A New Charge Against Southampton Football Club

[NickG]

Corteste got to run the club by himself- It wasnt about money, it was about somebody coming in to oversee him........ That is my take on it and my opinion.

 

A week later, there is a registered reduction in share captial statement issued - typically a vehicle for providing a return ...... Oh and a statement of solvency.

 

Now there is a new loan............. One of the ones that Cortese scoffed at other clubs for doing, which he has now done in two consecutive years and against everything that was said when Markus first took over.

 

I have absolutely no doubt we are solvent and and trading within our means, but Vibrac are super expensive....... To be doing this for tax purposes, simply doesnt stack up.

 

It would be a brave man that put his house on the fact that the liebheers are still financially supporting us after they cashed out in (33 million) we have taken two loans, issued a statement of solvency and a reduction in share captial...... when everything out there suggest they are not.

 

I have no issue in being self funding it appears others do.

 

I'm not fussed either way, and none of us know truth but when this story came out, following reporter (BBC?) Meeting NC pretty sure it was clearly stated as also about guaranteed funding for transfers from Katrina

 

Sent from my Nexus 4 using Tapatalk

[Gemmel]

I'm not fussed either way, and none of us know truth but when this story came out, following reporter (BBC?) Meeting NC pretty sure it was clearly stated as also about guaranteed funding for transfers from Katrina

 

Sent from my Nexus 4 using Tapatalk

 

So why the loans????? The very loans he mocked.

[Smirking_Saint]

Im no top accountant, I do a bit of financial management with my job but Im no financial wizard.

 

I do know that SSE a company worth billions does not use its own funds but does everything via loans etc

 

Now Im not entirely sure why this is but Im pretty sure there are 'financial' reasons behind it. So basically Im not worried too much, you dont get where Cortese was in the banking industry by being a numpty.

[NI Saint]

Did we not have all these same theories and questions after the last charge became public knowledge?

[trousers]

Did we not have all these same theories and questions after the last charge became public knowledge?

 

Yup

[trousers]

So why the loans????? The very loans he mocked.

 

Wasn't he only "mocking" clubs that borrowed beyond their means though? By borrowing against guaranteed future income ( TV money) we're not borrowing beyond our means. Maybe if we dig out the original Cortese quotes about his aversion to borrowing it'll put things into context.

[Gemmel]

Wasn't he only "mocking" clubs that borrowed beyond their means though? By borrowing against guaranteed future income ( TV money) we're not borrowing beyond our means. Maybe if we dig out the original Cortese quotes about his aversion to borrowing it'll put things into context.

 

No he was mocking the clubs that borrowed against the next years TV revenue..... which is exactly what he is doing. PM me and I will send you the document.

[Saint George]

Funding for the next few years is already in place and you can rest assured it's enough to fund our way to at least 4th place....The loans are there for accounting purposes, nothing more.....As anyone that has ran a company will testify.

[Frank's cousin]

No he was mocking the clubs that borrowed against the next years TV revenue..... which is exactly what he is doing. PM me and I will send you the document.

 

 

there is a difference.... given that it was paid within the year suggests that like other clubs we have borrowed simply because the tv money is staggered payments and we were spending a lot up front on transfers etc.

 

so although technically still a loan, its an advance against guarranteeed income. What NC is scoffing at is the Pompey way - clubs that borrow or spend by not paying tax etc, against NON-guarranteed income - eg if we spent 100mil now (or commited to that in contractual terms) which would be unsustainable on relegation - and beyond what is affordable within an annual revenue cycle. The fact the cheats down the road managed to end up in admin whilst pre money was still comming in just showws the level of their incompetence.

 

In some respects, this loan offers a very strong hint at what the argument between the Liebherrs and NC was about - as NC talked about backing... i dont thinkit had anything to do with other senior appointments but was all about spending plans. NC needed the loans/advances to strengthen the squad. For this to happen, he will have needed the agreement of the owner - as these short term agreements were secured against the clubs assets owned by the liebheers - i suspect this was about having the authority to do this now and in future to respond to the cubs needs without having to go cap in hand to the liebherrs when we needed such advances - in effect its about trust - wanting the liebherrs to trust NC to spen wisely annd not put their assets at any risk... I think he was given thsat authoritty and trust for a further number of years so he could follow the planned strategy - in effect gaining approval for the next stage of the plan.

[Batman]

No he was mocking the clubs that borrowed against the next years TV revenue..... which is exactly what he is doing. PM me and I will send you the document.

 

because the owner died?

[Gemmel]

because the owner died?

 

I would guess so

[jayrivers]

No he was mocking the clubs that borrowed against the next years TV revenue..... which is exactly what he is doing. PM me and I will send you the document.

 

But next years TV income isn't a guaranteed source of income. I was under the impression that the loans the company provide to Premier League teams were against guaranteed income. Which woud suggest a loan for the rest of this years TV income? I would be interested to see something that suggests otherwise. I'm not saying it's not out there, just I personally havn't seen it!

