Some Tweets Saying We Have Borrowed Against Future Season Ticket Sales

[Wes Tender]

"Not all debt is bad" is my new favourite. It's the ultimate in ignorance of our past 3 years.

 

MLG must be crying into his horlicks.

 

Don't be silly.

 

 

 

 

MLG is surely an Ovaltiney

[The Kraken]

Are people really moaning and saying having a loan is bad? This is normal in business. In addition, we have a chairmen who has managed the accounts of billionaires.

 

Are you actually ignoring that chairman's own words from just 3 years ago? Just wondering.

[Saint_clark]

As has already been said it all depends on the amount of the loan, but considering we have a guaranteed income for the next 4 years even if we get relegated I'm not too concerned. I really, really doubt Cortese would lend against money that we only might have.

[docker-p]

Can I just take this opportunity to remind everyone who has forgotten that three years ago we were literally thirty five minutes away from definitely going out of business forever and we were bottom of league one and everything and stuff.

CAN I TAKE THIS OPPORTUNITY TO REMIND EVERYONE WE WERE NEVER 35 MINS AWAY FROM DEFINIETELY GOING OUT OF BUSINES FOREVER.

 

One look at how PFC limp on with no new stadium, or training ground, 10 times the debt and only half the support of SFC should have put paid to that rumour years ago. It does sound very romantic though.

[The Kraken]

As has already been said it all depends on the amount of the loan, but considering we have a guaranteed income for the next 4 years even if we get relegated I'm not too concerned. I really, really doubt Cortese would lend against money that we only might have.

 

He's not. It's clear he's loaning against television money OR parachute payments from season 2013/14. Not healthy, and entirely at odds with his previous aims and ambitions for his running of the club.

[docker-p]

As has already been said it all depends on the amount of the loan, but considering we have a guaranteed income for the next 4 years even if we get relegated I'm not too concerned. I really, really doubt Cortese would lend against money that we only might have.

 

Cortese is borrowing not lending. Thats the problem.

[trousers]

Cortese is borrowing not lending. Thats the problem.

 

You can make money by borrowing at favourable rates and investing the funds in assets which give a higher cash flow return than the loan repayment terms.

 

Maybe this is what Nicola 'Investment Banker' Cortese has up his sleeve?

 

Of course, this would only work as an investment vehicle if the likes of Ramirez generate enough additional revenue to exceed the amount needed to service the loan.

 

Either that or the Liebherrs have pulled the plug on their financial support of the club and we're stuffed...

[capitalsaint]

The double relegation and administration has really destroyed our fanbase. We've turned into a load of paranoid, high-maintenance freaks. If the fans were a girl I'd have broken up with them a long time a go so they could go and get some much needed therapy.

[dubai_phil]

The double relegation and administration has really destroyed our fanbase. We've turned into a load of paranoid, high-maintenance freaks. If the fans were a girl I'd have broken up with them a long time a go so they could go and get some much needed therapy.

 

[CB Saint]

Are we dead yet?

[CB Saint]

If I were to take a punt at what going on I would suggest that we have borrowed money to fund our transfer window because the £60m from the EPL isn't paid out in one lump sum - i.e. a cashflow loan. It has come from a BVI company because that is the most tax efficient vehicle for the company making the loan - I t appears that they do this with other clubs. I t has then been secured against next years income because that is the earliest income available after the point the loan becomes repayable, however it is our intention to repay by the end of the season.

 

All in my humble opinion of course.

[Huffton]

FML, Liebherr may have been a bit 'anti debt', but anyone who seriously thinks he built up his business without ever borrowing a penny is as deluded as that lot down the road.

ALL businesses borrow money from time to time. With a former **** hot investment banker at the controls I'm far less worried about it than people here seem to think I should be.

[CB Fry]

CAN I TAKE THIS OPPORTUNITY TO REMIND EVERYONE WE WERE NEVER 35 MINS AWAY FROM DEFINIETELY GOING OUT OF BUSINES FOREVER.

 

One look at how PFC limp on with no new stadium, or training ground, 10 times the debt and only half the support of SFC should have put paid to that rumour years ago. It does sound very romantic though.

 

 

 

There isn't a Whoooooosh big enough for this post.

[scotty]

The double relegation and administration has really destroyed our fanbase. We've turned into a load of paranoid, high-maintenance freaks. If the fans were a girl I'd have broken up with them a long time a go so they could go and get some much needed therapy.

