[Archived] If we go into administration...

[K-Hod]

11 hours ago, A cup of beans said:

Who was peddling the lines?

Commentary team.

[Brian-Potter]

The potential problem that stands out with any administration is that the bulk of the clubs debt is owed to the owners (well technically Venkys India Ltd) via Venkys London Ltd. Therefore there would be little benefit for the owners to place us into administration as this would impact directly upon them and there core business. Although you could argue that they are never going to get that money back it does however still appear as an asset on their balance sheet. There is then a knock on from this in that if a third party tried to force administration again the owners are unlikely let this happen due to the reason mentioned previously. Especially when we consider that the amount of external debt is relatively low and when backed into a corner they could easily raise funds to stave this off. Take into account that Venkys India Ltd looks set to break the £1bn barrier in terms of turnover for the current year with projected net profit of circa £200m (and yes I am talking pounds not rupees!) then the only reason we would enter admin is if the owners chose to let it happen and wanted out, bearing in mind that there are supposedly parties interested in buying the club then they would explore that route for exit rather than administration. 

On a side note I have quickly analysed the latest accounts for Venkys India (not easy as things are done differently than here) and as stated by another poster they have a number of fixed charge loans outstanding with various Indian Banks. These are all secured on land, property and assets based in India and the bulk of these are to fund expansion and working capital. The amounts borrowed are at a favourable interest rate and are in no way excessive when related to the company's performance.

Incompetent with no understanding of football or regard for our club, or the damage they have done to it - without doubt!

Idiots with no business acumen and short of money - I'm not so sure!

As much as I hate to say it, and I really hope I'm wrong, I think we are stuck with them. 

[47er]

Wouldn't we be put into administration by the football authorities if wages aren't paid?or suppliers or the Inland Revenue if bills are overdue?

You're right about owners not putting us in re their own money but these won't be the only debts if Venkys can only meet them by more borrowing? There must be a limit to that but the bills keep coming.

[JHRover]

The Inland Revenue could issue a Winding Up Petition as they have with various clubs in recent years over unpaid tax. However these have happened regularly at other clubs, the most recent perhaps was Bolton last season when they would have had to enter administration had Houldsworth/Anderson not stepped in and agreed to settle the tax bill.

So if things got so bad that Venkys weren't paying the tax bill then it could get to a point where a change in ownership could be forced by a 3rd party, but before then they would have ample time to settle things themselves and maintain control of the operation. Plus there's no evidence to suggest so far that there has ever been an issue with paying tax/wages.

[tomphil]

57 minutes ago, Brian-Potter said:

The potential problem that stands out with any administration is that the bulk of the clubs debt is owed to the owners (well technically Venkys India Ltd) via Venkys London Ltd. Therefore there would be little benefit for the owners to place us into administration as this would impact directly upon them and there core business. Although you could argue that they are never going to get that money back it does however still appear as an asset on their balance sheet. There is then a knock on from this in that if a third party tried to force administration again the owners are unlikely let this happen due to the reason mentioned previously. Especially when we consider that the amount of external debt is relatively low and when backed into a corner they could easily raise funds to stave this off. Take into account that Venkys India Ltd looks set to break the £1bn barrier in terms of turnover for the current year with projected net profit of circa £200m (and yes I am talking pounds not rupees!) then the only reason we would enter admin is if the owners chose to let it happen and wanted out, bearing in mind that there are supposedly parties interested in buying the club then they would explore that route for exit rather than administration. 

On a side note I have quickly analysed the latest accounts for Venkys India (not easy as things are done differently than here) and as stated by another poster they have a number of fixed charge loans outstanding with various Indian Banks. These are all secured on land, property and assets based in India and the bulk of these are to fund expansion and working capital. The amounts borrowed are at a favourable interest rate and are in no way excessive when related to the company's performance.

Incompetent with no understanding of football or regard for our club, or the damage they have done to it - without doubt!

Idiots with no business acumen and short of money - I'm not so sure!

As much as I hate to say it, and I really hope I'm wrong, I think we are stuck with them. 

Whilst all that is probably bang on there might be a twist to it if indeed the head woman has withdrawn to the background and along with that the support of the main corporation. That leaves us at the mercy of the Indian bank who appear to have slammed their door shut as well so we come down to Mr Bling scrabbling around to provide finance to keep it going. Question is can he provide that ?

