[Archived] The Rao's : We need a statement of intent for next Season.

[Athlete]

Other than the amount owed going up, what has actually changed in the last three years? All the things in bold equally applied three years ago, despite multiple warnings in that time, not least from yourself, that the precipice was imminent.

The number owed might be eye-watering to us, but it so far hasn't had the slightest impact on the owners. Wages are being paid, suppliers are being paid, pitches are being relaid. The wage bill is being cut but quite right too. Nothing goes on forever of course, but I see no tangible signs that a precipice has been reached by the owners or the Bank of India.

EIT no one knows when they'll get bored or what there plans/motives are but surely sooner or later someone in the Rao clan is going to say hey that amount owed is getting higher....or that precipice is a bit closer

That is the big worry as if it carries on even promotion won't level us off

I for one would rather them leave ASAP so the pieces can be picked up in whatever division

[roverzee]

As an accountant, it pains me to say that I think we are gazing over the precipice.

You've been saying exactly the same thing for three years. And it's as speculative now as it has been every time you've been proved wrong.

[1arC]

In a nutshell, and to try and clarify some earlier posts, accounts for year ended 30 June 2014 show:

• Rovers have creditors of £98million
  • £40million is 'external' debt including BOI
  • £58million is owed to parent company VLL - if the Raos get totally hacked off, Rovers could be history
• BOI reserve the right to take a debenture over Rovers' assets - if this happens, fasten your seatbelts

It's largely irrelevant if debt is secured or unsecured. Inability to pay debt as it becomes due leads to insolvency

.

The land security in India that BOI hold could be for either one or both of the following:

• To secure guarantees (for Rovers debt to BOI) provided from the Raos as individuals or from VHPL (Indian company regarded as controlling company of VLL) or indeed from both the Raos and VHPL
• To secure monies that the Raos have borrowed in order to increase issued share capital in VLL (keeps the football club afloat) which I understand has now increased from the £85million shown in accounts of VLL for year ended 31 March 2014 - this would be staggering if correct

I think a lot of fans are under a misapprehension that Venky's are taking all the hits and Rovers are mortgage free and risk free. Nothing could be further than reality.

As an accountant, it pains me to say that I think we are gazing over the precipice.

Hi Mercerman,

Not too sure if you know the answer to this, but if you do, it may put minds at rest or, send blood pressures racing. How is Rovers debt to Bank of India structured? Is it an overdraft, or a loan? If it is an overdraft, than I assume we pay a fee for this and interest,just like a personal or business overdraft here. Again assuming it is an overdraft, when is this due to be renegotiated? If it is a loan (Mortgage) then I assume payments will be made at certain junctures and are capital and interest over a given term, again, just like any loan or mortgage here. If these payments are up to date and provision is made to continue to do so, then fine.

I understand that the outstanding amount owed to VLL is interest free and assuming that is also an overdraft, type of arrangement, then we are ok with that, until they decide they want it back. Even then, if there is no money there to repay it, when they do want it back, what then?

I still can't get my head round what the land in India is doing as security, when Rovers don't own it, but we owe the Bank Of India £40 Million. Surely that's equivalent to me taking out a Mortgage on my next door neighbours house!

[ABBEY]

Dear FBI ..

Please head to pune.

[tomphil]

Dear FBI ..

Please head to pune.

....and check out one or two other offices in Zurich whilst your at it !

[1arC]

Dear FBI ..

Please head to pune.

I assume that's a response to taking a Mortgage out on a neighbours house? Don't you find it a bit strange though, that the Bank of India lend £40 Million to (Rovers) and secure the funds on land in India, that Rovers don't own. It is all rather strange!

[OJRovers]

"BOI reserve the right to take a debenture over Rovers' assets - if this happens, fasten your seatbelts"

Yes, this is the most worrying part.

Ewood and Brockhall are valuable assets.

When it comes to the crunch do you think the Raos are going to give up their land in India or give up Ewood/Brockhall to the BOI?

I assume that's a response to taking a Mortgage out on a neighbours house? Don't you find it a bit strange though, that the Bank of India lend £40 Million to (Rovers) and secure the funds on land in India, that Rovers don't own. It is all rather strange!

It's not uncommon if the assets are under joint control.

[1arC]

"BOI reserve the right to take a debenture over Rovers' assets - if this happens, fasten your seatbelts"

Yes, this is the most worrying part.

Ewood and Brockhall are valuable assets.

When it comes to the crunch do you think the Raos are going to give up their land in India or give up Ewood/Brockhall to the BOI?

It's not uncommon if the assets are under joint control.