 

 

That sounds like the voice of experience. Do your ex-girlfriends usually end up in therapy?

[sandwichsaint]

If I were to take a punt at what going on I would suggest that we have borrowed money to fund our transfer window because the £60m from the EPL isn't paid out in one lump sum - i.e. a cashflow loan. It has come from a BVI company because that is the most tax efficient vehicle for the company making the loan - I t appears that they do this with other clubs. I t has then been secured against next years income because that is the earliest income available after the point the loan becomes repayable, however it is our intention to repay by the end of the season.

 

All in my humble opinion of course.

 

Stop talking sense - you're gonna put a lot of people out of their misery talking like that and they wouldn't want that would they?

[Turkish]

Are you actually ignoring that chairman's own words from just 3 years ago? Just wondering.

 

And just to remind everyone of those words;

 

"Clubs spend money they do not have, they spend next years money, They spend money that will not arrive for two years and say "we'll have some success and bring in more cash to cover the shortfall" it cannot be sustained. I'm good times you need to save money for bad times. If we reach the premier league I would like to be in a position where we didn't need parachute payments. In good years you should put money away for bad"

 

Nicola Cortese May 2010. Wise words.

[trousers]

And just to remind everyone of those words;

 

"Clubs spend money they do not have, they spend next years money, They spend money that will not arrive for two years and say "we'll have some success and bring in more cash to cover the shortfall" it cannot be sustained. I'm good times you need to save money for bad times. If we reach the premier league I would like to be in a position where we didn't need parachute payments. In good years you should put money away for bad"

 

Nicola Cortese May 2010. Wise words.

 

How do we know when this loan will be paid off? Cortese cites "two years" in that quote but what if it's a 6 months bridging loan to manage cash flow in this case?

[Turkish]

How do we know when this loan will be paid off? Cortese cites "two years" in that quote but what if it's a 6 months bridging loan to manage cash flow in this case?

 

If it was going to be paid back in six months then why would it be secured against next seasons income?

[trousers]

If it was going to be paid back in six months then why would it be secured against next seasons income?

 

Maybe that's just a formality that these loan companies insist upon. Who knows? All I'm highlighting (with my MLG tribute hat on) is that we don't yet know if Cortese has done a Nick Clegg on his "no borrowing beyond our means" pledge. This may just be a clever, tax efficient, way of managing the club's cash flow for all we know (thus making us more self-sufficient in the long run, not less)

 

Posting the Cortese quote for the next 18 months until the accounts are published won't alter the level of uncertainty or prove anything outright.

[trousers]

If it was going to be paid back in six months then why would it be secured against next seasons income?

 

P.s. I've got a mortgage which the bank insists is secured against my house for the next 10 years but I intend to pay it off sooner than that...it's cheaper money that way...

Edited 4 October, 2012 by trousers

[Turkish]

P.s. I've got a mortgage which the bank insists is secured against my house for the next 10 years but I intend to pay it off sooner than that...

 

Intend to, or have agreed to in the contract?

[ToreSF]

The double relegation and administration has really destroyed our fanbase. We've turned into a load of paranoid, high-maintenance freaks. If the fans were a girl I'd have broken up with them a long time a go so they could go and get some much needed therapy.

 

This. Understandable that some of our fans are worried,based on our recent history, but come on! Having debt doesn't mean your economy is bad or that you have little money.

[trousers]

Intend to, or have agreed to in the contract?

 

Intend

[Turkish]

This. Understandable that some of our fans are worried,based on our recent history, but come on! Having debt doesn't mean your economy is bad or that you have little money.

 

It's it so much the loan in itself, it's the fact that weve been told time and again 'the family' don't do debt. It's th fact that why would we take out a loan with an APR when we are backed by billionaires and why do we need a loan just months are £33m pounds worth of debt was written off by our owners.

[benjii]

If it was going to be paid back in six months then why would it be secured against next seasons income?

 

Why wouldn't the lender want the widest security possible? Just because there is an all encompassing debenture it doesn't follow the amount borrowed is equivalent to all present and future assets.

 

As others have said, ignorance, hysteria and general bell-endedness abounds.

[Turkish]

Why wouldn't the lender want the widest security possible? Just because there is an all encompassing debenture it doesn't follow the amount borrowed is equivalent to all present and future assets.

 

As others have said, ignorance, hysteria and general bell-endedness abounds.

 

Who said it did?

 

Tsk, ignorance, hysteria and general bell-endedness abounds.

