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SaintsFan wrote:

What about the £3 million private loan by one of the chief's buddies based in Asia? (I can't remember his name)

You mean Mike Coleman.

This is not external debt as he is a major shareholder. External debt is entities like a bank of a finance company etc etc.

It would make no sense for a major shareholder to call his own debt in, even if he/she could as that would be financial suicide. Hence it is not classed as external debt.

The amount was actually £6M of which £3M was a term loan and £3M is convertable to shares which if converted would give him around 38% of the club.

saint at wire wrote:

You mean Mike Coleman.

Yes, that's the bloke.

This is not external debt as he is a major shareholder. External debt is entities like a bank of a finance company etc etc.

Ah, ok. But what happens to that debt in terms of records? Does it appear anywhere?

It would make no sense for a major shareholder to call his own debt in, even if he/she could as that would be financial suicide. Hence it is not classed as external debt.

Didn't one of the directors at the Bulls call in his loan? Maybe that was just hearsay. I'm sure I read that one of the directors at Gateshead did so and by calling it in brought the club to its knees.

The amount was actually £6M of which £3M was a term loan and £3M is convertable to shares which if converted would give him around 38% of the club.

Did he loan both aspects? I didn't know that. I thought the rest was shared between the directors. Do you think he's going to be our next Mr Big?

SaintsFan wrote:

Yes, that's the bloke.

Ah, ok. But what happens to that debt in terms of records? Does it appear anywhere?

Didn't one of the directors at the Bulls call in his loan? Maybe that was just hearsay. I'm sure I read that one of the directors at Gateshead did so and by calling it in brought the club to its knees.

Did he loan both aspects? I didn't know that. I thought the rest was shared between the directors. Do you think he's going to be our next Mr Big?

The other directors capitalised their loans in the previous year to share capital amounting to around £750,000 I think before he came along and solved all Eamonn's problems. Capitalising loans is swapping debt for shares in the business, thus cancelling the debt.

Mr Big? He is probably as much as a businessman as he is a saints fan.
He will have seen confidential information which convinced him it would make money on a regular basis. So when the club starts making money it will be able to start paying dividends to the long suffering shareholders - then would be a good time to convert the £3M into shares.

With regards to your previous questions -
£3M will be shown in the balance sheet in the accounts as a straight term loan - with or without agreed repayment terms and an interest rate
The other £3M will be shown as connvertable loan notes separately which is viewed in the finance industry as quasi capital i.e. a hybrid between debt and share capital. From a lending point of view it is better than debt but not as good as share capital.

If a director called in his loan(s) it would usually finish the company off; so financial suicide usually.

bewareshadows wrote:

In the end though the value of the asset can never be realised. So the asset value does not really mean much does it?

In effect the club needs a place to play, whether that asset is worth 1m or 1billion. That money will never be seen. It's not even the same as a house value as you can buy and sell houses and make money on it. Stadia can't be bought and sold in the same manner.

In the end it's the revenue and expenditure that are key. The fact that the club has absorbed so much in losses shows the efforts that Big Mac and co have gone to, puts any squad details well and truely into the shade.

Although you are correct in as far as cash flow is king, you are not strictly correct in saying that the asset can never be realised.

For example, it could be sold and leased back; like many of the supermarkets do.
The club could aslo raise cash via a mortgage of say £10M (I could help with that as its my job!)

Fortunately we are in position where Mike Coleman came in with £6M and so we didn't need to do any of these things.

Certainly if you don't own your stadium (whisper: wigan) then raising cash in this way is not an option.

saint at wire wrote:

The other directors capitalised their loans in the previous year to share capital amounting to around £750,000 I think before he came along and solved all Eamonn's problems. Capitalising loans is swapping debt for shares in the business, thus cancelling the debt.

Do the shares have any value though?

Glad you explained 'capitalising the loans' because while I know what capital (noun) is and a loan is, 'capitalising loans' just sounded brutal!

Mr Big? He is probably as much as a businessman as he is a saints fan.

That was my daft way of saying the chairman. Do you think he will become the next chairman?

With regards to your previous questions -
£3M will be shown in the balance sheet in the accounts as a straight term loan - with or without agreed repayment terms and an interest rate
The other £3M will be shown as connvertable loan notes separately which is viewed in the finance industry as quasi capital i.e. a hybrid between debt and share capital. From a lending point of view it is better than debt but not as good as share capital.

Thanks for that. I've just understood a bit of the chairman's previous statement that had my mind imploding.

If a director called in his loan(s) it would usually finish the company off; so financial suicide usually.

Yep, that's what happened to Gateshead. And they haven't won a match in the subsequent 27 months.

SaintsFan wrote:

Do the shares have any value though?

Glad you explained 'capitalising the loans' because while I know what capital (noun) is and a loan is, 'capitalising loans' just sounded brutal!

That was my daft way of saying the chairman. Do you think he will become the next chairman?

Thanks for that. I've just understood a bit of the chairman's previous statement that had my mind imploding.

Yep, that's what happened to Gateshead. And they haven't won a match in the subsequent 27 months.

We are so lucky to have Directors and shareholders with deep pockets and a loyal and growing fanbase but we will have to turn in a profit at some stage. At least that is now looking likely.

I do feel genuinely so sorry for fans of clubs like Bradford, Leigh, Cas and Salford etc as they do not seem to have the possibility of making a profit any time soon. Wilkin is right - we need to sort out the finances in Rubgy League.

One thing puzzled me which was why with a salary cap of £1.65M (flexible to a max of £1.75M), only a few clubs seemed capable of making any money on income of between £4M and £7M.
When I looked into it - there was what seems a big imblance between playing staff and non-playing staff i.e. there seems an awful lot of non-playing staff at almost every club to what seems logical. For example at Saints we ad 93 coaching and playing staff (that seemed high in iteslf) plus 62 other staff.

I'm convinced there is a major cost imbalance.
The other big factor was the lack of non RL related income. Wire for example lease out a lot of office space to the NHS.

Thank the lord for saint at wire. Excellent posts.

BackrowSaint wrote:

Thank the lord for saint at wire. Excellent posts.

Thanks for the comment.

I wish I was as knowledgable about the game as I am at finance!

Judder Man wrote:

We will have reduced profit this year due to the fitting out of the stadium being classed as expenditure

I would expect such costs to be capitalised, so will drip through to P&L over time rather than in year incurred.

EDIT - should have read the whole thread before posting.

saint at wire wrote:

So when the club starts making money it will be able to start paying dividends to the long suffering shareholders - then would be a good time to convert the £3M into shares.

No shareholder in a rugby league club should ever be looking at getting a dividend. The stadium should allow Saints to operate solvently as a top level rugby league club/team. If its looked upon as a business asset to realise profits for distribution to shareholders then the team will inevitably suffer.

The year at Widnes was obviously horrendus financially. How much was turnover down by? I would guess the £2.4m loss is a record for any Super League team. It just goes to show that Super League clubs, together with 99% of all other professional sport clubs, rely upon the generosity of wealthy benefactors to survive as a successful club.