[Archived] Rovers' Debt

[Steve Kean's Hypnotoad]

So after my re-starting the club idea went down like a lead balloon, I began thinking “ok, why don’t I join in with the protests then”. The main reason is, even if they wanted to, I can’t see Venkys being able to find a serious, credible buyer. And the reason for that is our colossal debt. Last I heard it was around the £100m mark.

Debt is all relative. If I owed £10 million to a bank, the bailiffs would be knocking down my door. If Man Utd owed the same bank £10 million, they’d be taking them out to a Michellin starred restaurant hoping to extend the credit. So the important factor about Rovers debt is the ability of the club to service it. I’m not sure of the exact amount of our annual revenue but I’m pretty sure it’s between £5-10m. Which makes our £100 million debt an absolute nightmare in my opinion.

So will whoever takes us over basically take on the debt, and whatever interest is due on it? Not sure what normal rates are for large company debts, maybe 2-3%? Even so that’s £2-3m per year, or about a third of Rovers current revenue. Why anyone would want to service Rovers debt out of their own pocket is beyond me, Jack Walkers come along about once a millennium rather than once a decade.

So if the new owners instead intend to service the debt using club revenue rather than their own money, firstly its gonna take a very, very, very long time to pay it off. Secondly there’s gonna be exactly the same fire sale of players and decimation of wage budget that we’ve had under Venkys for the same very, very, very long time. There has to be, the interest plus reducing it will cost the club a huge chunk of its revenue. So the only significant thing that will change is we’ll get better managers picked by football people rather than corrupt agencies, but even then probably not too much better given the financial situation of the club.

I’m no expert so may well be reading all that wrong, hopefully I am, hopefully there’s some financial experts on the board who can tell me why it ain’t all that bad. But it looks to me like Rovers are now destined to effectively decades of crushing “austerity” no matter who owns us.

[tomphil]

We could hope that eventually BOI just claims whatever assets of V's it's secured against in India after seeing Rovers continual slide and realising it's the only way they'll get their cash back.

[K-Hod]

I'm sure some of the more clue up folk on here with accounting backgrounds (Mercerman, Andy Neil, PhilipL?) could put this into a much better context than me, but as I recall, wasn't it the case that most of the money is owed to Venky's rather than the Bank of India? I may well have that completely wrong of course!

[47er]

SKH, your post about starting a new club will resonate one day. No-one wants it but many would prefer it to oblivion.

It would be an exciting venture and Rovers fans would come on board in the end. I really believe that.

[Claytons Left Boot]

Bank of England Base Rate currently 0.25%, borrowing £100m on overdraft say anywhere round 1.75% to 3.00% above Base Rate, so it's safe to say interest accrual on the debt will be somewhere around £2-3m per annum.

All football clubs lose money, bar one or two and Rovers are no exception. Even with stringent cost cutting and without trying to reduce that overdraft from our own turnover, we will lose money every year. So, unless Venky's dip their hands into their pockets to reduce the overdraft, it will continue to rise.

My own feeling is that they will write off the debt and sell us for a nominal amount. The way things are going, we'll be a third or fourth tier team and be lucky to get £10m, but that's their problem.

All the more reason to ramp up the protests and rid ourselves of them asap.

[koi]

But how does Jock McJockface get his money back from deal? How will Crescendo get out of the deal? If it was 100% Venks I'm sure they'd have cut and run years a go.

All alleged by the way - I can see you guests cruising the board....

[JHRover]

In the last accounts around £20 million was owed to the Bank of India, with the remaining circa £80 million owed to Venkys India.

If they have been using the money from player sales to pay off the Bank loan (or the bank have been taking the money without Venkys having a choice) then the amount received in transfer fees exceeds the total Bank debt.

If they have been using the money received to pay off the debt then I would expect to see a fall in the debt figure.

Losses last season were around the £17 million mark, with Shaw saying they were due to fall further once pay offs and top end salaries were out of the system. Since then we've also got Rhodes' wage off the books. However our income has probably dropped by about £8 million due to the ending of parachute money.

Given the level of money received (more than £25 million) then either our debt level should fall by that figure, or we should be breaking even/making a profit in the next set of accounts.

If, however, we post another major loss and our debt stays the same or increases then its time to start thinking about where the money has gone.

[Claytons Left Boot]

SKH, your post about starting a new club will resonate one day. No-one wants it but many would prefer it to oblivion.

It would be an exciting venture and Rovers fans would come on board in the end. I really believe that.

That's the key point - preferring it to oblivion. If Blackburn Rovers as we know it 'went bang' and ceased to exist thereafter, well yes, I would hope everyone would get behind a phoenix club. I certainly would.

[glen9mullan]

My understanding is some of the debt is secured through the Bank of India on Land owned by the Rao's

However to has been alleged, over the last couple of months from people with greater knowledge of this arrangement than I, that the land the debt is secured against was the Rao's fathers which he basically got for nothing decades ago, through some old Bi-Law as did many Indian people at this time.

However the Indian government are now kicking up a storm, suggesting that the title of the land is not safe and are now in the realms of challenging the ownership of the land, as it may not be the Rao's land to use as security. Like many countries, people are falling foul all the time in land registry and if this is true, which I have no doubt to not believe the source of this information, it could open up a very good reason, why all funding is on stop for players etc, If the Venky's now need to find money or another asset to offer up to the bank of India as security?

[tomphil]

I'm sure some of the more clue up folk on here with accounting backgrounds (Mercerman, Andy Neil, PhilipL?) could put this into a much better context than me, but as I recall, wasn't it the case that most of the money is owed to Venky's rather than the Bank of India? I may well have that completely wrong of course!

It's widely thought that the money V's themselves have been using to fund the club is borrowed money against land owned by them.

As Glen has pointed out there has been rumour for quite a while that has now hit the buffers as well.