[Patrick Bateman]

I would suggest that Cortese knows what he's doing. There must be posters within the corporate finance world here who also know. Debt isn't a bad thing - pretty much every company with a reasonable sized turnover has debt - there are many reasons why - debt over equity means lower tax payments and more security for the owners.

 

I quickly dug out this from the Harvard Business Review which talks at a high-level about it; http://blogs.hbr.org/financial-intelligence/2009/07/when-is-debt-good.html

There are many small articles out there; http://kapitall.hubpages.com/hub/Why-Does-a-Company-Use-Debt

 

Stop worrying.

[Patrick Bateman]

Why wouldn't the lender want the widest security possible? Just because there is an all encompassing debenture it doesn't follow the amount borrowed is equivalent to all present and future assets.

 

As others have said, ignorance, hysteria and general bell-endedness abounds.

 

Agreed on both counts.

[Patrick Bateman]

If it was going to be paid back in six months then why would it be secured against next seasons income?

 

Because that's tangible and a certain income, whether it's Prem money or parachute money. Securing against SMS wouldn't be a wise move - what if it blows up, decreases in value etc etc etc. Next season's income is tangible.

[egg]

Why wouldn't the lender want the widest security possible? Just because there is an all encompassing debenture it doesn't follow the amount borrowed is equivalent to all present and future assets.

 

As others have said, ignorance, hysteria and general bell-endedness abounds.

 

The lender would want wide security for a large amount, lesser security for a lesser amount. Why would someone borrow at all if they're being bankrolled by the estate of a deceased billionaire?

 

We are all ignorant of unknown facts, but shouldn't be ignorant to a potential sign of a problem. That doesn't equate to hysteria or bell endedness.

[egg]

Because that's tangible and a certain income, whether it's Prem money or parachute money. Securing against SMS wouldn't be a wise move - what if it blows up, decreases in value etc etc etc. Next season's income is tangible.

 

Is the security not against all assets?

[trousers]

it's the fact that weve been told time and again 'the family' don't do debt.

 

It gets mentioned on here a lot but it's got the whiff of one of those self perpetuating myths. Perhaps if you post a few of these definitive quotes from the Liebherr family then we can dissect what they were actually saying rather than what we think they might be saying about "debt".

[trousers]

The lender would want wide security for a large amount, lesser security for a lesser amount. Why would someone borrow at all if they're being bankrolled by the estate of a deceased billionaire?

 

Because tapping into a finite capital base isn't necessarily as financially astute as tapping into a favourable loan facility. Why burn the capital that is the foundation of your security as a company when you can borrow money at zero risk?

 

I do the same with my household budget. I don't tap into my savings to buy a new sofa if the furniture store are offering favourable hire purchase deals.

[manji]

Looking forward to "The Echo understands" headline about this when their sports journo wakes up and does his day job of browsing websites.

[itchen_dan]

Looking forward to "The Echo understands" headline about this when their sports journo wakes up and does his day job of browsing websites.

 

[Red and White Army]

I have asked questions about who is the ultimate owner of the club, and what the funding structure looked like a few times in the past. It seems a few more people are starting to get the picture that we are doing the same as Pompey did - splashing out tens of millions on fees and more on wages - players a club our size could not have dreamed about.

 

I hope we are living within our means but we have absolutely no way of telling that.

[Saint Garrett]

I studied Corporate Finance at uni (just last year) but not hugely up on it. Pretty much every company has debt. But I do think it is a bit more worrying in our case as we always thought we were being bankrolled, so it's either free money for the estate or we're paying money to raise this finance.

 

However, if the estate are taking 'dividends' out of the company anyway then debt it actually cheaper for the club, although it is initially worrying, there's no point getting suicidal about it as we don't know any of the details around it.

[St_Tel49]

He's not. It's clear he's loaning against television money OR parachute payments from season 2013/14. Not healthy, and entirely at odds with his previous aims and ambitions for his running of the club.

Is it?

Edited 4 October, 2012 by St_Tel49
Fix

[CB Fry]

So, just to confirm, all those people smugly and rabidly parrotting through the summer that "we don't do debt/we are now run debt free" are actually quite happy that we have debt again and debt is fine and not all debt is bad and is just part of business.

 

Just checking.

[Window Cleaner]

with the amount we have spent and fans desire for such "quality" signings.......

 

is this a surprise..?

