

Agree completely Jal,but for how long can we still afford to maintain the club,without being financially secure. Its interesting,that the credit crunch seems to have hit the rich clubs more than the clubs with less financial muscle. In that, its become almost a level playing field in terms of spending. Or am i completely losing it,for saying that?

I think the first thing is for the board to get their decision making RIGHT and all subsequent recruits correct all the way down the line. The money lost by Rovers over some poor decisions taken regarding recruitment must have cost Rovers a fortune running possibly into tens of millions of pounds.

Think the old rule of the more you earn then the more you can afford applies to all clubs so the bigger ones will always be big.

[thenodrog]

Agree completely Jal,but for how long can we still afford to maintain the club,without being financially secure. Its interesting,that the credit crunch seems to have hit the rich clubs more than the clubs with less financial muscle. In that, its become almost a level playing field in terms of spending. Or am i completely losing it,for saying that?

I went to Marrakesh this time last year and we took a trip into the Atlas Mountains. I commented at the time that if the world's economic situation blew itself to smithereens those Blue men and Berber Arabs would hardly know about it. If you have nowt to begin with then I assume that the impact of the credit crunch is minimal.

[Iceman]

Hmm, interesting that a financial thread was created and no sign of the bank manager, Philip lol. When does Rovers normally release their financial results, and is it available to the general public?

[RevidgeBlue]

The accounts are not yet available on Companies House website, but have probably been distributed to Shareholders, so this is conjecture as to numbers.

The simplistic answer was that at the last financial year end, before the effects of the credit crunch really started to bite, Rovers had a £20m overdraft facility which it was using. All cash that has come in since, and any potential "pot" that was not wasted on Grella, Carlos, Andrews, Robinson etc was probably banked. As it was banked, the bank said, "oh good, your overdraft has come down, so you won't need that much any more" and the facility was reduced, therefore effectively hampering any future purchases. I don't know what the overdraft stands at now, because if Bentley was sold on finance terms it's entirely possible that we have yet to see a single penny from the transaction (Arsenal having been paid their cut immediately, as is required, but the rest over 2 years- as with Duff to Chelsea).

That money will probably now, along with the extra that was earmarked for Carlos, go to paying the overdraft down, therefore any "pot" has effectively disappeared to the bank. Similarly, any remaining overdraft will probably have to be repaid using any proceeds from Santa Cruz.

While the banks were quite happy lending good money after bad- ie when the last accounts were drawn up to 30 June 2007- borrowing more to finance player development was probably possible. Now, with finance virtually impossible to find, the bank will want its money before we're allowed to spend any more.

That is the cash position. Do not be confused by the fact we've made an operating profit. Cash and profit are not the same thing and it is entirely possible to be profitable without having any cash. (See stores like Whittards and Officers club, both of whom were profitable but had debts they couldn't service to the bank's satisfaction. Hence they were bought out of administration whereas Woolies was unprofitable, so it hasn't been)

Jan, just for the sake of clarity, are you saying you know for a fact that our overdraft facility has been decimated, or, like philip, are you merely presenting it as a possible case scenario?

[Iceman]

Question for Philip. When can we expect to see the financial results being released for Rovers? Dont they do this on a quartely basis?

[philipl]

Question for Philip. When can we expect to see the financial results being released for Rovers? Dont they do this on a quartely basis?

Annual basis- they are a non-traded company in terms of public quotation.

The accounts are in the hands of shareholders now.

I have always written my commentary when the accounts are filed at Companies House and are therefore available to the public.

That usually means towards the end of January.

Re Rev's question- I'll let Jan go first on that.

[Iceman]

Interesting to know that results are not released, on a quartely basis. Is it not easier for Rovers to improve their financial side of things, when reviewing every 3 months? Im no financial expert, so apologies if i dont understand these things.

[Jan]

Simply surmised based on experience of hundreds of companies in the current climate. We have an insolvency arm and we're seeing dozens of similar stories every week, and our funding arm has been reporting the difficulty of raising any money for months.

Even the very largest in the world are having their facilities withdrawn.

Answer this. Why would the company's bankers continue to give overdraft facilities to a company with a history of making losses and no financial backing (let's not kid ourselves, the trustees will not guarantee anything in this climate) Especially when this is not a public interest story (such as the bankruptcy of, say, Man United or Liverpool would be?)

We're being forced into self-sufficiency. Let's hope that Sam can do what Hughes did, and provide us with the funds to keep us afloat.

And Iceman, the company probably looks at its results on a monthly basis, and cash flow almost daily, it's just as a private company it only has to report to the public once a year.