[Brian-Potter]

JHRover is quite correct, as it stands it would appear that the club is meeting its financial obligations as they fall due and there is nothing to suggest otherwise (bar the usual unfounded rumour mill of course). The accounts show that some of its obligations are being met by short term finance arrangements, however the key thing at present here is that the repayment terms of these arrangements are also being adhered to. 

The usual bearer of winding up orders is the inland revenune and I can find nothing to suggest that there are any issues on this front at the present time. Finance companies are much less likely to issue winding up orders, and even if the club defaulted on its repayments they would more likely go down the route of re-negotiating terms rather than winding up orders.

I am not saying that we won't go into admin, just that if we do it will be the owners choice to allow this to happen and I'm not sure that they will.

 

[Dunnfc]

The context of administration to the football club exists in quite an unusual form from those of a normal business. Firstly there is the football creditors ruling which is consistent with the actual “Ownership Test”. In the case of Blackburn if either VLL or BRFC fell into administration the other would likely go too resulting in the fact nor Venkys or connections to them could buy the club back and pass the ownership ruling. Now this has been done before with Coventry and Leeds but the football league could not distinguish who owned the BVI entity purchasing Leeds whom mysteriously appointed Ken Bates to act nor whom owed Avro purchasing Coventry out of admin.

Footballing administrations are allegedly on a parri passu basis resulting in even terms for all securities holders and creditors however there has been instances such as the old Wimbledon failing to meet this requirement with HMRC whom under the enterprise act (2002?) I think it is called and applies to most business rank HMRC and tax obligations as a preferential creditor therefore reducing the terms of the ordinary creditors.

To comply with the football creditors ruling all settlements to preferential creditors results in payments within the football circle so payments of wages to players and ticket monies owed to away teams etc. The FA actually were awarded a ruling where this remains preferential to any HMRC claim. This rule itself ranks higher as the footballing rule is equal measure to the parri passu basis and the anti-deprevation rule which ultimately means throughout an administration or insolvency the enterprise assets so in Blackburn’s case could be Ewood Brockhall can be used/sold to meet creditors’ claims. This is why it’s important to have ACV’s on everything and restricting it’s uses for sport only as it narrows down the market of a purchaser i.e it gets sold to other clubs or in turn it’s sold to a party and usually leased back.

So the subject of local pie sellers i.e the trade creditors lie further down the priority list for payment upon in administration. Once the football creditors rule has been applied, players are entitled to receive 100% of monies owed to them. When all transfer fees have also been paid in full, there may be little money remaining to pay other unsecured creditors. Suppliers, local businesses that have dealings with the club, charities and HMRC, are among those who lose out because of the rule - generally due to the high salaries paid to players.

Now if we were to go into administration then firstly we’d have to either engage or appoint one ourselves which can be a process of around 14 days but in the context of football this has usually been simmering in the background and it’s just formalised and announced to the media and papers filed at court. OR the club receives a winding up notice which can come from a supplier or HMRC and is usually for a debt of anything over £700. It is illegal for the named directors of an institution or company to knowingly continue to trade whilst in the knowledge of being insolvent. It’s also illegal to knowingly trade insolvently or have no money and switch assets to other companies.

Now there are two main scenarios I would say what could be played out here so these are:

A)

Blackburn has very minimal trade creditors in all fairness certainly at the moment of the last accounts was something like around 7.5 million including the taxes and social securities owed or falling due. The 87.5 million was debt owed to the parent company whom in this case would have their own administrator and become a creditor. Interestingly enough I’ve pulled together a table of fixed charges on what’s owed by VHPL to banks which when you take the asset value of the debt of the club to achieve usually fair evaluation/method of value on something is around 20k difference on 70+ million. I have the theory VHPL at this point would owe the bank and therefore whilst the bank would be in the same positon but rank below the footballing rule but higher than HMRC wouldn’t bother with club assets but those secured by the fixed charges on whatever they are against VHPL to claw back the 87.5 million owed.

Once the sniff of admin comes the bank in the accounts (SBOI) reserve the right to place at any time a fixed or floating charge on the club, now the overdraft of 14 million is something I think would see them put a charge on rovers as I don’t think the overdraft is secured by anything in VHPL as overdrafts are usually a form of unsecured borrowing similar to a small private loan you and I might take out but this is not from the accounts specified so in theory it could very well happen. If it does we purchase the assets and goodwill etc for what I can see would be the value of the overdraft and trade creditors or whatever the admin is likely to accept in the p to the £ range.

If this is true the bank becomes the main creditor and chooses who to appoint to oversee the administration and calls the shots. This is why I think they are hanging onto it because in any scenario this and below it looks like chances of a return in admin are zilch, zip etc.