[Lancaster Rover]

I think investors will be waiting for us to go into administration, it looks an inevitability at this point. Why take on an unserviceable debt when you could potentially pick it up for peanuts down the line

[Claytons Left Boot]

Given the level of money received (more than £25 million) then either our debt level should fall by that figure, or we should be breaking even/making a profit in the next set of accounts.

.

I admire your optimism JHR but, if we ever post a profit in the foreseeable future, especially with the dark forces (allegedly) still around, I will go and eat hay with the donkeys.

[broadsword]

It's widely thought that the money V's themselves have been using to fund the club is borrowed money against land owned by them.

As Glen has pointed out there has been rumour for quite a while that has now hit the buffers as well.

Maybe Madame could go on the game. That should plug a gaping hole.

In the finances.

[tomphil]

But how does Jock McJockface get his money back from deal? How will Crescendo get out of the deal? If it was 100% Venks I'm sure they'd have cut and run years a go.

All alleged by the way - I can see you guests cruising the board....

That's the crux of it really as long as it rumbles on those % partners continue to benefit from the scheme regardless of the mounting debt, who's it is or where it's from. Hence their constant bad advice or covering over tactics.

[Gav]

That's the key point - preferring it to oblivion. If Blackburn Rovers as we know it 'went bang' and ceased to exist thereafter, well yes, I would hope everyone would get behind a phoenix club. I certainly would.

I'd be behind anything Venky free.

I'd be very surprised if this lot paid of the debt and because fans have been sat on there hands waiting for Venkys to get it right , its becoming un-servicable by the day.

The end game is probably picking up the club for £1, and a slight name change.

Been saying for 3 seasons now, give me that any day of the week over what we have now.

[tomphil]

Maybe Madame could go on the game. That should plug a gaping hole.

In the finances.

First customer a nice English tourist by the name of Abbey ......

[yoda]

The 80 million + owed to the Venky's is in shares, i.e. a piece of paper that they created, it is worthless. It is the external debt that has to be taken care of.

[tomphil]

Well the overdraft to BOI showed on the accounts should be well taken care of by now.

[perthblue02]

Well the overdraft to BOI showed on the accounts should be well taken care of by now.

It is rumoured that the Indian Government are currently looking into amounts of land around Pune that was given away some 30 years ago and the legal entitlement to it.

Lets just hope non of the land in question is land in hock to one of the Indian banks and as any bearing on Rovers, or it just could explain the projects turn of direction.

[Kamy100]

That is my understanding as well Perth.

The land was given to the business community when Pune was first established as a business hub from which Mr Venky benefited. At the time the land was worthless but now all of it combined is worth billions of rupees. From what I have heard is that the Indian government are looking for this land to be reclaimed under some local laws as it wasn't ever officially endorsed by the central government.

[darrenrover]

So after my re-starting the club idea went down like a lead balloon, I began thinking “ok, why don’t I join in with the protests then”. The main reason is, even if they wanted to, I can’t see Venkys being able to find a serious, credible buyer. And the reason for that is our colossal debt. Last I heard it was around the £100m mark.

Debt is all relative. If I owed £10 million to a bank, the bailiffs would be knocking down my door. If Man Utd owed the same bank £10 million, they’d be taking them out to a Michellin starred restaurant hoping to extend the credit. So the important factor about Rovers debt is the ability of the club to service it. I’m not sure of the exact amount of our annual revenue but I’m pretty sure it’s between £5-10m. Which makes our £100 million debt an absolute nightmare in my opinion.

So will whoever takes us over basically take on the debt, and whatever interest is due on it? Not sure what normal rates are for large company debts, maybe 2-3%? Even so that’s £2-3m per year, or about a third of Rovers current revenue. Why anyone would want to service Rovers debt out of their own pocket is beyond me, Jack Walkers come along about once a millennium rather than once a decade.

So if the new owners instead intend to service the debt using club revenue rather than their own money, firstly its gonna take a very, very, very long time to pay it off. Secondly there’s gonna be exactly the same fire sale of players and decimation of wage budget that we’ve had under Venkys for the same very, very, very long time. There has to be, the interest plus reducing it will cost the club a huge chunk of its revenue. So the only significant thing that will change is we’ll get better managers picked by football people rather than corrupt agencies, but even then probably not too much better given the financial situation of the club.

I’m no expert so may well be reading all that wrong, hopefully I am, hopefully there’s some financial experts on the board who can tell me why it ain’t all that bad. But it looks to me like Rovers are now destined to effectively decades of crushing “austerity” no matter who owns us.

What's Eddie Davies' net worth and how did he then manage to write off a £170 million debt?

[stuwilky]

Given the level of money received (more than £25 million) then either our debt level should fall by that figure, or we should be breaking even/making a profit in the next set of accounts.

We continue to make multi million pound monthly losses though - so any profit from player trading offsets that ongoing loss first and foremost before even being looked at for debt repayments.

You dont need to be an accountant to take one look at ours accounts and realise we're not in the best of health financially!

[Iceman]

Good business decisions leads to success, bad business decisions leads to failure.

[Ribble Rover]

What's Eddie Davies' net worth and how did he then manage to write off a £170 million debt?

He allowed them to just pay him a fraction of the debt, I think 15m was the amount he was paid back. Nice bit of coin back for him and the club is relieved of its major problem. Happy Days for Notlob

[AJW]

That is my understanding as well Perth.

The land was given to the business community when Pune was first established as a business hub from which Mr Venky benefited. At the time the land was worthless but now all of it combined is worth billions of rupees. From what I have heard is that the Indian government are looking for this land to be reclaimed under some local laws as it wasn't ever officially endorsed by the central government.

. So the land against which Rovers debt is secured , may not belong to Venkys ...should we be worried ?