[Archived] Club Finance Stuff

[awhom111]

Companies House just posted this today:

FFP settlement related?

[Wing Wizard Windy Miller]

I assume that is the conversion that got us out of the embargo?

[J*B]

Theres the way out the embargo then. Theoretically we now must be borderline, Lambert has said loans only this window. Immediately sounds as if a 1m signing will put us back in, so a 1m signing becomes a 2m signing as they'd have to write off another 1m to spend 1m.

[Mercer]

_{Spot on - when everything comes to light, I think you will find this to be the key element.}

_{Would think folk will also be surprised at how relatively small the number is likely to be - IMV, £millions that could be counted on one hand.}

No surprise either to the methodology or the relatively small amount involved.

[Wing Wizard Windy Miller]

Does this mean they would need to convert further debt in order to free up transfer funds - or does this put us back in 'trading club territory' ie we can spend what we get in?

[JHRover]

Leeds had their embargo lifted in March/April this year in time for the summer transfer window. They then went out and spent an estimated £5 million on Chris Wood and Stuart Dallas, not to mention their presumably considerable wages. Leeds haven't gone straight back under an embargo.

If Venkys are determined to spend there are ways to do it. The likes of Derby, Middlesbrough, Leeds, Sheffield Wednesday, Wolves, QPR, Fulham and Reading have all spent considerable amounts in the last couple of transfer windows yet none have been embargoed as yet.

[patrickvalery]

The key to this ffp is surely not the fact we might go back in to an embargo, but more the notion that by the time the next accounts are submitted there may not even be ffp. The club can't continue to operate like this all the time. They must be confident the whole thing will be scrapped.

[Neal]

Hope we continue to be careful on spending personally. If we're goings-on invest then it should be on players under 25. Should be closely looking-glass the market in leagues 1 & 2.

[T J Hooker]

is there any reason they couldnt have gone this route to get us out of the embargo during the summer(or earlier)?

[den]

I'm still waiting for someone to clarify how we got out of the embargo anyway. It's about losses, not debt - and the losses were way, way above what was allowed. The owners putting in a lump sum would reduce the losses for that one period, not for ever.

[Pedro]

I'm still waiting for someone to clarify how we got out of the embargo anyway. It's about losses, not debt - and the losses were way, way above what was allowed. The owners putting in a lump sum would reduce the losses for that one period, not for ever.

Maybe as a debt the interest charged would be offset against any profit, as it is converted to shares we wouldn't have to do this. The amount of % against £3m though wouldn't be colossal (100 - 300k PA at a guess) Might be that we are cost cutting right across the board and every little bit of debt restructured in a much more sensible manner could equate to millions in savings.

I personally think that the V's appointment of Rob Kelly and Alan Irvine - the guys at Rovers during our best period of Youth development (recent years) signifies the way in which they want to grow the business. I'd be more than happy with that.

[Mike E]

I'm still waiting for someone to clarify how we got out of the embargo anyway. It's about losses, not debt - and the losses were way, way above what was allowed. The owners putting in a lump sum would reduce the losses for that one period, not for ever.

I spoke to Shaw after the tea party. He said that converting some debt into shares turned that amount into income.

My understanding of what he said was that if you have 100m debt and convert 5m into shares, you have 95m debt. The 5m reduction of debt counts as income for thus years accounts, meaning 5m less in losses.

[Amo]

Make hay while the sun is shining. Let's get all our business done and take the hit from FFP.

[DavidMailsTightPerm]

Thought the new rules were losses over a three year period - so not likely to immediately go back into embargo if spend too much.

[philipl]

I spoke to Shaw after the tea party. He said that converting some debt into shares turned that amount into income.

My understanding of what he said was that if you have 100m debt and convert 5m into shares, you have 95m debt. The 5m reduction of debt counts as income for thus years accounts, meaning 5m less in losses.

Anything is possible in football accounting but ordinarily converting shareholder debt into shares is purely a balance sheet item and does not feature in the income statement.