[American]

Why would they? Because they know it is just a plaything compared to the larger businesses run by the trust. I would only see them removing funding if they are worried about the solvency and loss of fees from the other businesses.

[philipl]

Jan is saying what I am seeing as well.

The Banks (all of them) have had massive write-downs which have produced losses which have fed straight through to the capital value. As banks lend a multiple of their capital value, they have to cut back on lending to repair their balance sheets and keep within ratios.

So they easiest thing to cut immediately are unused loan and overdraft facilities to put a cap on future lending.

That is going for everyone from the strongest to the weakest- when the objective is simply to reduce the lending book as fast as possible, quality is a secondary consideration sadly. Even the Trust, with its many strong businesses, will be finding that it is being required to provide more and better collateral for any of its businesses' borrowings.

[Blue n White Rover]

So what will be happening to the likes of Man Utd and Liverpool, whose owners have taken out huge loans in order to buy the club?

[The Prof.]

So how will this non liquidity situation affect Rovers?

The move towards financial self sufficiency (could do a paper on that one!) is probably a good thing in the long term. However in the short term it's not good at all. In June just by chance I set a group a question "When is an asset not an asset" and got some telling answers. It was largely because Debtors are seen as an asset on balance sheets.

This is now still the case but Debtors can be depending on money owed through say 5 or more companies and if one at the beginning or the chain can't pay it affects all the others. Freddie and Fannie just happened to be the biggest cards and the top of the biggest chain What has also happens is that 5 companies are showing the same cash possibility as an asset multiplying the problem. The return to self sufficiency will be long and painful and as usual Joe Public will pay.

For Rovers. Well I'm sure I'll be corrected if I'm wrong here but the premiership is now spilt two ways.

1. The traditional way - clubs who have huge revenues and have huge spending v the rest (ie. us)

2. The new way. Clubs who have liquidity (cash) and the rest.

For the Rovers the latter situation throws up some interesting possibilities.

We know some clubs have no cash

- The Cashless League:

Portsmouth

West Ham

Everton

Possibly even Chelsea

A second tier have some cash but large set debts.

-The It's Not My Cash League

Man Utd

Liverpool (up to a point- could go below)

Some have cash (supported by owners with cash):

- The Cash League

Man City (a lot)

Villa (see above - it's all Randy's fault anyway for overlending to Trailer Park Trash)

Arsenal - possibly but I suspect they could go above

Wigan?

Middlesborough?

Some have no cash but now no debt:

The Self Sufficiency League

Rovers

At last we are in a league of our own. This must surely be the time to buy. A £25m investment will propell Rovers into the top 6 and possibly the top 4. But we can't find the cash. With an IOU not being worth the paper it's written on just 3 or 4 clubs can put together a coherent bid for a player. It's almost a dereliction of a directors duty to let a £20m overdraft lapse in this day and age!

If Jan is right then I am also wondering what the cash situation is like in Italy and Spain. Italian clubs seem to be perpetually hanging by a financial thread and should be struggling to survive. But they do! It's a buyers market folks!

[Paul]

I feel Rovers strogest suit is cash. We are not desperate to sell any player, though clearly £15-20m for RSC would come in very handy. The club is in a far better financial situation than many PL clubs and so it would be reasonable, in the current financial climate, to demand full payment for a player at the time of the sale. Why take a risk when any number of clubs coud go to the wall and create a chain reaction? It will ONLY take one to go bust to create a huge problem.

This improves Rovers position in three ways:

It would be reasonable to refuse to sell a player on the basis the payment is not secure

- release clause or not

Rovers would have cash as a real bargaining tool with other clubs

We would be less exposed to potential the domino effect if a PL club were to go bust

[Iceman]

Prof when you say no cash, do you mean Rovers are skint despite there being hardly if any debt at the club? If 80 percent of Rovers turnover goes towards salaries etc, is it not easier to find new ways to generate income through other means? It seems that Rovers(perhaps not the clubs fault) are one dimensional in its thinking, in terms of generating income through various other ways. Or am i being an idiot, that a club of our size could generate income besides gate fees, tv money and player sales etc?

[dingles staying down 4ever]

Prof when you say no cash, do you mean Rovers are skint despite there being hardly if any debt at the club? If 80 percent of Rovers turnover goes towards salaries etc, is it not easier to find new ways to generate income through other means? It seems that Rovers(perhaps not the clubs fault) are one dimensional in its thinking, in terms of generating income through various other ways. Or am i being an idiot, that a club of our size could generate income besides gate fees, tv money and player sales etc?

To be fair, Rovers have tried various other ways to create income, including franchising out the club shop in previous seasons.

[Iceman]

Fair enough on that comment Dingle Staying Down.