[Archived] Barclays Mortgage or Charge

[broadsword]

Why don't you put something on Andy Cryer's twit-feed?

[RovertheHill]

There is a legitimate question to be asked here. I've been told several times now on here that people behind the scenes are doing their best to limit the damage - are those people able to pose this question in such a manner that it gets publicly answered?

[deftangel]

Why don't you put something on Andy Cryer's twit-feed?

I've asked the two chaps from the LET on Twitter. I would have thought they've already picked up on it from here anyhow but we'll see.

[RovertheHill]

I've asked the two chaps from the LET on Twitter. I would have thought they've already picked up on it from here anyhow but we'll see.

I followed up your tweet yesterday - no response - did you get a response?

[deftangel]

I followed up your tweet yesterday - no response - did you get a response?

I saw, thanks. And not heard anything. Cryer hasn't tweeted much and Plunkett hasn't responded. They seem to be geared up for a quiet week whilst the squad is in Dubai. A good time for some thorough investigation you might think :/

[Exiled in Toronto]

Without knowing the intent behind this move, it's impossible to know what to think of it.

Debt doesn't mean they have no money. My past employer made a billion profit a year, hundreds of millions in positive cashflow and still had an overdraft. Personally, I wondered why Venky's would even not want to keep the Trust-era overdraft. It must charge, what, 6%? I'm sure with Indian GDP growing at 10%+, they can get more than a 6% return on their working capital in their group so why take cash out of a fast-growing bsuienss to pay off soemthing that costs them less than the opportunity cost of the cash they have? Plus of course changing Rupees into sterling costs them every time they do it.

[Steve Moss]

The mortgage (or charge) is a concern but there are so many legitimate business explanations for it that I haven't stressed over it. As some have pointed out, perhaps to create an alternative to the overdraft or serve as a stop gap until ruppees become pounds. It could also be for tax and other financial reasons which I haven't a clue about.

It doesn't mean that the owners don't have the money and are piling on the debt, ala Portsmouth.

I reserve the right, however, to come unhinged if more information comes to light.

[47er]

I'm still as confused as ever. I guess if Venkys are wealthy enough it doesn't matter what their banking arrangements are does it? They can always cover the cost.

If the cost is leveraged against the club and club assets are seized, Venkys will have thrown away an enormous investment for nothing and their name will be mud world-wide. Doesn't seem likely to me. What am I missing?

[Guest roverspogges]

Not sure if I should post this but one of the Venkys lot asked to borrow a fiver from me the other week. Utter disgrace.

[Athlete]

Without knowing the intent behind this move, it's impossible to know what to think of it.

Debt doesn't mean they have no money. My past employer made a billion profit a year, hundreds of millions in positive cashflow and still had an overdraft. Personally, I wondered why Venky's would even not want to keep the Trust-era overdraft. It must charge, what, 6%? I'm sure with Indian GDP growing at 10%+, they can get more than a 6% return on their working capital in their group so why take cash out of a fast-growing bsuienss to pay off soemthing that costs them less than the opportunity cost of the cash they have? Plus of course changing Rupees into sterling costs them every time they do it.

your correct exile it doesn't make business sense so I think we should reserve judgement on the intent until more info becomes clearer

[broadsword]

I'm still as confused as ever. I guess if Venkys are wealthy enough it doesn't matter what their banking arrangements are does it? They can always cover the cost.

If the cost is leveraged against the club and club assets are seized, Venkys will have thrown away an enormous investment for nothing and their name will be mud world-wide. Doesn't seem likely to me. What am I missing?

That they didn't realise what they were getting into and now they need loan capital?

That they're going to run thew club on debt and secretly hope it somehow works out?

[dave birch]

using debt is not new, in fact it's as old as the hills.

Most companies use it to grow. Whether it works in football is another matter, but in business, it's not a problem until the debt gets too big.

[broadsword]

Thde club on its own can't service debt as it will never turn a profit.

If the facility does get used, they will either have to pay it off from another arm of their group or just leave it as-is and keep it revolving.

PS: When Venky's took over, we were told that they hadn't paid off the existing debts, they were just servicing them, so is this a mortgage in addition to the o/d we are running?

[CrazyIvan]

Companies do interesting things (some I would consider barely ethical) with debt and money owed to others. A company I used to work for was opening a number of stores around the country, they had two opening in a week. Bearing in mind that their suppliers were already supplying something like 20 stores already, the company announced that they wouldn't be paying any suppliers for a month so that they could open these two stores. The reason every supplier went along with it (even though the capital was already there)? Because they knew that the company they supplied would be selling more of their goods. As I said, barely ethical.

In this case, I can see why Venkys want to use a mortgage/charge against the TV money. They would want to avoid getting hit with the costs (and difficulty) of transfering money out of India. I suspect a lot of companies operate that way. I also wonder how much differing monetary values plays a part and trying to pick the right time to move money around between currencies must be one hell of a juggling act, especially at the level Venkys operate at. If you won the lottery and wanted to transfer £1 million into USD, how much would that transaction cost you just to complete let alone the actual loss between the buying and selling price of currency.

