When Vichai and co took over I don't mind admitting, I thought it was more for recognition in the English market. What with appointing Sven and spending on a lot of expensive players. But I'm more than happy to admit I was wrong they should be given the freedom of the City. For what they have done for our club. And I have no doubt they will still be here in five years time. And with us making a comeback as a top ten premier league club and personally I hope Pearson is still manager!!!!!! Merry Christmas Leicester City.
Only short term so that the interest doesn't burden their investment. Medium/Long term they could reverse the process by having the club buy back the shares they've just issued themselves and they could provide the funds to do that using a loan. That process also wouldn't affect FFP other than by adding the interest back into the expenses. I've specifically highlighted the word could, I'm not saying they will. It's a good thing for all concerned at the moment, just don't get carried away.
They can't reverse it. They can't ask for the money back. Until the club is making a profit which won't happen in this league the owners can't take money out of the club for their own pockets King Power's wealth has soared in the last 12 months making the 100M small change to Vichai Tremendous support from them
Please don't try to teach the accountant how the purchasing and selling of shares in a business by the business itself works. They can't take a dividend until the club is making a profit, but I never mentioned a dividend, I said they could reverse the transaction they carried out today. As I don't know the specific number of shares issued in the club, lets say yesterday there were 100 shares in Leicester City in existence. Today they converted the debt into equity, which means the club created more shares that were then issued (sold) to the owners in exchange for the debt being written off. There are now 200 shares in Leicester City in existence. At any point in the future the club can purchase any of those 200 shares back from the owners if the funds are available. When they did that those shares would be destroyed because the club can't own itself, in the same way that the extra shares issued today had to be created. If the club didn't have it's own funds available from profits, the funds could be provided by the owners in the form of a loan. Assuming the shares were bought back for the same price they were issued at, such a transaction would have zero effect on the profit/loss of the club for the time in question, other than the restoration of an interest charge each year.
What a mockery Watford and now Leicester have made of FFP in the last few seasons - Basically Leicester have just cheated the system in a far superior way than Watford did. How can they turn £100M of loans owed into equity of a business worth £30M Just seen the FA are looking into this - what are those buffoons going to do - sweet FA no doubt!!
They'll have explained what the transaction does and the implications. There is no way that the transaction cannot be reversed in the way I described.
You still don't get it TC. We no longer have to repay the owners. Doesn't effect our costs in any way other then we don't have to pay the owners interest Private company value the club at 75M Again though TC don't let facts ruin a story
There is nothing to argue with here Proud. However, while i'm no accountant, there have been financial advisors and such on radio stations and local media saying how this is excellent news because it means Vichai and Top are in it for the long haul. If they wanted to take the money now they wouldn't have done it, it's as simple as that. But Ricardo is right, they could. But there really isn't a reason as to why they would.
Money cant be recalled The financial future of Leicester City has been secured after the owner effectively wiped out the club's £103 million debt. Chairman Vichai Srivaddhanaprabha has swapped the huge liabilities for shares in City, meaning he or his family can no longer call in what they are owed and potentially destabilise the club. The process used by Thai owner Mr Srivaddhanaprabha, known as a "debt-for-equity swap", has also been used by the owners of Manchester City and Chelsea. Financial expert and City fan Andrew Howard, of Thorpe Astley, said: "It means the club no longer has any debt, or at least very little debt such as that associated with day-to-day trading. "The owners can't call in those loans Read more: http://www.leicestermercury.co.uk/F...tory-20352762-detail/story.html#ixzz2oLWbUkbh
At what point did I say the loans would be recalled? I said they could easily be reinstalled. They've created equity by granting them new shares. Now view the process of equity buy back: http://www.investopedia.com/articles/02/041702.asp You see the part in that article where it says "You can think of a buyback as a company investing in itself, or using its cash to buy its own shares". If the company doesn't have the cash to buy back the shares itself there's nothing to stop it taking out a loan, say from the owners, and then using that money to complete the buy back. Effectively reversing the swap that was done today. The tax bit at the bottom is irrelevent as I did say they'd be buying back at the same price they were issued at so there's no profit to be taxed or not. As an example of a similar thing, how do you think Man Utd came to be in debt due to the cost of buying Man Utd? EDIT: I would just like to remind people as well, I did say from the very beginning that they weren't likely to, just that it was possible to. So whilst it's a good thing it's not the magic beans it's being made out to be.
.. not quite accurate - they have turned the debt into share capital ... but that share capital is still effectively an asset of monetary value that the owners are entitled to ... the main difference is that interest is no longer due ... instead they could extract 'money' (should we ever make any ) by way of dividend ...
