[Archived] Financial Weekly

[PAFELL]

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.

Ironically if the worse happens and Rovers were relegated this season they and the banks would know that Rovers have a guarrenteed parachute payment to come. If Rovers stay up the banks would also know Rovers have good money coming in from Tv deals etc. Whatever happens Rovers have a guarrenteed income - even if it invloved a fire sale - they also know that Rovers have a player that others would pay £18million for. Even though Rovers have yet to receive all the Bentley money it is still income.

A lot of businesses outside of football are not in this postion of guarrenteed income.

They would also know that as the trustees are the clubs owners - and if Rovers got into serious financial trouble would the trustees be obliged to chip in or bail out the club under the terms of the trust?

The banks would know the assests of the trustees other businesses. Lending to Rovers could even be a safer debt than other prem clubs even in this current credit crunch.

[Jan]

Ironically if the worse happens and Rovers were relegated this season they and the banks would know that Rovers have a guarrenteed parachute payment to come. If Rovers stay up the banks would also know Rovers have good money coming in from Tv deals etc. Whatever happens Rovers have a guarrenteed income - even if it invloved a fire sale - they also know that Rovers have a player that others would pay £18million for. Even though Rovers have yet to receive all the Bentley money it is still income.

A lot of businesses outside of football are not in this postion of guarrenteed income.

They would also know that as the trustees are the clubs owners - and if Rovers got into serious financial trouble would the trustees be obliged to chip in or bail out the club under the terms of the trust?

The banks would know the assests of the trustees other businesses. Lending to Rovers could even be a safer debt than other prem clubs even in this current credit crunch.

And from the accounts they would know that 87% of current income is spent on wages and salaries (well in 2007 it was) giving precious little room for error. This would be well over 100% if they didn't get rid of all of the high wage earners if we went down. The Bentley money is also not income, although it will be cash. I also doubt that the trustees would be required to do anything.

[philipl]

Pafell, sorry but your post is just about wrong in every aspect.

Rovers' revebue would collapse by over 50% even with the parachute leaving no room for repaying bank debt would be the (probably correct) way the bank will see Rovers as a lending prospect.

And as we are sitting in a relegation place still we are probably an absolutely no hope case for extra bank lending not least because the Chairman has actually said in public not too long ago that relegation would be a threat to the club's continuing existance.

[The Prof.]

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?

Well if Jan and Phillip are right we had cash but this went into paying the overdraft of by default. I'll check up on the legality of this on Monday - I doubt if your bank can unilateraly reduce an agreed overdraft because it's skint. It seem like a breach of contract. Rovers find it tough to generate new income due to it's small catchment area and unfashionability. They could do more in my opinion, such as use the ground more or re-develop some of it. I do think Rovers have become very one dimensional but that could be because they want to concentrate on their core business.

[PAFELL]

Pafell, sorry but your post is just about wrong in every aspect.

Rovers' revebue would collapse by over 50% even with the parachute leaving no room for repaying bank debt would be the (probably correct) way the bank will see Rovers as a lending prospect.

And as we are sitting in a relegation place still we are probably an absolutely no hope case for extra bank lending not least because the Chairman has actually said in public not too long ago that relegation would be a threat to the club's continuing existance.

Sorry but I am not an expert in money stuff.

What obligations do the trustees have with regards to the survival as a business of Rovers. Could they let the club go bust if they wanted too? If they could it puts a mockery on the word TRUSTEE.

[stuwilky]

I'll check up on the legality of this on Monday - I doubt if your bank can unilateraly reduce an agreed overdraft because it's skint. It seem like a breach of contract.

Of course they can.

They simple "review your lending facility" Its a standard term in contract.

[American]

Either way, how much does the club value the land they own?

[Pugg]

Random question. What do you two (Philip and Jan) do work wise? It's just everyone seems to be directing questions that way.

[The Prof.]

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?

Sorry - football interrupted.

The way the Walker Business is set up doesn't lend itself to a divergent business model with a Football Club at the core. For example Rovers develop a Hotel or Casino, it might be better as a BMI business rather than a football one. Land rental say at Brockhall might be better as a Walker Holding Company rather than a football centred one. In hindsight it works for the Walkers as they can clearly see that Rovers is or isn't a going concern and how much it's costing/making them. This would be cloudier if a multitude of micro businesses are involved with the club.

However it does hinder the ability of the club to raise income from other sources.

Even so there has to be areas that could be improved in my opinion. Take Rovers Radio. It's appalling and so uncommercial it's untrue. The Bee have got along commercially okay where Rovers could have used their branding to do the same but with more oomph. Not all that impressed with other aspects of the current regime as a revenue raiser (ie. the club shop). It seems too amatuerish by far for me.

[The Prof.]