[dave birch]

Ivan, there's nothing "unethical" about companies pushing out payments by a month. Most companies I deal with, (and I suspect most companies do the same) usually pay after ninety days. Yep, they use their debtors like a free bank, so if you're in the loop there's no loss until someone above you goes belly up.

[CrazyIvan]

Ivan, there's nothing "unethical" about companies pushing out payments by a month. Most companies I deal with, (and I suspect most companies do the same) usually pay after ninety days. Yep, they use their debtors like a free bank, so if you're in the loop there's no loss until someone above you goes belly up.

I said barely ethical. One supplier went under.

[Al]

In my experience as a Company Secretary it is common practice for a bank to have a fixed and floating charge over the assets of a company as security against an overdraft facility, whether it is used or not. I see nothing cynical in this. It is standard practice.

[Blackburn Ender]

I've not been on board for a few days and have just read this.

It confirms many people's fears as to the future running of Rovers by someone other than the Walker Trust.

So quickly taking out a mortgage after buying the club is a worry.

It's not this season we should worry (unless we go down), it's the next or the next one after that.

Running a Premiership football club right now is gambling, pure and simple. Especially for small clubs like Rovers.

The sums - players wages & transfer fees mainly - just don't add up. John Williams spent his whole tenure at Rovers wrestling with this one.

As Philip, I think, has said Venky's were said to be investing money, not speculating with it.

One loan too far, one bad season, one bored owner. It's a fire sale.

[thenodrog]

Not sure if I should post this but one of the Venkys lot asked to borrow a fiver from me the other week. Utter disgrace.

For some brylcream was it?

[Roversider]

The need to sort out funding and sources after a takeover are usually at the forefront of a new set of owners thoughts. That is normal in business.

Also the need to have a facility to balance irregular income against irregular outflow is also sensible. It protects against not having liquid assets when you need them.

On that basis I would suggest judgement is based on what happens in practice rather than implying some potential outcome in what is a normal business decision. We all agree that we want to see Rovers run with care and without putting the club into risk. I also understand that the experience of other clubs will be contributing to apprehension.

Finally, I would echo the comments of others that potentially libellous statements are avoided, that risk increases when posters forget themselves in the heat of the moment.

[otto man]

It confirms many people's fears as to the future running of Rovers by someone other than the Walker Trust

And The Trust were doing exactly what for the club? Keeping outgoing transfer fees? Refusing to re invest in new players?

Watching us slowly sink toward the relegation zone season after season?

[RevidgeBlue]

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.

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

I mentioned this in the other thread Paul but have you thought to contact the Club for an explanation as to the existence of the new charge?

As for your comment "There was no 5m." your guesstimate as to the wages for the two loanees is in no way unreasonable and my understanding is that the two young lads cost 3.5m between them.

Thats around 6.75m straightaway even without all the improved contracts for the existing players.

[Paul]

Revidge perhaps in days gone by one might reasonably have contacted the club about the new charge and hoped for a response. Today I think it highly unlikely there would be a reply.

As for there being "no £5m" what I meant was I don't believe Venky's have provided any cash investment. Yes money has clearly been spent, how it was funded is another matter. I suspect it is debt but neither of us cam prove this, one way or the other, until the accounts ending June 2011 are published next year.

[philipl]

I think it is safe to say that for the first time, the bank can go to the Premier League and tell them to send the money direct to them and not to the club.

Hitherto they could require assets to be sold to repay the loan but now it appears they can still do that but they can also take 70% of the club's income away as well.

That puts the Rovers at a new level of risk.

Thankfully this new situation "only" covers this season.

But this raises all kinds of new questions about the nature of the new ownership.

Remember the Daily Mail report where they say they do not use debt?

[Roversider]

I think it is safe to say that for the first time, the bank can go to the Premier League and tell them to send the money direct to them and not to the club.

Hitherto they could require assets to be sold to repay the loan but now it appears they can still do that but they can also take 70% of the club's income away as well.

That puts the Rovers at a new level of risk.

Thankfully this new situation "only" covers this season.

But this raises all kinds of new questions about the nature of the new ownership.

Remember the Daily Mail report where they say they do not use debt?

I agree that in theory this puts the club at greater risk, in theory. So using basic risk management you would normally rate a risk by comparing the impact and the likelihood. Has the impact of the risk should it occur increased, yes, has the likelihood increased or decreased, we aren't in a position to comment.

Given the need to establish a short-term funding facility I fail to see how this necessarily equates to structural debt. If you have an overdraft facility that doesn't mean that you are going to use it as basic funding for the business, i.e. as a permanent overdraft. I agree of course that it may mean that.

We don't know.

My view is that we have to wait to judge this, of course the world may be ending but I guess I am not as pessimistic as you Philip. I need some more facts. However, given the opportunity, I would advise the owners that sometimes silence is best or if there is a statement in the press in respect of how the club is funded that there should be an expansion to cover the issues of long-term and short-term debt.

Your concerns are understandable and have been stated many times.