How can the land in India be under joint control? The Roa family own the land and raise the funds on it. They use the funds to carry on pumping money into the football club via VLL. If the Bank of India aren't paid they would rather go after Ewood and Brockhall, than take possession of land they have a charge on in their own country?

[JHRover]

Ewood Park and Brockhall are valuable assets, but even if they were somehow seized by the Bank of India, I would imagine their total worth would be short of what they are owed. Even selling off every player wouldn't cover it.

I thought that Brockhall had numerous covenants on the land as to what it could be used for and what could be built on it. Ewood might make a supermarket or some new housing but land off Bolton Road is hardly sought after real estate.

Whatever happened to turning Ewood Park into a 'Community Asset', as was mooted a couple of years ago? Did this happen? If so this would make the land even less attractive and of less value to developers.

There must be some mechanism in place whereby the Bank of India could pursue payment from Venkys or their Indian holdings. Otherwise the Bank wouldn't continue to lend such sums of money to a loss making football club that is worth less than the loans they have provided.

[broadsword]

Other than the amount owed going up, what has actually changed in the last three years?

Income has dropped off of a cliff, FFP embargo has the potential to anchor the club into the second flight for a long time to come, the club has been out of the limelight for three years and in so doing has less utility to Venky's.

I don't think you can look at the accounts and say: "as you were".

[ABBEY]

Wonder if baz whites ass is twitching .. Hers to hoping venkys are in the Zurich scopes of the fbi

[OJRovers]

How can the land in India be under joint control?

The family own the land and they own the club.

Agreed that the bank would rather seize the land than the football club. But if it came down to that, you would bet that the family would try to get them to take the club's assets rather than their family heirlooms.

[ABBEY]

The only people who know the truth are the slum dogs themselves and I bet even they don't know it either.

[1arC]

The family own the land and they own the club.

Agreed that the bank would rather seize the land than the football club. But if it came down to that, you would bet that the family would try to get them to take the club's assets rather than their family heirlooms.

Yeah I guess you are right. Hard to put a value on the ground and I think the asset of community value restriction was out on it anyway, so that would decrease the value. If Brochall is worth very much, I would be surprised, so I think the Bank of India, may well have a problem.

[chaddyrovers]

Wont the Bank of India only secure assets in India and not overseas?

Thats was my understanding of the funding situation from one of the BRFCS podcast

[1arC]

Wont the Bank of India only secure assets in India and not overseas?

Thats was my understanding of the funding situation from one of the BRFCS podcast

I am pretty sure you are correct there. What some people are saying is that a debenture will be taken out on Ewood and Brockhall. Why the Bank of India would do that is beyond me, as I think a more straight forward way would be to call in and sell the security, which is the land in India.

[perthblue02]

I am pretty sure you are correct there. What some people are saying is that a debenture will be taken out on Ewood and Brockhall. Why the Bank of India would do that is beyond me, as I think a more straight forward way would be to call in and sell the security, which is the land in India.

The Bank of India do have a UK operation so in theory it could be transfered. What also is difficult to find info on is the financial situation regarding Venky's London Ltd other investment Hitlab Inc,

Let's just hope that Desai and the Rao's financial advisor''s are not like their just like a family member ones

[Mercer]

You've been saying exactly the same thing for three years. And it's as speculative now as it has been every time you've been proved wrong.

Finance in football sometimes defies logic, however, the Raos / Rovers' situation is a most peculiar situation - make of that what you will.

[phili]

One thing I have lost track of is actual cashflow - can any of our real accountants tell me what was the net cash put into the business in the last set of accounts?

As loan was taken out last summer based on parachute payments for the 2015/2016 season to cover losses this season I would say the summer will be interesting.

Without any form of large income for 2015-2016 we will have season ticket sales, sponsorship, match day income and a few other bits and pieces to survive on. So I would say we'll have a negative cashflow of around £500k+ per week assuming that we have managed to reduce the wage budget down to around £22m. As our income for 2015/2016 season will be around £8-9m.

[Mercer]

Hi Mercerman,

Not too sure if you know the answer to this, but if you do, it may put minds at rest or, send blood pressures racing. How is Rovers debt to Bank of India structured? Is it an overdraft, or a loan? If it is an overdraft, than I assume we pay a fee for this and interest,just like a personal or business overdraft here. Again assuming it is an overdraft, when is this due to be renegotiated? If it is a loan (Mortgage) then I assume payments will be made at certain junctures and are capital and interest over a given term, again, just like any loan or mortgage here. If these payments are up to date and provision is made to continue to do so, then fine.

