Anybody read this with a real sense of dread? £110m loan to be paid back by next December. With relegation, that’s going to be extremely messy. The credit rating of the parent company (on whom the loan is secured) has also just been downgraded. If this were about another club, I would be extremely worried for them…
No dread. Perfectly normal to buy a company and borrow to do it. Total non story from the Times and that isn’t me burying my head in the sand. As to credit rating, have you seen the effect on your credit rating once you take out a loan? It is good to get the loan, then drops after. Another thing to consider is that we have the assets (and will probably lose them with relegation ) to more or less clear that loan if he wants. He probably won’t and will restructure so we have working capital. I think you will find it a rare occurrence for a Billionaire to pay cash for a company.
Just what the Glazers did at Man U and look how that turned out. I said this yesterday and no one seemed to believe it would impact
Man borrows money (from himself) to buy a football club and has to pay it back. Shock. Mountains & Molehills spring to mind.
They key part is this part in that article - “There isn’t and never has been any intention to repay the loan using Southampton FC cash flow”. So no, no sense of dread in the slightest.
The truth is; unless you are Dragan, the clubs accountant or have insider knowledge it’s almost impossible to gauge. As others have pointed out, at face value a loan like this is totally normal. However the question is how negatively will relegation impact our ability to pay back the loan and whatever else. All we can do is hope they show more aptitude in their business dealings than they do in their football dealings.
The difference is that the Glazers was a leveraged buyout - meaning they put the club up as an asset to secure the loan. Don’t think SR have done that with us.
Just think we could witness melt down on virtually every topic for Saints Not606. Relax everyone, the summer's coming, cricket underway, European wins The Masters, looking forward to the next few months!!
I just Googled “Saints loan” and got half a dozen items about how well Nathan Tella is doing. Reasons to be cheerful…
The Glazer thing was absolutely fine insane. They bought the largest football club in the country (if not the world) without using their own money and pay back the loan using the clubs profits and as far as I know have not put any money in. It baffles me that such a thing is even possible, let alone allowed.
having your credit rating downgraded by the likes of S and P is not the same as your own personal credit. It has a direct impact on value, viability in terms of investment and stakeholder protection. It’s really not the same.
The only real new information/clarity this article provides is when the repayment due date is: end of 2024. Other than that you'd think it's assumed knowledge that finance was secured for the acquisition of a £110m asset with fairly significant operational costs and a £75m Covid loan to repay. (with a bulky interest rate)
But it is similar. Say I wanted to borrow £500k for a business venture and secured it against the house. The bank would do due diligence on me and say that there is enough equity in the asset to secure against and also have leeway for asset price drops. They would also look at my credit rating and say ok. 6 month down the line, if I asked for another £500k, they would do the same due diligence, but my rating would be less as 1) I have 500k outstanding and b) my only asset is secured already. My credit rating would be significantly lower than 6 months previously, even if I had covered all the payments.
I'm normally the financial doom and gloom guy, but we should be okay (within the normal bounds when getting relegated, which is always pretty ugly financially). Beyond this payment on the purchase of the club, the large and high-interest loan that Gao took out no longer shows up in our books at all...it has presumably been reassigned to the parent company or something, as we had a gross debt of £0 listed in the 2022 books that were filed as of the end of March: So to the extent that there is financial risk involved here, it appears to be borne by Solak, and no longer by the club itself. Getting relegated on the back of our spend this season is obviously going to be A Problem, but we're in a pretty solid place in terms of assets: we have a number of players who will be highly-desirable (and who we should absolutely sell), and with our extremely large and young squad we could probably sell pretty aggressively without the need to draft in too many replacements. And ultimately that's what we should be doing here.
Update in The Athletic: Southampton owner Sport Republic has injected a further £15million into the relegation-threatened club following a share issue. The agreement was finalised on Thursday night and means lead investor Dragan Solak has now put £63m into the club over seven months. Solak, a Serbian-born businessman, previously injected £48m in September 2022 — a move that diluted the shares of minority stakeholder Katharina Liebherr and reduced her previous stake of 20 per cent. Liebherr was not involved in the latest round of investment and her share in the St Mary’s club has now been further reduced. Solak has made the move to aid general running costs and highlight his continued commitment to the club. Sport Republic, a London-based investment firm, completed a takeover of Southampton in January 2022, buying Gao Jisheng’s controlling 80 per cent stake in the club. Solak took out a loan of £110m in December 2021 to help buy Southampton. The loan was provided by Luxembourg-registered company Summer Invest Sarl – owned by Solak. The Premier League knew about the loan, which is unrelated to Southampton’s cash flow and will not be repaid from club accounts, before signing off on the takeover. Southampton are currently battling to stay in the Premier League and are four points from safety at the bottom of the table.
In other words, no debt to the shareholder here either, instead converting it to equity. Similar to what Liebherr Sr did, less so what Liebherr Jr did. Can't question his financial commitment.