B

Balaji actually funded the 87.5 million himself meaning he will have the creditor’s vote (more than 75% of debt owed to big creditor) and not the bank and he controls what happens to the assets and whether he accepts to actually exit administration via CVA, he will also get to appoint before any court action brought against his own administrator. The football league and FA rulings which I’ve queried denote that the only way out of administration is via CVA (Company Voluntary Agreement). Again it’s imperative we do all we can to corner the market where assets could be sold as it would result in meaning an empty or limited pot for creditors and not the 35p or whatever has been suggested as a rule. Balaji and administrator in this case dictates the swing and the chances of liquidation increase.

The reason I queried the trade creditors ruling is that it doesn’t specify anything about being preferential or secured and we currently have no charges on the club registered so in this case as long as we oblige with the parri passu form we could technically satisfy the “trade” creditors rule i.e the 7.5 million being repaid in full as a new parent company. By purchasing the trade debt (fair value of club) we could potentially acquire from the administrator the club along with its chattel, goodwill and namely if the FA can get back and confirm the goldenshare if it is still in the name of the football club. We would be purchasing it for the 7.5million under the new parent company as it would be the administrators decision to achieve what it can and allow the business i.e the football club to survive and exit via cva. This ultimately meaning we satisfy the definition of reimbursing the trade creditors leaving the preferential creditor i.e Balaji behind as the administrator sells to us.

Now that sounds great but depending on who he appoints is the swing, the game changer, as obviously he will be doing his best to achieve max returns for Balaji and even more so if he’s been appointed by him and likes him. Also the FA could confirm that the trade creditors rule means all creditors and we'd need to cough probably 35% of the value of debt to purchase and exit via CVA.

Average admin costs per week in football is around 80k by the way.

Then we have the NEWCO option but until those two above play out and possibly something else I'm looking at happen then let's not go there.

[Brian-Potter]

If that is the case Tomphil then yes you are right. If Mrs Desai has closed the door and the VH Group will provide no more funding then we are in a perilous position.

The thing is that there is no actual evidence that this is the case, and indeed the loans owed to VLL have all been provided via VH Group. There is nothing that points to Balaji putting in any money directly from his own pocket.

The problem we face is that we are in a fairly unique position in terms of ownership and nobody has any clue what their true agenda or motive is. What we do know is that they are deep in to this to the tune of £100m and I can't see them walking away without recouping that - something that is never going to happen so it just keeps going on. 

The information I have found on them is limited although a passing conversation with a business aquaintence (who has no agenda or interest in football at all) but lived in India for a few years back in the late 90's and was aware of "Mr Venky Senior" said: "they are one of the richest families in India, worth billions, however the fact that everywhere they go they are flanked by bodyguards makes you question the circles in which they move" I don't normally do rumours and it was only his view but interesting non the less as he had direct knowledge of them.

 

 

 

[Roverall]

To quote out dear friends in Pune, I am confused. Some posters (IraC, J*B) who appear to know a lot about the accounts are saying administration is an unavoidable near-certainty. Others (Brian Potter, Philipl) seem to suggest it won't happen.

To be very simple about this, could Venkys avoid it at the drop of a hat by just lobbing in a minimal amount or getting another payday loan?

[Kamy100]

A question - Venky' seem absolutely determined not to sell to a local or national buyer.  If they sell they seem to want to sell to another foreign buyer.  Going into administration would lead to the administrator picking the buyer, so could Venky's if they remain determined not to sell to someone local/national and in absence of a foreign buyer skip administration (as that would take the decision of who the club is sold too out of their hands) and try to liquidate the club? and if they are able to do that would there be any legal means that fans could use to stop it?

[Brian-Potter]

Dunnfc again you are correct in everything you say. From the information I have indicates that the circa £87m has been provided by Venkys India Ltd and some of this they have financed by bank loans and finance. So, in basic terms this element of debt only becomes a problem should Venkys India Ltd no longer be able to "service" this debt. Judging by their latest financial results that situation is not imminent. 

With regards to the club itself and it's holding company VLL there are currently no creditors with any security or charges held over the assets of either. This indicates that the overdraft is unsecured (unlikely although possible as we have no idea of Venkys terms or investments with State Bank of India) or is security for this has been given by VH Group.

To summarise, the amount the club owes and will owe in the foreseeable future to creditors (other than amounts owed to VLL and ultimately VH Group) are relatively small, and when looking at the financial position VH Group as whole are very small indeed.

