West Ham ground share news...

[justfookinhitit]

The current so-called "credit crunch" is in effect increasing the borrowing cost for banks, who in turn pass those higher costs onto their customers. And with Liverpool looking to borrow hundreds of millions those higher borrowing costs that are being passed to them amount to something significant.

I read a few days ago that the new Liverpool owners, along with downgrading some aspects of the stadium design to cut costs, are looking to restructure the finances of the club and in effect do exactly as the Glazers have, which is to transfer the debt they took on and secure it instead to the club's assets. So rather than the owners of the club carrying the debt, the restructure basically makes them debt-free and transfers the liabilities for servicing the debt to the club.

It looks like semantics but trust me it isn't - if the debt cannot be serviced the banks will now go after the assets of the club (players, merchandising rights, even the stadium) and not the owners, and that is a significant difference. It also makes it easier for the owners to borrow for other investments if they no longer are personally carrying this debt. And as Arsenal and Manure are both seeing, they are able to just pay the interest on the debt, but none of the debt itself, meaning that they will be carrying debt long into the future (an no doubt long after the current owners have marched off into the sunset with pockets full of cash).

 

[Legend10]

The current so-called "credit crunch" is in effect increasing the borrowing cost for banks, who in turn pass those higher costs onto their customers. And with Liverpool looking to borrow hundreds of millions those higher borrowing costs that are being passed to them amount to something significant.

I read a few days ago that the new Liverpool owners, along with downgrading some aspects of the stadium design to cut costs, are looking to restructure the finances of the club and in effect do exactly as the Glazers have, which is to transfer the debt they took on and secure it instead to the club's assets. So rather than the owners of the club carrying the debt, the restructure basically makes them debt-free and transfers the liabilities for servicing the debt to the club.

It looks like semantics but trust me it isn't - if the debt cannot be serviced the banks will now go after the assets of the club (players, merchandising rights, even the stadium) and not the owners, and that is a significant difference. It also makes it easier for the owners to borrow for other investments if they no longer are personally carrying this debt. And as Arsenal and Manure are both seeing, they are able to just pay the interest on the debt, but none of the debt itself, meaning that they will be carrying debt long into the future (an no doubt long after the current owners have marched off into the sunset with pockets full of cash).

I thought that they had already done this which is what I was referring to earlier when I mentioned UTD & Liverpools leveraged ownership. So this isn't the case but might be soon.

It's going to be real interesting when and I believe it will be when a 5th powerhouse emerges and these clubs start to service debt without guaranteed CL places.

Question...As interest rates are generally cut is it likely or possible that commercial sub prime rates as this are increased to ease the banks own borrowing costs?

 

[Stoof]

So rather than the owners of the club carrying the debt, the restructure basically makes them debt-free and transfers the liabilities for servicing the debt to the club.

They secured the debt on personal guarantees alone?? Surely not? Surely some of Liverpool's assets are secured too?

 

[justfookinhitit]

Question...As interest rates are generally cut is it likely or possible that commercial sub prime rates as this are increased to ease the banks own borrowing costs?

My understanding is that when interest rates were rising last year and early this, the banks weren't passing on all of that rise to consumers. And as interest rate start to fall, similarly they won't pass it all on to consumers either. It really depends on not so much the interest rate but the rate at which banks will lend to each other, and while we are seeing the interest rate fall by 0.25% the rate at which banks lend to each other isn't falling by anywhere near that amount. I don't believe banks will increase their interest rates while the overall interest rate is falling, but there is nothing to physically stop them doing that other than the threat of their client base going elsewhere.

 

[justfookinhitit]

They secured the debt on personal guarantees alone?? Surely not? Surely some of Liverpool's assets are secured too?

I've not had enough caffeine today, so I wasn't as clear in my original mail.

No, not personal guarantees, the debt was on their company. Now they are transferring the debt from that holding company to Liverpool FC, a company which they happen to own. But when that debt sits firmly on the books of Liverpool and not the holding company it makes it very easy for them to separate themselves from it. The income of Liverpool has to cover the servicing of the debt, not the income of the holding company. And if they decide to sell off the club in the future, the debt will seamlessly go with it and will not remain with the holding company.

 

[Legend10]

My understanding is that when interest rates were rising last year and early this, the banks weren't passing on all of that rise to consumers. And as interest rate start to fall, similarly they won't pass it all on to consumers either. It really depends on not so much the interest rate but the rate at which banks will lend to each other, and while we are seeing the interest rate fall by 0.25% the rate at which banks lend to each other isn't falling by anywhere near that amount. I don't believe banks will increase their interest rates while the overall interest rate is falling, but there is nothing to physically stop them doing that other than the threat of their client base going elsewhere.

Cheers for that.

