£175m Loan from the Bank of England

[coys200]

As a small aside your answer is 'anyone who has ever taken out an interest only mortgage' so literally millions of people lol. It's the business model of most medium to large scale property investors (including myself).

You’ve obviously completely taken it out of context. The club aren’t suddenly gonna magic up £637m in 15 years time unless we get taken over by a sugar daddy. Interest only loans are only viable in very specific situations. And over 15 years would be very risky unless you can be certain of making a profit long term and clearly that wouldn’t apply to the stadium as it’s not gonna be sold unless part of a takeover.

 

['O Zio]

We have gone from lower mid table to top four. Had numerous CL runs including a final.

I know some are only interested in trophies but we have undoubtedly improved a huge amount overall.

If you look at how clubs like West Ham are run now and go back to see how Everton, Villa and other clubs a similar size to us have done and you see we have done well.

We can disagree on the points above but the fact that it isn’t our money has absolutely nothing to do with this and is the point I was disagreeing with you on.

Spot on. Some people refuse to see the wood for trees when it comes to Levy.

 

[vegassd]

You’ve obviously completely taken it out of context. The club aren’t suddenly gonna magic up £637m in 15 years time unless we get taken over by a sugar daddy. Interest only loans are only viable in very specific situations. And over 15 years would be very risky unless you can be certain of making a profit long term and clearly that wouldn’t apply to the stadium as it’s not gonna be sold unless part of a takeover.

I don't want to get drawn into a financial ding-dong, but from what I've read previously about the stadium finance it is separated into 3 different bond issues which will mature (be repaid) at 15, 25 and 30 years from issue which was last year. The bonds total a little over £500m so there's the outstanding loan of around £100m as well.

This means we won't have to pay back the £500m in 15 years time - only the amount that was issued in that 15 year bond.

And with a bond that is pretty much what you do - you pay the whole lump sum back when the bond matures. It's very much like an interest-only loan. You pay an annual fee to whoever lent the money but that annual amount does not detract from the overall lump sum that needs repaying. This is a fairly common financial tool used to raise a lot of money quickly without relinquishing control like a share issue or even a loan.

So the £3.5m per year (I actually thought it was higher) is just the service payment on the bond. It has to be paid each year and it does not decrease the overall amount that has to be paid back like you would typically be doing on a mortgage.

When viewing the repayment of the bond let's imagine that the 15 year bond holds about £300m of value - I don't know even rough numbers for these so just taking a guess for the argument's sake. That can be achieved by saving £20m per year over that time. And that saving doesn't even have to be linear - maybe 5 years of saving £10m followed by 10 years of saving £25m. Even in that over-simplified example it's very achievable.

The club will have plans for how they save that money to repay the bonds, and our friend C19 has thrown a spanner into the works almost immediately. I would imagine that this recent £175m loan will be designated to cover immediate cash flow deficits caused by C19 rather than used to try and service the bonds. That doesn't rule out some financial gymnastics in the future to meet the bond repayments, but that won't happen until the first bond matures.

 

[coys200]

We are paying back £35-40m a year not £3.5m. So we are clearly paying more than the interest as that’s around £14m.

 

[coys200]

These are the actual maturity dates of the bonds. I guess there is the possibility we could just pay the face value on maturity although I’d be very surprised especially the £300m in 2049. Although I guess by then levy might not care and will have probably sold the club. But there’s a myriad of different conditions that could be in the bonds that we don’t know about. All we really know is the interest rate and the maturity date. I guess we will know more when we see the next accounts when the first payments should show up.

 

[coys200]

But I’ll hold my hands up to MK yid in theory you could be correct about the 15 years but I’d be surprised if that was the reality.

Saying all that Levy has done an extraordinary deal with the refinancing.