To put it in more simple terms, if you earn £10,000 a year and your outgoings are £8,000 per year at the end of that year you have £2,000. If someone you know wants to borrow £100 then provided you are willing to lend it to them then it's impact on you is fairly insignificant.

Now increase the amounts but apply the same ratios. You earn £1bn a year and your outgoings are £800m, at the end of that year you have £200m. If someone you know (BRFC) wants to borrow £10m and you are willing to lend it to them then the imapct upon you is the same as the first example.

That is a very simplistic way of putting it but hopefully illustrates the situation

 

[Dunnfc]

Just now, Brian-Potter said:

Dunnfc again you are correct in everything you say. From the information I have indicates that the circa £87m has been provided by Venkys India Ltd and some of this they have financed by bank loans and finance. So, in basic terms this element of debt only becomes a problem should Venkys India Ltd no longer be able to "service" this debt. Judging by their latest financial results that situation is not imminent. 

With regards to the club itself and it's holding company VLL there are currently no creditors with any security or charges held over the assets of either. This indicates that the overdraft is unsecured (unlikely although possible as we have no idea of Venkys terms or investments with State Bank of India) or is security for this has been given by VH Group.

To summarise, the amount the club owes and will owe in the foreseeable future to creditors (other than amounts owed to VLL and ultimately VH Group) are relatively small, and when looking at the financial position VH Group as whole are very small indeed.

To put it in more simple terms, if you earn £10,000 a year and your outgoings are £8,000 per year at the end of that year you have £2,000. If someone you know wants to borrow £100 then provided you are willing to lend it to them then it's impact on you is fairly insignificant.

Now increase the amounts but apply the same ratios. You earn £1bn a year and your outgoings are £800m, at the end of that year you have £200m. If someone you know (BRFC) wants to borrow £10m and you are willing to lend it to them then the imapct upon you is the same as the first example.

That is a very simplistic way of putting it but hopefully illustrates the situation

 

Close but Venkys is traded on around 5 stocks, Bombay and Mumbai exchanges predominantly. So the profit isn’t all there’s it’s the shareholders.

I don’t think the 200million mark from a billion is entirely accurate to be honest, Operating Profit before Tax in 2016 results was 128 Crores which converts to in GBP (each crore is £120,000) so 15.3 million (circa 6% profit). Likely to double in all fairness for 2017.

http://www.moneycontrol.com/financials/venkys/financial-graphs/operating-profit-ebitda-percentage/V03

[Dunnfc]

This is the status off Venkys fixed charges in India. Look at the dates of the TXN's find the accounts in that year and the capital if it tallys you may just prove the scenario A above when it plays out.

[Stuart]

7 minutes ago, JHRover said:

The Inland Revenue could issue a Winding Up Petition as they have with various clubs in recent years over unpaid tax. However these have happened regularly at other clubs, the most recent perhaps was Bolton last season when they would have had to enter administration had Houldsworth/Anderson not stepped in and agreed to settle the tax bill.

So if things got so bad that Venkys weren't paying the tax bill then it could get to a point where a change in ownership could be forced by a 3rd party, but before then they would have ample time to settle things themselves and maintain control of the operation. Plus there's no evidence to suggest so far that there has ever been an issue with paying tax/wages.

Bolton still have a winding up petition against them. To be heard later this month. Not the tax man though, I don't think.

[Dunnfc]

Just now, Stuart said:

Bolton still have a winding up petition against them. To be heard later this month. Not the tax man though, I don't think.

Blumarble finance over 5 million loan to holdsworth secured on the parent company allegedly however ken Anderson says it isn't and as such holdsworth pocketed a million of it as only 4 million hit the books.

[JBiz]

2 minutes ago, Dunnfc said:

Blumarble finance over 5 million loan to holdsworth secured on the parent company allegedly however ken Anderson says it isn't and as such holdsworth pocketed a million of it as only 4 million hit the books.

It turned out the "white knights" had ambitions of making a few bob.

[Brian-Potter]

I think what we get back to is the same old story in that:

1. The information we have is sketchy to say the least and involves a great deal of effort to decipher.

2. Non of us truly know the true extent of the Venkys empire or their resources.

3. There appear to be so many companies within the group and indeed outside of it that it's nigh on impossible to gain a true snapshot.

My figures were based solely upon the accounts for Venkys India Limited for the 6 months ended 30/09/16 of which I have uploaded a summary of their P&L account, this indicates a profit of just over £50m for the period. 