Of course they can.

They simple "review your lending facility" Its a standard term in contract.

For large amounts eg. £20million you would surely have tied in a time period - remember a bank would have moved mountains to get this account in the days prior to the collapse. Any business I was advising or involved in would have certainly had a period over which they could gaurantee that a £20m debt (which is what it is) was secure for the time it was needed or you could be accused of financial mismanagement if for instance the company ran short liquidity and losses were incurred. It just seems very amatuerish.

Either way, how much does the club value the land they own?

Land has to be valued by a professional and re-valued by a professional if you change the value in your accounts. Land is rarely valued at it's actual worth and was normally undervalued. Now it's probably overvalued on many accounts.

Sorry but I am not an expert in money stuff.

What obligations do the trustees have with regards to the survival as a business of Rovers. Could they let the club go bust if they wanted too? If they could it puts a mockery on the word TRUSTEE.

It would depend on the actual wording of the trust. There are claims that can be made against them if the trustees disregarded the terms of the trust. It would probably be chased up by the SEC in the USA but here it would probably end up being a Civil case. I think Phillip mentioned that a drop into the Championship would be a nightmare for the trustees. If Rovers became impossible to manage the trust obviously has a sell on clause but much worse for us would be if the trustees decided they couldn't perform the wishes of the trust and resigned. That would become our nightmare.

[stuwilky]

For large amounts eg. £20million you would surely have tied in a time period - remember a bank would have moved mountains to get this account in the days prior to the collapse. Any business I was advising or involved in would have certainly had a period over which they could gaurantee that a £20m debt (which is what it is) was secure for the time it was needed or you could be accused of financial mismanagement if for instance the company ran short liquidity and losses were incurred. It just seems very amatuerish.

As I am sure you are aware Banks have lovely little clauses that allow them to do whatever they want generally. I think I have 16 years left on my mortgage, there is a lovely clause that lets the bank recall it at 30 days notice if they want - regardless of whether I do anything wrong.

It might well have been part of Rovers' business model to reduce the overdraft, the overdraft equally might not have been reduced - its all hypothetical. Even when we get sight of the accounts they are 6 months out of date.

If a business isnt using an agreed overdraft and banks want to reduce their debt to asset ratio to keep within rules - its very easy to reduce it.

[Bobby G]

Ive read this thread but didnt come across anything regarding how we havent got our hands on any of the Bentley money, something which was hinted at on another thread. Can someone post what was said exactly and how the hell that has happened?

[AndyC]

Ive read this thread but didnt come across anything regarding how we havent got our hands on any of the Bentley money, something which was hinted at on another thread. Can someone post what was said exactly and how the hell that has happened?

rovers have a large overdraft.

money comes in....money pays off part of overdraft.

job done.

[Bazzanotsogreat]

rovers have a large overdraft.

money comes in....money pays off part of overdraft.

job done.

Its considerbly smaller than most comparitive clubs in both the Premiership and many in the Championship for that matter.

In fact in terms of football overdrafts its very small

[The Prof.]

As I am sure you are aware Banks have lovely little clauses that allow them to do whatever they want generally. I think I have 16 years left on my mortgage, there is a lovely clause that lets the bank recall it at 30 days notice if they want - regardless of whether I do anything wrong.

It might well have been part of Rovers' business model to reduce the overdraft, the overdraft equally might not have been reduced - its all hypothetical. Even when we get sight of the accounts they are 6 months out of date.

If a business isnt using an agreed overdraft and banks want to reduce their debt to asset ratio to keep within rules - its very easy to reduce it.

There you go - mine can't! It did try. Only a couple of weeks ago I had to remind them of the terms of our contract - and they complied.

Banks can't do what they want - they would like you to think so but they do have rule to follow and their has to be equity within any contract. I have spent a lifetime advising people not to just accept the word of so called experts who work in industries like this. They use vague or untested rules as fact when they are not. You've probably suffered from this as 9 years ago you might just have caught the end of the endowment floggers. I was put on an endowment many years ago by a financial adviser for my first mortgage but I read small print and got it changed to a repayment mortgage -it's literally saved me thousand (I could have reclaimed it but the hassle and eventual repayment has been easily achieved by now). In the UK the lack of a strong regulatory body for finance has helped cause the current situation. You have to fight the bank in civil court but make the contract that suits you when you make it and you're in the clear. In the US it tougher for iexample the SEC (Securities Exchange Commission) has clout. You get to go to jail and are almost innocent until proven guilty.

Remember - you make the terms or walk away.

If the business model has changed then we're on a different level of supposition. Rovers are being set up to stand on their own two feet. I don't understand why an overdraft facility has been removed voluntarily at this stage though - if as you say indeed it has. You keep the liquid potentiality and limit it yourself surely if you know times are hard for getting cash. don't you?

