[Archived] Barclays Mortgage or Charge

[Exiled in Toronto]

So we are now seeing that under the trust Ewood and Brockhall were in fact used as security, so much for the untouchable.

No surprise really, but can you imagine the furore if Venky's had a) taken that out, built up a 20 million overdraft and c) sold our best players? What's sauce for the goose and all that.

[RevidgeBlue]

Quite possibly much ado about nothing here if my reading of it is correct.

To summarise my understanding:

1) In 2001 and 2003 the Trustees mortgaged all the Club's assets including Ewood and Brockhall as security against existing and future bank borrowings.

2) Those securities may or may not have been paid off in full in September 2010, but were certainly paid off in part at the very least.

3) The new owners in December 2010 mortgaged the 2010/11 PL/TV monies only as either additional security if the previous charges were not paid off in full or new security if the previous charges were settled in full.

4) It is not clear whether the initiative for the December 2010 charge came from the owners wanting an additional loan facility or the Bank requiring extra security post takeover.

5) It is not clear whether the Bank still hold securities over other physical assets of the Club apart from the 2010/11 PL/TV monies.

So to summarise even further, is it not possible that we have moved from a position whereby all the Club's physical assets are in hock to the Bank to a position whereby it is only the 2010/11 PL/TV money?

Would that not possibly be consistent with Venky's having separately undertaken to repay the current overdraft over a four year period (If philip is correct on that point)

[Majiball]

I wondered that. Also they would have to consider exchange rates would they not which would certainly put me off shuttling money in and out of the UK just because of cash flow

I'd wondered about Venky's UK and whether they had tried to set it up with that company only to be told no for whatever reason.

Good reason to be moved to one side if he was fighting it.

It's not good timing that JW leaves and then this comes out, regardless of what it is for people will worry.

Maybe that is why they're borrowing against UK assets (ie, the club) rather than setting up a facility in India and transferring the cash.

It does worry me that there is a possibility that there isn't a reservoir of cash for Venky's to call on to fund their vision for Rovers, and instead they will attempt to do it on HP.

It's all pie-in-the-sky at the moment, but it is slightly disquieting.

For me the worry isn't so much the mortgage but whether I will believe what they say it's for. Trust is key to any relationship and I don't trust what they say, for obvious reasons.

I truly hope we can remain a PLC so that the accounts can set my mind at ease.

[Hughesy]

Ok isnt this just a new bank facility in light of new owners? I mean the bank are not going to still agree to lend money under the Trust’s assets are they, so they would need a new agreement – against the new owners name.

Doesn’t EVERY premier league club have a borrowing facility? This agreement doesn’t say we have borrowed anything does it, just that we have the ability if necessary?

And if it only gives them rights to 2010/11 money – well most of that has already been paid out…except for final positions and a couple of months, hasn’t it??

[philipl]

Not every club has owners who said they don't use borrowings.

[thenodrog]

Anybody care to speculate how might the worst case scenario of relegation affect this arrangement?

[Lee0r]

Its the same if you buy a house, if the bank are going to lend you any money they want physical security if you dont pay so they get their money back if it goes pear shaped, so they take a charge against the house, if you dont pay the mortgage, they repossess and take the house sell it and get their money back.

Its the same here, the only assets the club has apart from the players are the TV rights, the ground and the training ground, as we cant mortgage the players they are putting the ground and Brockhall up as security for the loans we have taken out.

We are literally banking on getting the Sky money and the pay out from the Premier League, if Sky went bust like ITV Digital a few years back, we along with all the other clubs we would be up the Creek!

[OscarRaven]

Anybody care to speculate how might the worst case scenario of relegation affect this arrangement?

I suspect relegation is why the loan is secured against other assests other than the TV money. Quite frankly no bank should be betting on a football club to stay in the league.

Now personally I believe the Ronnie thing was a mutually beneficial smokescreen, to distract from the £5m TOTAL transfer budget, leasing model and worrying mangerial departures but perhaps this is a sign it wasn't...

It could all be as innocent as ensuring that should the chance come up to sign a Messi or similar we can, or it could also be a sign that £5m is the depth of the owners pockets.

I think both are equally unlikely extremes but what can we do about it? You can worry about how they manage the club but ultimatley there is nothing you can do. They are doing it thier way like it or not.

[Roost]

Taking the glass half full approach, yes I had heard that the brothers had not understood when the money comes into the Rovers from the media deal but the bank should not need a charge against all the clubs assets AND its 2010/11 media income to cover short term cash flow - the bank has not liked something of what it has seen to have insisted on taking such an excess of security.

I am staggered if thats the case Philip - surely the DD or previous years trading figures would show a massive spike in income when the PL money landed? It must have been hard to miss........

I guess it will become clearer once (if at all) the charge is ever usaed to borrow against?

[deftangel]

Can I just say here that I applaud the intention to publish information in the public domain so that we can discuss it rationally. The rather suggestive hints and inferences here and there over the past few weeks have been detrimental to discussion, in my view.

The one question I have, the "2010/2011" season is mentioned explicitly so am I correct in thinking this facility, at least as it stands, is perhaps only a temporary one? In that it would be leaning slightly towards BPF's half full view?

