It's how loans work
If the person (the club) who owes the money only pays the interest every year for a million years they still owe the original amount
Ehab interview incoming...
- Thread starter originallambrettaman
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If the person (the club) who owes the money only pays the interest every year for a million years they still owe the original amount
And we can become the next Pompey, owing money to several previous owners.
So expand on this lads. Genuinely interested. What is going to, or could happen? How will it work?
They can use the parachute payments to pay off the debts to Allamhouse or not.
1) Take profits (TV money) as dividends (not sure on current rules - may be able to claim dividends against current profits or may be illegal due to negative capital account) to Allamhouse and leave the debt in place (have cake and eat it). Sell club for £1 but new owners owing Allamhouse whatever remaining debt is.
2) Take profts and repay debt Allamhouse debt with it. Debt free club and can sell for £1.
3) As per 2) but sell for whatever they can get. Purchase price for new owners probably paid as loan from club so we are back to where we were but owing millions to a different creditor.
I'm not suggesting I know what's going to happen
I was simply pointing out that as long as they can get the interest paid to them, at pretty good rates, then it's a good investment
If they keep taking the interest without paying down the debt then they get cash paid but the debt to them is still the same to get paid eventually
That is risky though if you think you can't get your original investment back so probably the best bet would be to pay the debt down to a level where you think you can get it back by selling it if you need to, but in the meantime youre still getting some interest paid
And all that ignores the potential to reduce tax elsewhere by offsetting losses in one organisation against other profits elsewhere
Very risky to leave an oustanding £80m for someone else. New owner buys it for £1, declares us insolvent and then puts us in administration. Someone buys club agreeing to pay 10p in the £ and £80m just became £8m.
I wasn't suggesting them selling it though
Ehab said they don't need to
Once the parachute payments run out, unless he finds a way to appease the dwindling crowd and get them to come back, he either has to sell or get the club liquidated.
If they've repaid the loan then they don't really care if the club goes to the wall.
Agreed
I just think they'll be trying to go part way there for now
Repaying some loan but keeping some debt to keep an interest payment ticking over too
I don't base this on any specific knowledge though, just a hunch
They need some working capital so they might leave a bit of cash and a bit of debt, with enough cash left to repay the debt whenever they want.
Far too risky leaving debt as it is, after next season there's no parachute money and the club's worth a fraction of the debt.
I'm sure they'll have paid down at least some of the debt, there's no tax on the loan repayments and they've got tens of millions to take out.
I'm sure they'll have paid down at least some of the debt, there's no tax on the loan repayments and they've got tens of millions to take out.
But if the loan is repaid there will be no other debt so I think it's unlikely the club would go to the wall.
It's more likely the budget will reflect attendances and we'll slip into lower league oblivion.
Is this like when you went to the fair the other night? Remember? It was pissing down. Right?Way too much information I'm off to pub to reflect
So which pub is it tonight Chazz?
But what is in it for them? Lower leagues still require expenses. If we got into league 1 I could see attendances falling well below 10k and, after paying 14 youth players and a manager, I doubt there would be much left to pay the vice chairman. I believe once they've repaid the loan they will try and make the club break even (not competitive) and sell for whatever they can get.
As has been alluded to, if they repay the loan then the interest on it over 10 years would allow them a healthy profit (but not quite the cash cow they were hoping for).
One with mirrors obviously, or highly polished windows.Is this like when you went to the fair the other night? Remember? It was pissing down. Right?
So which pub is it tonight Chazz?