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NUFC - A leveraged buyout?


Tooj
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ChezGiven has just put this up on Toontastic, makes for rather interesting reading.

 

Well after a bitterly disappointing end to the transfer window, my mind has turned to the financial state of the club. Many apologies for being a boring bastard but for me if any sense is to be made of what is going on then some answers must come from the finances. I have said a few times on here that the Carroll money must be being used to cover the losses of the previous 2 seasons. Thats not offered in any capacity other than an explanation for why he wont spend. What troubles me more is that if the Carroll money has been used to cover these cash losses, then in effect these losses never occurred, its as though (financially) we stayed in the premiership, we just lost a player. However, given the increasing TV revenue and the massive reduction in wages then surely this last season should have seen a surplus and surely this surplus is what should have been invested. What possible reason is there for not having extra funds available?

 

The only reason i can think of is the total debt of the club. Any surplus made is being funnelled to pay off debts, this has happened at low levels over the last few seasons.

 

So i went back to the debt data and one thing struck me that i admit has always been in the back of my mind but never had the time to delve into (I did make some comments to the swiss rambler on this over the summer but he never got back to me). There has been a few discussions on here on this so maybe this has already been resolved and i missed it but i wanted to work out why we have £240m worth of debt? In the chart below you will see that the debt grew from £55 to £77m from 2005 to 2007. Our debt position was clearly getting worse but it then jumps by £138m in 2007, showing up in 2008.

 

http://img30.imageshack.us/img30/3143/16newcastledebt.jpg

 

Now, unless i'm mistaken regarding the liability of the club for debt held by SJH Ltd, it seems to me that Mike Ashley lent SJH Ltd £138m in 2007, which is the exact price Ashley paid for the club. Although not the exact definition of a leveraged buy-out, where a bank lends money secured against the asset, the principle is the same if the money earned from the business is then used to pay back this debt as per Man Utd. What causes me  concern is the figure in the chart for 2009 which shows that the specific £138m debt to Ashley is reduced to £132m. Forgive me for not being a proper financial expert but in what way is this different from the Glazers using Man U funds to pay back the debts they used to buy the club?

 

Surrely if the Carroll money covered the losses of the last 2 seasons and Ashley bought the club outright then the debt position should be slowly reducing itself from £77m as per 2007 accounts (which included stadium expansion). If i havent got this completely wrong (i dont really understand the financial relationship between the holding company and us and why the SJH Ltd debt is showing in our accounts), then was NUFC subject to a covert leveraged buy-out? Does this explain why we are so stifled financially? Was it a leveraged buy-out or similar in principle? Maybe this post is a waste of time but i dont get it.

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

I think I mentioned the 250m a while back, can't remember what came of it though. I realise that's no help  :lol: :blush:

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

so Ashley didn't spend a penny at all and got himself Newcastle United? this is getting better, is this even legalize?

 

 

 

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

I think I mentioned the 250m a while back, can't remember what came of it though. I realise that's no help  :lol: :blush:

 

:lol:

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

I think I mentioned the 250m a while back, can't remember what came of it though. I realise that's no help  :lol: :blush:

 

:lol:

 

I think quayside talked me through it iirc, I might have a look back

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Guest north shields lad

This is against the law in lots of country's but unfortunly not in the UK. Ask Liverpool. Whats even more worrying if it is true, is that we are selling season tickets for the next 12 years. If someone come in and bought the club, they would find that a proportion of the profits from tickets for the next 12 years, has already gone in the back pocket of the former owner. Infact that makes us look like a bad proposistion to buy.

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

Would make sense as to why we've not spent much. Of course the main problem with us doing this as opposed to Man Utd (who weren't very happy with the Glazers take over anyway) is that we don't have nearly as much money coming in as they do, resulting the net debt growing while the St James Holdings debt is being paid back. A lot more selling of players to come if that's the case.

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So Mike buys the club for 138m and labels the entire cost of the purchase as "club debt". Have I gotten it right?

 

Pretty much. Mike loans the money to SJH Ltd, who actually buy the club. Now this loan has been added onto the club's debt, to be paid back to Mike.

 

I think I mentioned the 250m a while back, can't remember what came of it though. I realise that's no help  :lol: :blush:

 

:lol:

 

I think quayside talked me through it iirc, I might have a look back

 

Hopefully you can find it.

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