I understand that the outstanding amount owed to VLL is interest free and assuming that is also an overdraft, type of arrangement, then we are ok with that, until they decide they want it back. Even then, if there is no money there to repay it, when they do want it back, what then?

I still can't get my head round what the land in India is doing as security, when Rovers don't own it, but we owe the Bank Of India £40 Million. Surely that's equivalent to me taking out a Mortgage on my next door neighbours house!

My understanding is that BOI's overdraft facility is reviewed / negotiated annually in November. Interest rate on the facility that ran to November 2014 was 2.65% over 6month GBP LIBOR (LIBOR is the average interbank interest rate at which a number of banks on London's money market will lend to one another) - interest rate for that facility will therefore most likely have been sub 4%.

'Other Loans' are more prescriptive and secured against the 'parachute' fund, however, interest rate is a meaty 9.5%.

The accounts tell us that the loans from VLL are interest free with no fixed day for repayment. We are therefore reliant on how Desai feels when she wakes up each morning !

We don't owe BOI £40million - that is the sum of all external creditors as at June 2014. However, it may be that the Raos owe BOI up to £100million if they borrowed from BOI in order to fund issued share capital (hence security on Indian assets).

As regards the secured land in India, this almost certainly has nothing to do directly with Rovers and forms part of a guarantee from either the Raos as individuals or from VHPL or indeed from both in relation to:

• Rovers debt to BOI and / or monies that the Raos have borrowed in order to increase issued share capital in VLL (keeps the football club afloat); if the latter, would be staggering and of even more concern

[Mercer]

How can the land in India be under joint control? The Roa family own the land and raise the funds on it. They use the funds to carry on pumping money into the football club via VLL. If the Bank of India aren't paid they would rather go after Ewood and Brockhall, than take possession of land they have a charge on in their own country?

In a normal default situation, the lender will pursue its monies, interest (including default penalties) and costs directly through the borrower. Only when all avenues have been exhausted with the borrower (ultimately at the end of administration or liquidation) will the lender look to enforce its third party guarantees (secured or otherwise).

[Mercer]

Wont the Bank of India only secure assets in India and not overseas?

Thats was my understanding of the funding situation from one of the BRFCS podcast

It is almost certain that the secured land is part of guarantees provided by the Raos / VHPL for either / or / or both monies owed by Rovers to BOI / monies lent to the Raos in order to increase issued share capital in VLL.

The accounts also tell you that BOI reserves the right to take a debenture (fixed and floating charges) over Rovers' assets. This blows a hole in your understanding and comfort zone !

Also, remember, BOI has a UK operation.

[Exiled in Toronto]

I found this blog from an Indian stock picker on the Venky's Group. Hard to follow in parts and the bit on BRFC will inflame passions, but it does has some interesting nuggets:

- turnover of the entire group is around 600 million quid a year.

- it's a vertically integrated company, so what goes on is heavily masked by transfer payments between the various entities. It's a very common practice though and is how Amazon and Starbucks avoid UK tax.

- the family-owned holding group sits on an invested cashpile and a land bank even while having debt, somewhat analogous to the "if they are so rich why have they taken out debt?" question.

- he rates them as a (risky) buy!

http://oscillationss.blogspot.ca/2015/05/venkys-india-ltd-high-dose-of-protein.html

[1arC]

Thanks for the reply Mercerman. I was obviously asking for myself, but also in the hope that other members of the site were put more in the picture too. I suspect the higher rate of interest for the parachute monies, must now be either full repaid, or nearly repaid (maybe from more borrowed money) as the parachute payments are all but now gone.

Although a large amount of money would remain to repay BOI if this is still linked to LIBOR and the margin doesn't changed, that rate isn't bad. I guess the bank could say no to extending that in November and we then have trouble. The money owed to Venky's at 0% just sits there and I guess we have to hope Mrs D remains in a good mood.

[tomphil]

I found this blog from an Indian stock picker on the Venky's Group. Hard to follow in parts and the bit on BRFC will inflame passions, but it does has some interesting nuggets:

- turnover of the entire group is around 600 million quid a year.

- it's a vertically integrated company, so what goes on is heavily masked by transfer payments between the various entities. It's a very common practice though and is how Amazon and Starbucks avoid UK tax.

- the family-owned holding group sits on an invested cashpile and a land bank even while having debt, somewhat analogous to the "if they are so rich why have they taken out debt?" question.

- he rates them as a (risky) buy!

http://oscillationss.blogspot.ca/2015/05/venkys-india-ltd-high-dose-of-protein.html

Interesting stuff, well done for digging it out. If I didn't dislike them so much I might even buy some shares