 

 

 

It's not a surprise at all, even with League 1 and NPC expenditure on players we've been running at a loss for the last 3 seasons so where everybody thought we'd got the 30 million we've spent since last May from I just don't know. I don't think the PL give you money in advance so you've got to find it from somewhere and I don't doubt that the Swiss funds dried up ages ago. I don't even think Markus was all that rich, the Liebherr wealth which is always referred to means the other members of that illustrious family, didn't Markus give all his shares in the main Liebherr holdings away long long ago? I remember getting royally slagged off on here last year for suggesting that we were running up debts and would continue to do so, right again then ?

[manji]

Borrowing has always been a part of any capitalist venture. So why would we be any different ? Maybe this story has been leaked by some uber fanontheboarders who plan a takeover of Southampton and turn the club into a workers cooperative ? Is that why work on the training ground has been stopped ? Is there a plan to turn the area into a workers collective farm to finance the club?

[badgerx16]

Is there any evidence that we have ever been 'bankrolled' by Marcus's estate ? If the family are as financially astute and conservative as is repeatedly stated, then why would they, or the estate, present an open chequebook to a football club ?

[badgerx16]

I have asked questions about who is the ultimate owner of the club, and what the funding structure looked like a few times in the past. It seems a few more people are starting to get the picture that we are doing the same as Pompey did - splashing out tens of millions on fees and more on wages - players a club our size could not have dreamed about.

 

I hope we are living within our means but we have absolutely no way of telling that.

 

I think back to back promotions skewed the 5-year plan.

[egg]

Because tapping into a finite capital base isn't necessarily as financially astute as tapping into a favourable loan facility. Why burn the capital that is the foundation of your security as a company when you can borrow money at zero risk?

 

I do the same with my household budget. I don't tap into my savings to buy a new sofa if the furniture store are offering favourable hire purchase deals.

 

Would be a cracking argument if there was a) certainty of the existence of a capital base, and b) certainty that the return on the capital base merited the cost of the borrowing.

 

I'm not saying that we're on a poor financial base, I just don't know enough facts, but this could well be a large scale payday loan. I repeat could.

[Window Cleaner]

Is there any evidence that we have ever been 'bankrolled' by Marcus's estate ? If the family are as financially astute and conservative as is repeatedly stated, then why would they, or the estate, present an open chequebook to a football club ?

 

I believe that the loans from the owner were turned into equity last year or the year before. Up until the end of the June 2011 financial year we'd run up about 35 million of debt to the owner including the intial purchase (or so I think anyway). We probably tacked on another 15 million or so for our Championship season so the first 3 years losses were about 50 million part or all of which seem to have been covered by the owner and then the Estate.

[Junction 9]

I do hope Nick Illingsworth didn't throw the "Save our Saints" charity buckets away.

[CHAPEL END CHARLIE]

My guess?

 

I think we've probably overspent on our transfer/wages budget this summer in order to (we hope) acquire a PL quality squad and avoid relegation. We have funded that overspend via this reported load arrangement. In theory once you have established PL standard squad we can spend less in future and return to a more sustainable financial model.

 

Thats a OK theory - it may not work out like that in practice.

[Dibden Purlieu Saint]

I'm very surprised that people thought we spent all that money (not on the defence) without having to borrow..? Clubs borrow money, and to do so they have to secure the loan. The safest and most reliable income for that is future season ticket sales, that's all.

 

Bet you'd all be more worried if secured against St Mary's.

[Saint Garrett]

My guess?

 

I think we've probably overspent on our transfer/wages budget this summer in order to (we hope) acquire a PL quality squad and avoid relegation. We have funded that overspend via this reported load arrangement. In theory once you have established PL standard squad we can spend less in future and return to a more sustainable financial model.

 

Thats a OK theory - it may not work out like that in practice.

 

But the worrying thing is IF the unthinkable happens and we go down, what then?!

[tajjuk]

Whilst this is a bit worrying, we don't know enough so everyone is just wildly speculating about things.

 

Also the title of this thread is completely wrong, we haven't borrowed against future season ticket sales, just one years parachute payment or TV money.

 

One final thing I might add (wildly speculating here) is that maybe we are just borrowing to improve our credit rating for the future? If the club was debt free, and has been debt free we have had no lines of credit, thus in the eyes of banks (particularly under the spotlight UK banks) our credit rating would be poor (+ football club + previously in admin football club) so to enable us to get a big loan in the future future investments (i.e new stadium mortgage etc.) we will need good credit to get it. Just a thought.