[OJRovers]

I spoke to Shaw after the tea party. He said that converting some debt into shares turned that amount into income.

My understanding of what he said was that if you have 100m debt and convert 5m into shares, you have 95m debt. The 5m reduction of debt counts as income for thus years accounts, meaning 5m less in losses.

Crazy rules. The 'debt capitalisation = income' must've been in the small print of FFP somewhere. Also begs the question why we didn't do it earlier?

[Tom]

Anything is possible in football accounting but ordinarily converting shareholder debt into shares is purely a balance sheet item and does not feature in the income statement.

There's a fair chance that Derek doesn't actually understand what's happened

[TBTF]

Anything is possible in football accounting but ordinarily converting shareholder debt into shares is purely a balance sheet item and does not feature in the income statement.

Exactly. Farcical rules. Moving Debt to equity has zero effect on the losses so why were we ever in an embargo if it was only ever a case of a simple conversion of this debt into equity?? In reality they must be so deep into this club that the loans would have to written off as worthless anyway (just like Bolton).They will never ever get repaid unless by some miracle we get to the Prem and it can be sold for big bucks based on the Prem riches .

I am staggered that converting such a small sum (relatively speaking) is enough to put the whole thing away. I thought they would have converted £20million at least.

[philipl]

Exactly. Farcical rules. Moving Debt to equity has zero effect on the losses so why were we ever in an embargo if it was only ever a case of a simple conversion of this debt into equity?? In reality they must be so deep into this club that the loans would have to written off as worthless anyway (just like Bolton).They will never ever get repaid unless by some miracle we get to the Prem and it can be sold for big bucks based on the Prem riches .

I am staggered that converting such a small sum (relatively speaking) is enough to put the whole thing away. I thought they would have converted £20million at least.

Actually this particular filing is a straight shareholder debt cancellation so it will reduce losses by £3m and can be done unilaterally by the majority shareholder.

There would be a separate conversion of debt to equity in process based on what was said at the time the embargo was lifted. I guess this will be proposed to the AGM for members to vote on.

[TBTF]

Actually this particular filing is a straight shareholder debt cancellation so it will reduce losses by £3m and can be done unilaterally by the majority shareholder.

There would be a separate conversion of debt to equity in process based on what was said at the time the embargo was lifted. I guess this will be proposed to the AGM for members to vote on.

Thanks for clarifying Philipl. Does it mean its like buying something that you need for your business and is therefore an item of expenditure which the seller then says you can have it without paying which thus reduces your costs?

Sorry my knowledge of accounting is a bit .....you know!

Still looks a small amount even so.

[Mike E]

Before you jump down his throat it may just be that I misunderstood what he said.

[bob fleming]

I spoke to Shaw after the tea party. He said that converting some debt into shares turned that amount into income.

My understanding of what he said was that if you have 100m debt and convert 5m into shares, you have 95m debt. The 5m reduction of debt counts as income for thus years accounts, meaning 5m less in losses.

Utter nonsense! So you may as well go out and spend £200m every other season in that case. Just reduce it now and again. Surely that can't be right?!

There's a fair chance that Derek doesn't actually understand what's happened

Ah! Sorry, ignore me.

Then again FFP has looked after Bolton so very very well. The Football League should be extremely proud of themselves. Anythings possible.

[47er]

Hope we continue to be careful on spending personally. If we're goings-on invest then it should be on players under 25. Should be closely looking-glass the market in leagues 1 & 2.

Yes! Said this 5 minutes ago in another thread!

[JAL]

Hope we continue to be careful on spending personally. If we're goings-on invest then it should be on players under 25. Should be closely looking-glass the market in leagues 1 & 2.

Rovers should be looking only at players who are better than this league, if they come from there fair enough, but age should not play any part.

[K-Hod]

Rovers should be looking only at players who are better than this league, if they come from there fair enough, but age should not play any part.

As Paul Lambert has been promoted out of this division before, I think I might just trust his judgment....