Edited 24 October, 2013 by jayrivers
typo

[Saint86]

Which is complete drivel - I tried to be polite and got a mouthful.

 

Maximising revenue by taking a loan :)

 

To aid the FFP :) :)

 

Hysterical reaction - Where ????????? :) :)

 

At no point did i state that the club are maximising revenue by taking loans. And the quotes from the club and KL after the "showdown talks" in the summer support my views, and the views of other fans... Now stop bed wetting and attacking me for believing the club aren't about to financialy self destruct... I assume that is what you meant when you called my comment of "my 2 sense is that their is very little to indicate financial trouble at the club" complete drivel and you were in now way polite, as you are not above.... seriously, are you a 16year old who expects everyone to follow you word for word? Where to people get off having to moan about the club and predicting doom and gloom all the time.. We are on a high, it won't last forever so enjoy it.... And if you are going to moan and panic at least pick something realistic... this club has got to be one of the safest financially...

[SW5 SAINT]

As I understand it, a charge gives priority to certain creditors in the event of a default. Possibly the liebherr's are somehow, through a third party, protecting themselves??

 

I reckon you have this is spot on mate.

[Saint_DB]

Ok...crash course in company law:

 

We can be sure the co issued a dividend on 1 July 2013. You can only issue a dividend out of distributable profits, meaning even cash-rich companies can't issue dividends where they don't have enough profits. To create profits to distribute to shareholders (e.g. Liebherrs) by dividend, you reduce capital (I.e. create a reserve of money from shares being cancelled - this doesn't affect equity shareholders as it is done in proportion to how much of the shares they hold. A 20% shareholder will still have 20% of the remaining shares). To reduce capital you either need a court order (annoying to apply for) or a statement of solvency, which is just the directors saying the co isn't going to go insolvent any time soon (the preferred route as it is much less hassle). The reduction takes place, the reserve money goes into a "share premium account" which is then paid out as a dividend. That accounts for everything on 1 July. Nothing to worry about.

 

Re the loan, companies take loans for all sorts of reasons. The main one is normally that interest payments on loans are tax deductible (and dividends come out of taxed income, so you are paying more to repay an equity lender the same "interest"/dividend). Having a structure using a tax haven (like the BVI) reduces tax even further. That's not to say there's anything particularly dodgy about it. CFOs would just say that is smart accounting. As a business, the only thing that would make you choose to pay higher taxes is reputational, to show that you are fulfilling some kind of corporate responsibility. Otherwise, why pay more?

 

Re the charge, what kind of lender would let you have millions of pounds without taking security? It is no big deal, I come across it every day. Secured lenders take priority to unsecured lenders and equity shareholders on insolvency. So, the club runs out of cash and can't pay its bills, the assets are sold and the bank gets its money back first. This is perhaps why the move from all-equity lending to getting debt again may have caused a rift with the liebherrs as their investment just got more risky. Satisfying a charge only to replace it with a new one (as has happened here) is normally an indicator of refinancing (like remortgaging home, you pay off the first lender's mortgage when you take out the next one). The most likely security in the charge document is a fixed charge over the assets (stadium, training ground, etc - stuff that is not going anywhere) and a floating charge over whatever is in the club's bank account from time to time (as the cash in there is changing all the time so you can't have fixed security).

 

I haven't looked at any of the documents, but every entry on the companies house register looks perfectly normal and doesn't give me any concerns.

[trousers]

Ok...crash course in company law:

 

We can be sure the co issued a dividend on 1 July 2013. You can only issue a dividend out of distributable profits, meaning even cash-rich companies can't issue dividends where they don't have enough profits. To create profits to distribute to shareholders (e.g. Liebherrs) by dividend, you reduce capital (I.e. create a reserve of money from shares being cancelled - this doesn't affect equity shareholders as it is done in proportion to how much of the shares they hold. A 20% shareholder will still have 20% of the remaining shares). To reduce capital you either need a court order (annoying to apply for) or a statement of solvency, which is just the directors saying the co isn't going to go insolvent any time soon (the preferred route as it is much less hassle). The reduction takes place, the reserve money goes into a "share premium account" which is then paid out as a dividend. That accounts for everything on 1 July. Nothing to worry about.

 

Re the loan, companies take loans for all sorts of reasons. The main one is normally that interest payments on loans are tax deductible (and dividends come out of taxed income, so you are paying more to repay an equity lender the same "interest"/dividend). Having a structure using a tax haven (like the BVI) reduces tax even further. That's not to say there's anything particularly dodgy about it. CFOs would just say that is smart accounting. As a business, the only thing that would make you choose to pay higher taxes is reputational, to show that you are fulfilling some kind of corporate responsibility. Otherwise, why pay more?

