This just popped up on twitter RE: NUFC Debt.

http://www.toontastic.net/board/index.php?showtopic=31383&st=0

Someone has posted this on another forum suggesting that Mike Ashley bought NUFC in the same means as the Glazers at Man Utd.

Now it may not be true but it certainly makes for interesting reading, any financial experts on here willing to give their views?

 

I do business at college?

 

Look at post #3

 

I've got a Finance degree and I'm still confused...

 

Its not quite what the guy thinks, basically MA paid down bank debt but instead of it counting as equity finance he has taken on the debt himself, meaning aswell as profits, he gets paid interest

edited to adjust yet more appalling spelling!

 

[QUOTE="not" geniusvoiceoreason;1208286]Its not quite what the guy thinks, basically MA paid down bank debt but instead of it counting as equity finance he has taken on the debt himself, meaning aswell as profits, he gets paid interest

edited to adjust yet more appalling spelling![/QUOTE]

in more simpler terms please? i've no idea when it comes to this sort of thing. thanks.

 

More debt added after Ashley took over all owned to him, this must be for the wages he offered to players like Smith and Geremi.

 

Before he bought it, the club was owned by shareholders, but owed money to banks.

Ashley bought out the shareholders, but the club he now owned owed money to banks.

Ashley paid off the banks, but the club now owes him those debts (he could have written them off and counted it as equity investment).

The difference to Man U, is that the Glazers holding company own the club but have financed it by borrowing themselves.


Thats not more simple really is it?

 

I don't think so.

Ashley established St James Holdings Limited purely as an instrument to buy NUFC and to hold the ownership of the club. As it is a Limited Company it is a separate legal entity to both. As MA put in the cash to buy the shares in NUFC St James Holdings owes the money to Mike Ashley hence a £138m debt. Although this means that at this stage the shares and therefore ownership of the club are held by the holding company not MA directly. The unknown factor in this is who officially owns St James Holdings Limited? I would suggest MA directly or alternatively it is owned by a Trust Company with Ashley as both the Settlor and the Beneficiary.

I don't get his leap to the conclusion that there is any sort of leveraged loan going on here. But maybe that is just me!

 

[QUOTE="not" geniusvoiceoreason;1208372]Before he bought it, the club was owned by shareholders, but owed money to banks.

Ashley bought out the shareholders, but the club he now owned owed money to banks.

Ashley paid off the banks, but the club now owes him those debts (he could have written them off and counted it as equity investment).

The difference to Man U, is that the Glazers holding company own the club but have financed it by borrowing themselves.


Thats not more simple really is it?[/QUOTE]

thanks pal!

 

So basically nothing we already knew, Ashley bought the club and also gave the club an interest free loan to clear all the debts off.
So if he leaves the club or new owner would need to pay him them as well.

 

He sees 'debt' or 'loan' and alarm bells rings I guess.

I also assume MA has financed it this way in some insane hope that he will use the 'owings' as some way of justifying a £138m plus sale price in the future?

 

Is it interest free? I assumed he was charging interest, but never actually knew.

 

if you want a full detailed analysis of NUFC finances, now 9 months out of date, look up the swiss rambler blog.

 

[QUOTE="not" geniusvoiceoreason;1208539]He sees 'debt' or 'loan' and alarm bells rings I guess.

I also assume MA has financed it this way in some insane hope that he will use the 'owings' as some way of justifying a £138m plus sale price in the future?[/QUOTE]

He will want the £138m back yes so in effect it needs to be added to the value of NUFC if you want to gauge the value that MA is going to want to re-coup from any sale.

The main reason he will have done it this way is to have the club owned by a Limited company thereby protecting himself from unlimited liablility in the even that the club goes belly up. Technically if the club goes into administration or worse then he is just another person owed money by the club and not the person they can look to to repay them.

 

[QUOTE="not" geniusvoiceoreason;1208548]Is it interest free? I assumed he was charging interest, but never actually knew.[/QUOTE]

I'm pretty sure I've read somewhere that it was an interest free loan.

 

Yes the loans from MA are interest free.

Although (sorry to bore again) we have to remember that the FIFA Regs deem this unfair so in the annual Break Even Calculation which the club will have to submit an interest expense has to be added back in as an adjustment. Can't remember the figure I estimated some time ago on another thread but i'm pretty sure it was in the region of £8m per annum additional expense we will have to be able to cover in order to be eligable for europe. We need to get those loans paid off!!!

Note: just to make it clear the adjustment to the Break Even Calculation is an "on paper" expense, the club doesn't actually have to pay the interest.

 

I'm downloading the reports for St James Holding Ltd now from Companies House.

I'll let you know if anything interesting comes out of it but it's been a real b***h to get an updated version.

I think it may now be held offshore.

 

So how many players will we have to sell before we pay Ashley back?

 

When does the northern rock shirt sponsor end?

Whats the odds of sports direct becoming our shirt sponsor and Ashley putting no money into the club for it?