[Mattyblue]

Glenn, did you say there is more info to come out on this?

[Glenn]

Glenn, did you say there is more info to come out on this?

Not really. Just that we were going to include it as part of a bigger financial review (so it would justify "news" rather than a forum thread).

[philip369]

Except for the scouse fiasco/stitch up I don't recall a bank being the bearer of bad news.

Mostly the crown, i.e unpaid VAT/PAYE.

Leverage is good, if the proceeds are used wisely.

We are not wise, we are not billionaires.

They are!

[BRFC1995]

Except for the scouse fiasco/stitch up I don't recall a bank being the bearer of bad news.

Mostly the crown, i.e unpaid VAT/PAYE.

Leverage is good, if the proceeds are used wisely.

We are not wise, we are not billionaires.

They are!

they're dad sounds like a bit of a genius setting up a dynasty.......not convinced of how shrewd his kids are yet, the one with the ponytail and 70 cars does'nt sell himself as much of a gordon gekko to me

[philip369]

It does not take long to destroy.

Ask Mr Ratner.

Daughter seems to be doing very well.

[Baz]

Except for the scouse fiasco/stitch up I don't recall a bank being the bearer of bad news.

Mostly the crown, i.e unpaid VAT/PAYE.

Leverage is good, if the proceeds are used wisely.

We are not wise, we are not billionaires.

They are!

Just because we are not billionaires doesnt mean we should not be able to question, does it?

Personally I find it worrying that security against assets of the club were sought just a few weeks after a takeover by what we are told are rich benefactors. I just hope that it is a run of the mill exercise / short-term cash-flow issue, and not a way of paying for transfers by borrowings levied against the assets of the club.

[philip369]

Just because we are not billionaires doesnt mean we should not be able to question, does it?

Personally I find it worrying that security against assets of the club were sought just a few weeks after a takeover by what we are told are rich benefactors. I just hope that it is a run of the mill exercise / short-term cash-flow issue, and not a way of paying for transfers by borrowings levied against the assets of the club.

I whole heartedly agree.

It's just there are few soothe sayers who appear to be trying to scare the pants off some members.

With, as yet, undecared intentions,

[Herbie6590]

Before we start topping ourselves, it has to be stressed the new mortgage gives Barclays rights over the 2010/11 Sky money. This is not like Leeds selling the next 25 years of Premier League income which is what they did back in 2003.

That 2010/11 stipulation suggests this is a short term arrangement, or just that banks got wise to relegation risk.

However, if you take the book value of Rovers'assets plus the minimum payment we might receive from Sky, Barclays now have total security of in excess of £70m.

I am just hoping that in these financially screwed up times, Barclays have simply protected themselves several times over so they have the chance to grab whatever is easiest to hand if it comes to Rovers defaulting. So they would take the Sky cash first but if Rovers have done a Pompey or Leeds and already spent it before it arrived then they would grab Brockhall... So £70m of collateral might be backing £15m of debt if there is zero cash coming in before Sky cough up at the end of May.

However, the statements about not using debt look as reliable as the statement about retaining the existing management or the statement about the involvement of Kentaro.

Not sure I agree with the bit in bold - is there anyone out there who thanks to their job can search Land Registry to see if there are charges over Ewood & Brockhall propoerties registered in favour of Barclays ?

If the answer is no, then this mortgage is over a cash flow for one season. I struggle to see that any self respecting bank would rely on this mortgage alone to be able to foreclose on property as another lender could come in and obtain priority ahead of them before they can crystallise their position. Now if Barclays also have charges registered at Land Registry & at Companies House, then it's a fundamentally different picture.

[philip369]

Not sure I agree with the bit in bold - is there anyone out there who thanks to their job can search Land Registry to see if there are charges over Ewood & Brockhall propoerties registered in favour of Barclays ?

If the answer is no, then this mortgage is over a cash flow for one season. I struggle to see that any self respecting bank would rely on this mortgage alone to be able to foreclose on property as another lender could come in and obtain priority ahead of them before they can crystallise their position. Now if Barclays also have charges registered at Land Registry & at Companies House, then it's a fundamentally different picture.

Mortgages over land and property would be registered by the lender at Companies House.

As they do not appear to be registered we can be assured they do not exist.

If they did exist I think we are all sure it would have been posted on here without delay!

[SIMON GARNERS 194]

I strongly suspect that the Rao family are ploughing their own capital into Rovers which is a huge commitment for them to be making. But it does mean the situation would be parlous both for them and for us if things go wrong which is why taking huge risk decisions removing both the administrative and football management of a club everybody recognised was working well looks from my perspective to be reckless.

We would quite literally be left with NOTHING if matters went t1ts up.Great.

[philipl]

Mortgages over land and property would be registered by the lender at Companies House.

As they do not appear to be registered we can be assured they do not exist.

If they did exist I think we are all sure it would have been posted on here without delay!

Go back to my earlier post tracking the previous mortgages.