I see some choppy waters ahead for at least 1 of Utd, Liverpool or Arse.

 

[justfookinhitit]

I agree, Legend. It only takes one of those clubs to slip up in the league one season and not get to the Champions League and their finances have a decent sized hole in it. They'd still suffer a dent sized hole in their finances if they fell out of the Champions League in the round after the group stage, because the big money kicks in for the later rounds.

Everything is fine for them now, but they will have to continue servicing that debt for some time to come without being able to chip away at the underlying debt.

 

[Stoof]

No, not personal guarantees, the debt was on their company. Now they are transferring the debt from that holding company to Liverpool FC, a company which they happen to own. But when that debt sits firmly on the books of Liverpool and not the holding company it makes it very easy for them to separate themselves from it. The income of Liverpool has to cover the servicing of the debt, not the income of the holding company. And if they decide to sell off the club in the future, the debt will seamlessly go with it and will not remain with the holding company.

But if push came to shove, surely the corporate veil would be pierced, and a court would surely rule that the debts are the responsibility [ultimately] of the people that transferred them in such a manner.

To be honest this is entering into ridiculous hypotheticals - mainly (totally) by me - but what is true, is as you say, that Liverpool are definitely down-scaling. Whether it be cost of debt or cost of construction, it won't happen as how they wanted it originally.

 

[justfookinhitit]

Hear what you're saying Stoof, but if push came to shove the owners of the club would be selling it on long before proof of the downfall was to ever become apparent. they will be well aware of issues coming down the line that the balance sheet and P&L conveniently don't highlight.

I don't blame Liverpool for downscaling their stadium plans a bit. They are retaining a 70,000 seater stadium but getting rid of some of the fancy trimmings which would otherwise escalate costs. When spurs come out with our plans for the London version of the Maracana stadium, I'll be fine with them not going overboard and being prudent.

 

[worcestersauce]

Hear what you're saying Stoof, but if push came to shove the owners of the club would be selling it on long before proof of the downfall was to ever become apparent. they will be well aware of issues coming down the line that the balance sheet and P&L conveniently don't highlight.

I don't blame Liverpool for downscaling their stadium plans a bit. They are retaining a 70,000 seater stadium but getting rid of some of the fancy trimmings which would otherwise escalate costs. When spurs come out with our plans for the London version of the Maracana stadium, I'll be fine with them not going overboard and being prudent.

The Maracana doesn't have a roof so there's a saving straight away

 

[justfookinhitit]

Personally when we have our own version of the Maracana i'm looking forward to there being plenty of Brazilian babes scattered around the stands.

 

[worcestersauce]

And would they reflect the topless nature of the ground?

Where's me coat?

 

[hashmander]

The current so-called "credit crunch" is in effect increasing the borrowing cost for banks, who in turn pass those higher costs onto their customers. And with Liverpool looking to borrow hundreds of millions those higher borrowing costs that are being passed to them amount to something significant.

I read a few days ago that the new Liverpool owners, along with downgrading some aspects of the stadium design to cut costs, are looking to restructure the finances of the club and in effect do exactly as the Glazers have, which is to transfer the debt they took on and secure it instead to the club's assets. So rather than the owners of the club carrying the debt, the restructure basically makes them debt-free and transfers the liabilities for servicing the debt to the club.

It looks like semantics but trust me it isn't - if the debt cannot be serviced the banks will now go after the assets of the club (players, merchandising rights, even the stadium) and not the owners, and that is a significant difference. It also makes it easier for the owners to borrow for other investments if they no longer are personally carrying this debt. And as Arsenal and Manure are both seeing, they are able to just pay the interest on the debt, but none of the debt itself, meaning that they will be carrying debt long into the future (an no doubt long after the current owners have marched off into the sunset with pockets full of cash).

arsenal's interest rates are fixed and their latest financial reports in september showed that they already started paying down the principle. man utd is currently just servicing the interest payments.

 

[Legend10]

arsenal's interest rates are fixed and their latest financial reports in september showed that they already started paying down the principle. man utd is currently just servicing the interest payments.

Do you know how much the debt is against Arse and what there annual interest payment is?

 

[millhouse]

Lots

 

[hashmander]

Do you know how much the debt is against Arse and what there annual interest payment is?

http://www.forbes.com/sport/2007/09...ccer-lifestyle-sports-cx_pm_0924emirates.html

Replacing the £260 million loan the club took on to build the stadium with bonds will cut the annual debt service cost from £32 million to £20 million. The club has also started to retire its bonds. The outstanding balance as at May was £255 million.

Redevelopment of Highbury and another property will contribute positive net cash of £90 million over the next three years, Hill-Wood says. He expects the redevelopments to produce "confortably in excess of £300 million" in revenue.