 

Re the charge, what kind of lender would let you have millions of pounds without taking security? It is no big deal, I come across it every day. Secured lenders take priority to unsecured lenders and equity shareholders on insolvency. So, the club runs out of cash and can't pay its bills, the assets are sold and the bank gets its money back first. This is perhaps why the move from all-equity lending to getting debt again may have caused a rift with the liebherrs as their investment just got more risky. Satisfying a charge only to replace it with a new one (as has happened here) is normally an indicator of refinancing (like remortgaging home, you pay off the first lender's mortgage when you take out the next one). The most likely security in the charge document is a fixed charge over the assets (stadium, training ground, etc - stuff that is not going anywhere) and a floating charge over whatever is in the club's bank account from time to time (as the cash in there is changing all the time so you can't have fixed security).

 

I haven't looked at any of the documents, but every entry on the companies house register looks perfectly normal and doesn't give me any concerns.

 

Best post on a club finances thread ever! Cheers

[saintbletch]

Ok...crash course in company law:

 

We can be sure the co issued a dividend on 1 July 2013. You can only issue a dividend out of distributable profits, meaning even cash-rich companies can't issue dividends where they don't have enough profits. To create profits to distribute to shareholders (e.g. Liebherrs) by dividend, you reduce capital (I.e. create a reserve of money from shares being cancelled - this doesn't affect equity shareholders as it is done in proportion to how much of the shares they hold. A 20% shareholder will still have 20% of the remaining shares). To reduce capital you either need a court order (annoying to apply for) or a statement of solvency, which is just the directors saying the co isn't going to go insolvent any time soon (the preferred route as it is much less hassle). The reduction takes place, the reserve money goes into a "share premium account" which is then paid out as a dividend. That accounts for everything on 1 July. Nothing to worry about.

 

Re the loan, companies take loans for all sorts of reasons. The main one is normally that interest payments on loans are tax deductible (and dividends come out of taxed income, so you are paying more to repay an equity lender the same "interest"/dividend). Having a structure using a tax haven (like the BVI) reduces tax even further. That's not to say there's anything particularly dodgy about it. CFOs would just say that is smart accounting. As a business, the only thing that would make you choose to pay higher taxes is reputational, to show that you are fulfilling some kind of corporate responsibility. Otherwise, why pay more?

 

Re the charge, what kind of lender would let you have millions of pounds without taking security? It is no big deal, I come across it every day. Secured lenders take priority to unsecured lenders and equity shareholders on insolvency. So, the club runs out of cash and can't pay its bills, the assets are sold and the bank gets its money back first. This is perhaps why the move from all-equity lending to getting debt again may have caused a rift with the liebherrs as their investment just got more risky. Satisfying a charge only to replace it with a new one (as has happened here) is normally an indicator of refinancing (like remortgaging home, you pay off the first lender's mortgage when you take out the next one). The most likely security in the charge document is a fixed charge over the assets (stadium, training ground, etc - stuff that is not going anywhere) and a floating charge over whatever is in the club's bank account from time to time (as the cash in there is changing all the time so you can't have fixed security).

 

I haven't looked at any of the documents, but every entry on the companies house register looks perfectly normal and doesn't give me any concerns.

 

Saint_DB, thanks for taking time out of your role as corporate tax advisor to Starbucks and Google to put our minds at rest.

[Dusic]

http://www.theguardian.com/football/2016/nov/18/premier-league-offshore-loans-ban?

 

Interesting. We have used them significantly since being back in the PL.

[Fitzhugh Fella]

http://www.theguardian.com/football/2016/nov/18/premier-league-offshore-loans-ban?

 

Interesting. We have used them significantly since being back in the PL.

 

Why would we need to borrow in such a way when our net spend over recent years is in the black?

[Saint_clark]

Possibly transfer fees coming in are on instalments and so we're lending against that.

Don't see anything in that article that says we've used them "significantly" though.

[pluto]

Cortese used vibrac to do the Ramirez and Osvaldo deals and we stopped using them when Kat paid up the bill a year or so back. We now use some australian outfit and this is for cashflow between tv payments. They of course are spread over the year but one can imagine such is the huge deal now in place borrowing large wedges of money shouldnt be required.

[Shance]

It's all about cash flow. Nothing to see here.

[diggers]

The last couple of lines of the article state that "lenders typically charge 7% interest for loans against broadcast revenues"

I would of thought that a billionaire owner would of been happy to loan the club money at 7%, seems like a crap deal for the club and a great investment for any lender.

[Gemmel]

Why would we need to borrow in such a way when our net spend over recent years is in the black?

 

Don't take this personally - But as our historian, that is a little bit scary, that with so many great books, facts and figures at your disposal, your grasp of our financial situation is non existent.

[Gemmel]

Cortese used vibrac to do the Ramirez and Osvaldo deals and we stopped using them when Kat paid up the bill a year or so back. We now use some australian outfit and this is for cashflow between tv payments. They of course are spread over the year but one can imagine such is the huge deal now in place borrowing large wedges of money shouldnt be required.

 

We use macquarie bank- With a charge against Katrina's personal estate.