DunnFC where did you obtain that list of charges from? I'd be interested to see more on it as it doesn't entirely equate to those registered against VH Group or Venkys India Ltd.

In terms of the £1bn / £200m figures I used them as a simple example with amounts that were easy to understand rather than actual figures.

[OJRovers]

Although creditors at any point in time might be low, the football club has a big wage bill every week which can't not be paid.

Going off last year's accounts, there is going to be another £10m hole in the finances this year that will need to be filled.

Last year this was filled by player sales. This won't happen this year so something has to give.

[Dunnfc]

Just now, OJRovers said:

Although creditors at any point in time might be low, the football club has a big wage bill every week which can't not be paid.

Going off last year's accounts, there is going to be another £10m hole in the finances this year that will need to be filled.

Last year this was filled by player sales. This won't happen this year so something has to give.

This year is plugged by Duffy and Hanley 

[tomphil]

Agreed 10 million plus outside creditors for a league 1 club with hardly any valuable playing assets to sell is some going. Especially when you factor in its tiny income and already contracted outgoings of about 20 mill in the next year which won't go away no matter how many cuts there are.

[Dunnfc]

Just now, Brian-Potter said:

I think what we get back to is the same old story in that:

1. The information we have is sketchy to say the least and involves a great deal of effort to decipher.

2. Non of us truly know the true extent of the Venkys empire or their resources.

3. There appear to be so many companies within the group and indeed outside of it that it's nigh on impossible to gain a true snapshot.

My figures were based solely upon the accounts for Venkys India Limited for the 6 months ended 30/09/16 of which I have uploaded a summary of their P&L account, this indicates a profit of just over £50m for the period. 

DunnFC where did you obtain that list of charges from? I'd be interested to see more on it as it doesn't entirely equate to those registered against VH Group or Venkys India Ltd.

In terms of the £1bn / £200m figures I used them as a simple example with amounts that were easy to understand rather than actual figures.

I got mine from companies house equivalent in India > https://site2corp.com/in/search

That's in Laks so 72 laks is equivalent in GBP of 7.2 million when you factor in that's for 6 months only, the 15.3 million I quoted above looks about right. A lak is circa 100,000 pounds sterling.

So 4205 laks if that's all the companies bearing in mind some are JV's and awash with shareholders give a NET worth of 420.5 million given our debt is 104 million that's 25% before we start calculating the shareholders and JV partners share of the 420 million.

[Brfcrule1]

Kamy correct me if I'm wrong didn't I hear somewhere either the Trust or through the towns MP'S that Brockhall & Ewood have ACV's on them? I thought I read somewhere they are protected can you look into this? I was wondering are you taking a break from Twitter? Good to see you on here.

[Brian-Potter]

2 minutes ago, Dunnfc said:

I got mine from companies house equivalent in India > https://site2corp.com/in/search

That's in Laks so 72 laks is equivalent in GBP of 7.2 million when you factor in that's for 6 months only, the 15.3 million I quoted above looks about right. A lak is circa 100,000 pounds sterling.

So 4205 laks if that's all the companies bearing in mind some are JV's and awash with shareholders give a NET worth of 420.5 million given our debt is 104 million that's 25% before we start calculating the shareholders and JV partners share of the 420 million.

Sorry my red circle isn't drawn acurratley. The 72 Laks is other income. The net profit for the period is 4205 laks. The figures are just for Venkys India Ltd and don't include it subsidiary's as far as I can see.

[Crimpshrine]

This is really fascinating - Thanks to the people who are putting in the time and effort to explain things in such detail.

What I don't understand is why the shareholders of Venkys India ( effectively the creditors via VLL) are not jumping up and down saying 'get rid of this massive drain on our business'? £100 million on a turnover of £1 billion is surely very significant and it's going to grow. Selling the club must be the best option.

I understand the analogy of lending a proportion of your profits to someone as a kind gesture but what benefit are they getting?

Apart from the Raos, who are the Venkys India shareholders and how much more of this will they put up with?

[Brian-Potter]

It is a very very complicated setup and is further muddied by the fact that they are based in India. I am going to try to get some more accurate information in relation to the whole Venkys group over the next few days. There are a number of significant companies all owned by the Raos, some are part of the "Group" and others are not. The two major players appear to be Venkys India Ltd and Venkateshawra Hatcheries Pvt Ltd. I have looked at the accounts for VIL but still need to look at those for VHPL. It would also appear that the Raos have a property portfolio of staggering proportions as well.