Is the 'Spursy' tag justified ?

Not according to Levy it doesn't :

"Levy was asked by the Financial Times whether the refinancing would release more money for Mauricio Pochettino, the manager, to spend on transfers or new contracts for existing players. Three key squad members – Jan Vertonghen, Toby Alderweireld and Christian Eriksen – have entered the final year on their deals.

“It will have no bearing on how we run the club … and no bearing on those types of short-term movements [like transfers],” Levy replied.

We could have easily spent more money on players. Who knows if that would have bought us more success or not. The right approach is to build from the bottom up."

Seems like he's not going to put any extra revenue into the transfer kitty, or pay for big new contracts but instead try and develop youth players.

 

https://www.tottenhamhotspur.com/news/2019/september/club-refinances-construction-debt/
Operating costs only make a couple of million difference.

 

I think his point is more subtle than that. Buying players is riskier than fans think. But we can now afford to do it if we want to.

 

Interestingly Arsenal's debt costs more than double Spurs' rate of interest.

 

That's not what he said though. He said that the refinancing would have 'no bearing on how we run the club and no bearing on those types of short term investments'

He went on to say that '“I understand as I am a fan, clearly you want to win on the pitch. But we have been trying to look at this slightly differently, in that we want to make sure we ensure an infrastructure here to stand the test of time"

Sound more like to me that he's been able to refinance over the long term because he's told his investors that he won't go splashing big money on players or contracts i.e. it's business as usual.

 

To give you some flavour, a 30yr Gvt gilt yields little more than 1%. I haven’t seen the full package, but I would suspect that the rate on the 30yr bonds would be around 3%. That’s gilts plus 200 basis points, roughly. Whether the bonds are secured on the stadium, I.e. asset backed, I don’t know. If they are that makes it a pretty attractive deal for investors.

 

It’s got nothing to do with that. With interest rates where they currently are it just makes good sense to do what Levy has done.

 

Yeah I think the investors are pretty happy to back Levy's repayments long term, because he's got a fairly decent business model. Albeit one based on not spending big money on players or contracts. Hence Levy's comments about the refinancing having 'no bearing on short term investments (ie transfers)'

The stadium debt seems pretty secure, whether you can sustain any success on the pitch is another matter. The idea that you will suddenly have £50m more each window for the transfer kitty based on the back of the stadium refinancing, as power spurs was suggesting, simply isn't true though

 

That's what he has come out and said though.

 

However you’ve chosen to interpret his words, trust me, he’s done this because with long term rates about as low as they’re going to go, it would be financial stupidity not to.

The stadium value alone covers the debt.

 

In fairness, he’s hardly going to come out and say that they’re intending spending their additional revenue on buying players and paying higher wages mate.

The key part is that the revenue exceeds the debt repayment and incremental operational costs. Personally I thought he’d attempt to pay off this debt quicker given his previous.

 

If, as I suspect, the bonds are securitised, then his business model would be of secondary importance to investors, who always look at the worst case scenario -I.e. if it goes tits up am I going to get my money back.

 

He may well do at some point. But with long term rates where they are he’s done the sensible thing.

 

It's not me interpreting his words, he's said that the refinancing will have 'no bearing on short term investments (transfers)'. Low interest rates are obviously an attraction, but as I understand it, the way Spurs' debt has been structured, is to spread the cost over 3 decades. So even at 2.6% any investor is going to want to know that the business model can be sustained over that time. i.e Levy is not going to suddenly start spending beyond his means. As for the value of the stadium, you also have to take into account asset depreciation. So a stadium that costs £1bn isn't going to be worth £1bn (or it's equivalent according to inflation) in 10 or 20 years time.

 

I’m sure he will given the opportunity, as at some point they’ll surely want to exit and cash in their chips.

 

The maturities of the bonds are between 15-30 years. They are fixed income bonds so repayments are known and cannot change.

The business model is of secondary interest to the security provided for their loan.

It’s a stadium on land in London. I would bet it will be worth considerably more in 30 yrs time

 

I'm just countering Power Spurs claim that Spurs would have £50m each year to add to their transfer kitty, as Levy has said that it won't have any bearing on their transfer or contract approach and that he prefers to 'build from the bottom up'

And I agree, given that the revenue exceeds the debt repayment and that they were due to pay it off by 2022, I don't really understand why he's suddenly opted for a 30 year option. Unless ENIC have certain expectations about their profits and saw it as impacting on that possibly .

 

Maybe. If they sell, then they would need either the acquiescence of the lenders to the new owners assuming the debt. If not, then it would need to be refinanced or repaid.

If they don’t sell, the club can always retire the bonds or refinance, whichever is financially prudent at the time.

 

Yeah but my point being, that given the choice between sticking the additional operating profits into intangible assets or paying down the debt, you’d take the latter if you were the stakeholder - providing the playing side didn’t suffer and impact on revenue streams. It’s a balancing act eh.

 

I agree look at some of the ****E Man Utd have bought over the years
Veron