 

[MillerT]

Listening to the Guardian football podcast, one of the hosts (This it was Ed Aarons) described the loan as putting us in pretty healthy position financially, seeing as we made the largest profit out of all the prem clubs last season. Fingers crossed we'll ride Covid out relatively okay, compared to alot of other prem clubs who unfortunately I think will struggle

 

[inclineyid]

You’ve obviously completely taken it out of context. The club aren’t suddenly gonna magic up £637m in 15 years time unless we get taken over by a sugar daddy. Interest only loans are only viable in very specific situations. And over 15 years would be very risky unless you can be certain of making a profit long term and clearly that wouldn’t apply to the stadium as it’s not gonna be sold unless part of a takeover.

Yep I took a stupid blanket statement out of context and showed it to be stupid, you're right.

 

[HedgieSpur]

This is a great point. Anyone who criticises Levy for being a shit chairman only needs to look at some of those other clubs.

The fact that we got to the Champions League final and had 2 legitimate title challenges is, in itself, a minor miracle. Yes it's bloody frustrating that we didn't win anything, and yes, I think Levy has made a few mistakes along the way, but to go from a perennial bottom half team to genuine challengers without any serious investment on the pitch is a truly staggering achievement.

If back in 2008 someone told you that in just over 10 years VIlla or Everton would reach a CL final, challenge for the title and have a brand new world class stadium, without any new owners coming in, I doubt your reaction would be "Well...if they don't win anything who gives a shit?". You either wouldn't believe it or you'd be massively impressed at how far they'd reached.

I genuinely can't think of a single other club in world football that has made such a big leap in similar circumstances. Not over such a sustained period, anyway.

I can...Atletico Madrid

 

[HedgieSpur]

But I’ll hold my hands up to MK yid in theory you could be correct about the 15 years but I’d be surprised if that was the reality.

Saying all that Levy has done an extraordinary deal with the refinancing.

We are extremely unlikely to be paying anything over and above the coupon for the 15 years. It simply wouldn't make sense to pay down part of the principal until maturity.

 

[Timberwolf]

I can...Atletico Madrid

They're about as close as you'll find - and what Simone has done is truly incredible - but did Atletico go through as big of a transformation? I mean, they won the league in 2001, 1995 and prior to Simone were already the 3rd/4th most historically successful Spanish team with the 4th biggest stadium.

Compare that with us: we last won the league in the 61-62, WHL was about the 10th/11th biggest stadium and we were a perennial lower-mid table side for the best part of 15 years.

 

[thebenjamin]

I can...Atletico Madrid

They wouldn't have been able to do anything remotely close to what they've done without 3rd party ownership.

 

[mr ashley]

They're about as close as you'll find - and what Simone has done is truly incredible - but did Atletico go through as big of a transformation? I mean, they won the league in 2001, 1995 and prior to Simone were already the 3rd/4th most historically successful Spanish team with the 4th biggest stadium.

Compare that with us: we last won the league in the 61-62, WHL was about the 10th/11th biggest stadium and we were a perennial lower-mid table side for the best part of 15 years.

Atletico are probably the closest, in so much as they’ve redeveloped their stadium, reached a CL final and closed the gap between the perennial la Liga winners and themselves. They’ve won La Liga in the past 5 years.
You actually could argue that Man City are the club who have broken through the best. They’ve done everything we have ( although not ‘organically’) and won the PL.
But I’d say Atletico are at the top of the “Pot Two” CL clubs. I’d include Dortmund, Lyon, Porto, Benfica, Inter and maybe Roma in that group. When you consider what we’ve achieved, how quickly we’ve done it and the manner in which it’s been achieved, it’s incredible progress. The next challenge is to sustain it.

 

[Shadydan]

Worth noting that Atletico have achieved that in easier circumstances than we have, for example 3rd highest wage budget in the league in a 3 team league, you're going to get the odd year of success at some point.

 

[shelfboy68]

Atletico are probably the closest, in so much as they’ve redeveloped their stadium, reached a CL final and closed the gap between the perennial la Liga winners and themselves. They’ve won La Liga in the past 5 years.
You actually could argue that Man City are the club who have broken through the best. They’ve done everything we have ( although not ‘organically’) and won the PL.
But I’d say Atletico are at the top of the “Pot Two” CL clubs. I’d include Dortmund, Lyon, Porto, Benfica, Inter and maybe Roma in that group. When you consider what we’ve achieved, how quickly we’ve done it and the manner in which it’s been achieved, it’s incredible progress. The next challenge is to sustain it.