Still seems amatuerish.

[Iceman]

So if we sell Roque for 18mill,then majority of that money, goes into paying whatever debts the club has, salaries,day to day expenses etc? Is that about right? No wonder there is no transfer money or hardly any left to buy players.

[The Prof.]

So if we sell Roque for 18mill,then majority of that money, goes into paying whatever debts the club has, salaries,day to day expenses etc? Is that about right? No wonder there is no transfer money or hardly any left to buy players.

Well I think that's what the debate over the overdraft is about Ice. If we have no overdraft facility then we would need an amount of the cash to pay any short term payments. This would be the working capital of rovers as a company. It means some money would need to be kept rather than spent on players. Finding £20m quickly would finish a lot of clubs off. As it is if Jan is correct Rovers will or have found the money to not need this 'overdraft.' If they have found it - Rocky money should be used on players. If not - Squeeeeak - we are back to being a selling club!.

The other angle is that Rovers don't cover their running costs. Then some of the money could be used to subsidise our (very high) wages etc.

[dave birch]

There you go - mine can't! It did try. Only a couple of weeks ago I had to remind them of the terms of our contract - and they complied.

Banks can't do what they want - they would like you to think so but they do have rule to follow and their has to be equity within any contract. I

Got to agree with Profs comments.

Towards the end of last year I rang my bank as the rate on our "come and go" facility was higher than our regular loans. Could they do something? First answer was, "fill in these forms and we'll look"; second answer, (less than 24hrs later) was, yep, we'll bring into line with your loans; .6% knocked off. No change to the security, no change to the original terms of the loan.

If you are good enough, the banks will bend over backwards to keep you. I feel that the Jack Walker Trust is good enough and strong enough to dictate terms (within reason) to their bankers.

[Iceman]

This probably has to be in takeover thread, but just seen Derby could be subject to a new take over. Im still trying to work out, how Derby could be a more attractive option than Rovers. Financially, we are stable hardly any debts etc. We are in the premiership, and have consistently been a top 10 side. I can only guess that the area, and the fan base is the ultimate downfall of any takeover deal happening. Shouldnt our financial stability be a key part for any investor,wanting to buy the club?

[Paul]

Im still trying to work out, how Derby could be a more attractive option than Rovers.

Population - Derby is twice the size of Blackburn, though the broad East Midlands only has a population of 4.1m (north-west is 6.8m), there are fewer football clubs (4 in total I think) and no PL clubs so the opportunity for an investor is good. Rovers on the other hand have a historically poor support and compete with 6 other PL clubs and 14 Football League clubs. Simple really.

[Iceman]

Ha,never knew all that. So is it more to do with, population and support, than actual results etc before somebody buys into a club? I always thought investors looked into clubs being financially secure, and debt free or very little debt. Interesting stuff this.

[PAFELL]

Population - Derby is twice the size of Blackburn, though the broad East Midlands only has a population of 4.1m (north-west is 6.8m), there are fewer football clubs (4 in total I think) and no PL clubs so the opportunity for an investor is good. Rovers on the other hand have a historically poor support and compete with 6 other PL clubs and 14 Football League clubs. Simple really.

Yet we also have to take into consideration that a lot of today's football supporters are glory hunters. They don't have loyalty to a particular club, but support only clubs that are doing well. Which is sad really, even Rovers have their share of the prawn butty brigade. If people who go to Rovers supported the club through thick and thin times then an investor may well be interested in Rovers. But the reality is that at least half of the current supporters would go elsewhere if Rovers did the same as Leeds Utd and drop into the lower divisions.

Rovers can only encourage supporters to come to Ewood Park, form success on the pitch - because the glory hunters would then stay around. Rovers played a non league side last night and in my view the supporters of Blyth and other lower or non - league sides deserve upmost respect for supporting their clubs - who most likely have no chance of winning anything - apart from within their own league competitions - yet keep attending the matches - hoping for better times.

[Earlydoors]

Population - Derby is twice the size of Blackburn, though the broad East Midlands only has a population of 4.1m (north-west is 6.8m), there are fewer football clubs (4 in total I think) and no PL clubs so the opportunity for an investor is good. Rovers on the other hand have a historically poor support and compete with 6 other PL clubs and 14 Football League clubs. Simple really.

Derby also had the 11th best attendance in the prem last year. Average gates of 29000 I think, plus they are able to charge more per average ticket.

[roversmum]

Blyth's normal support is 400 so the police and stewards told me. So as there were about 3000 of them last night they have their share of glory hunters too!

[SIMON GARNERS 194]

Rovers on the other hand have a historically poor support

No we dont Paul,its quite good considering the size of the town.

FFS!