As at 22 October, the club reported that there was an already existing debenture over all the assets of the club which provided security for the bank loan. The only filing at Companies House since then was the new Mortgage Security over media income for 2010/11.

The bank lending has been transferred from Rovers to Venky's London Limited and indeed Venky's London Limited has a mortgage charge registered against it on 30 November but it appears that the existing charge over assets has continued and the new mortgage is additional, not in replacement.

I would be delighted to be proved wrong in this but that is what I can see.

[67splitscreen]

Go back to my earlier post tracking the previous mortgages.

As at 22 October, the club reported that there was an already existing debenture over all the assets of the club which provided security for the bank loan. The only filing at Companies House since then was the new Mortgage Security over media income for 2010/11.

The bank lending has been transferred from Rovers to Venky's London Limited and indeed Venky's London Limited has a mortgage charge registered against it on 30 November but it appears that the existing charge over assets has continued and the new mortgage is additional, not in replacement.

I would be delighted to be proved wrong in this but that is what I can see.

Confused I am as I'm sure others are.

Original debenture from 2001/03 still in place even though the owner has changed.

New owners take over the existing borrowings and at the same time lodge another mortgage to secure the existing debt.

Then on the 4th Feb another mortgage is lodged for the Revenue this year.

So is there now a total of three charges over the assets and Revenue.

Yes/No.

[philipl]

Companies have an existance independent of who owns them. That's why you do due diligence when you buy a going concern because everything continues from the old owner to the new one.

The new Mortgage taken out in late December 2010 is actually number 11 so there has been plenty of security given and retired in the past. The key point is that the Rovers accounts dated 22 October reported that the bank borrowings were backed by debenture over all the clubs assets and as far as I can see nothing has been filed after 22 October 2010 to record that is no longer the case.

[Paul]

By popular request then..................

I want to be clear on a few things in relation to this post:

1. I am not an accountant - I'd hoped someone else would do the plain English bit

2. There is no intention to scare-monger

3. This is just how I think - that's all

4. I post this because people have asked my opinion

In late December / early January the football club, as a company, registered a mortgage or "charge" (basically the same thing) at Companies House. This is something the company is legally required to do. This mortgage or charge, and we do not know how much money is involved, is secured against all, worldwide, income relating to the broadcasting rights associated with the PL for the 2010/11 season (this one). It's exactly the same as when you or I take out a mortgage or loan - we sign over our houses until the debt is repaid. Rovers have either borrowed, or have the facility to borrow (i.e they can if they wish), money which is secured by the TV income. This is fine, it's business practice, I do not have a problem with this. I presume the maximum amount we could be discussing is however much is left of the TV income for this season.

It could be the bank simply wanted extra security. I don't know. The other interesting point is, and again I stress I think this is true, the solicitors who acted are not the usual ones. Make of that what you will. I don't know what it means.

Why then am I concerned? A number of reasons:

1. As far as I am aware from reading the accounts the club has never needed to take out such a mortgage or charge before. Previous borrowings, other than those funded by the Trust, appear to have been in the form of an overdraft, usually in the region of £12-16m. Perhaps Philip can help me here? Why do we suddenly need to borrow more cash if, as promised, Venky's are funding the club?

2. TV income is spread through the season while operating expenses, wages etc, are paid monthly. An overdraft would appear to be the cheapest method of financing the cashflow. i.e we have perhaps 3 or 4 large chunks of cash come in each year and need an overdraft facility to help ease the cashflow requirement. For example we have only one home gate receipt in the next 5-6 weeks - no money coming in.

Rovers have been spending money in the transfer window - fees and wages - RSC and Jones may be costing £125k per week or more (guestmate) between them. Both are here for six months = £3.25m in wages. On top of this other players have improved contracts etc. It is not unreasonable to think the wage bill may have increased by at least £5m recently. I am left wondering if someone forgot to think about the implications of cashflow this would cause? i.e. how are we going to pay the wages?

But hang on a minute Venky's are funding the club so money isn't a problem. In which case why the new mortgage?

3. OK all our nightmares time now. Imagine the club is relegated. Any debts we have to Barclays are covered by the TV income, so all that cash could/might go directly to Barclays, just at a time when we might need it most. End of the season arrives, Barclays see us relegated (don't forget they will have intimate knowledge of club finances) and ask for their cash back on the basis the club is no longer a good bet. What do we live on in the summer? Perhaps another loan this time secured against our parachute payments?

It has always been my understanding we have been purchased by Venky's, a reputedly very successful company, who were prepared to invest in the club. The crucial word is "invest". Borrowing money from the bank, secured against club assets is not, in my book, an "investment."

If the money is needed for cashflow purposes two questions arise. First Venky's are a reputable company and must have accountants who would forecast this need? Second if the cashfowl needed help why is not a part of the investment?

Perhaps I'm twisted but this is how I think. For me too many fans only see ££££ and think if we spent big everything is OK. The transfer window was, IMO, a complete farce, there was no £5m. Look a bit further than headline 11.00 o'clockers

[deftangel]

Have the LET picked up on this? If not, can we get them to? As this is public domain info, it is a fair question to ask.

It's not like they've been shy in answering questions up until now