Incredible job,incredible manager who has done what we have been unable to do, which is taken the club to actually bagging silverware something which has escaped us as a club.

 

[mr ashley]

Incredible job,incredible manager who has done what we have been unable to do, which is taken the club to actually bagging silverware something which has escaped us as a club.

Directly comparing us with Atletico doesn’t really work though. They were the third best team in la Liga for a decade. We’ve only been able to call ourselves that for about 3 years (and possibly not this season).

 

[Johno1470]

Has anyone with any financial knowledge been able to properly breakdown this loan we took out and give some insight? I'm sick of seeing journo's just throwing in the statement that we're skint as we had to take a £175 loan to cope. I assume it's much more than us being skint and taking advantage of a low interest rate? Prior to COVID we were one of the best run clubs in Europe financially. Even though we do have a stadium to pay for, I can't imagine we will struggle that much short term if fans are getting back into stadiums later this year? If we're struggling then surely the majority of clubs in the PL are worse off than us?

 

[Spartanspurs]

Has anyone with any financial knowledge been able to properly breakdown this loan we took out and give some insight? I'm sick of seeing journo's just throwing in the statement that we're skint as we had to take a £175 loan to cope. I assume it's much more than us being skint and taking advantage of a low interest rate? Prior to COVID we were one of the best run clubs in Europe financially. Even though we do have a stadium to pay for, I can't imagine we will struggle that much short term if fans are getting back into stadiums later this year? If we're struggling then surely the majority of clubs in the PL are worse off that us?

I imagine even if we're in a very good place financially we'd be happy to let the media talk up how skint we are, another card to play in any transfer negotiations.

 

[G Ron]

Has anyone with any financial knowledge been able to properly breakdown this loan we took out and give some insight? I'm sick of seeing journo's just throwing in the statement that we're skint as we had to take a £175 loan to cope. I assume it's much more than us being skint and taking advantage of a low interest rate? Prior to COVID we were one of the best run clubs in Europe financially. Even though we do have a stadium to pay for, I can't imagine we will struggle that much short term if fans are getting back into stadiums later this year? If we're struggling then surely the majority of clubs in the PL are worse off that us?

It’s actually relatively straight forward. The BOE CCFF has essentially purchased Commercial Paper issued by the club, which the club will need to repay upon maturity.
The terms of the facility state that the BOE will only purchase CP with a maximum tenor of 1 year and so Spurs will need to repay the BOE either upon maturity, or they can repay early without penalty.

CP is commonly used by banks and Corporations to fund themselves, however in times of market stress where liquidity dries up (which is exactly what happened during March) central banks often step in to get things moving again. There are similar facilities in the US which the Federal Reserve support and are more wider reaching in terms of eligibility. Essentially if spurs needed to rely on banks to buy CP it would’ve been far more expensive to raise the cash than it was to tap the facility offered by the BOE. In short, if Levy was only concerned by the short term cash flow issue presented by the pandemic, the CCFF is the perfect solution (in terms of plugging the gap and not costing a great deal).

Hopefully that makes sense ??

 

[RichieS]

Has anyone with any financial knowledge been able to properly breakdown this loan we took out and give some insight? I'm sick of seeing journo's just throwing in the statement that we're skint as we had to take a £175 loan to cope. I assume it's much more than us being skint and taking advantage of a low interest rate? Prior to COVID we were one of the best run clubs in Europe financially. Even though we do have a stadium to pay for, I can't imagine we will struggle that much short term if fans are getting back into stadiums later this year? If we're struggling then surely the majority of clubs in the PL are worse off that us?

Winner. If we're going down then the whole Premier League is. I think the board probably just saw cheap money available and went for it on the off-chance that it would be needed.