Hicks to spend "big"

[James P]

Clearly the banks dont have much faith in the current owners

If you worked in the financial sector you'd know that the banks currently have very little faith in most businesses, and are loathe to lend full stop. It's not particularly a reflection on G&H, however much you might want it to be!

[Exiled_red]

If you worked in the financial sector you'd know that the banks currently have very little faith in most businesses, and are loathe to lend full stop. It's not particularly a reflection on G&H, however much you might want it to be!

Spoilsport

[Charly]

That's incorrect. The majority of the debt is not secured against the Club at all, it is secured against G&H's personal assets, and always has been. Plus the borrowing has never reached £350m, or anywhere near that.

The structure is that Kop Investment LLC owns Kop Football (Cayman) Limited (KFCL), which owns Kop Football (Holdings) Limited (KFHL), which owns Kop Football Limited, whichs owns the Club and other trading assets.

As at July 2008 (the last filed accounts for KFHL) the total facility was £350.5m, of which £245m was the facility for KFL, and £105.5m was the facility for the Club. Total draw down against that at that date was just under £260m, and we all know that £60m has been paid against that since - hence the £200m that Hicks talks about.

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I thought it was £350m at its peak, when they purchased the club, and then borrowed extra to start the stadium.

I conceed the point that it may only be £200m overall now, but my original point stands. IF we need to borrow a further £400m for the stadium, it will virtually cripple us. We will need to sell players not to go even further in debt while the stadium is being built. How exactly are we going to spend big in the summer? WE just dont have the cash. We made a loss last year, and extra sponsorship isnt going to get us a big name player, but pay the extra wages of the contracts signed in the summer, and make up the interest payments on the debt.

The only way to make the stadium work without the club carrying the debt is if G&H own the stadium as a seperate company, and charge LFC to play in it. GG already said they wont finance the stadium from cash.

And surely the point about KFHL is just semantics. Its a SPV, and if its only asset is LFC, then LFC carries all the debt, and pays all of the interest.

[James P]

I thought it was £350m at its peak, when they purchased the club, and then borrowed extra to start the stadium.

The maximum facility was £350m, but the borrowing never reached that level, according to the accounts.

And surely the point about KFHL is just semantics. Its a SPV, and if its only asset is LFC, then LFC carries all the debt, and pays all of the interest.

No offence, but do you even understand what an SPV is? KFHL hasn't been set up as an SPV, it's simply a holding company. The loans are mostly secured on G&Hs personal assets, so even if it was an SPV it still wouldn't place the majority of the liability on the Club, as the majority of the liability doesn't subsist in KFHL in the first place.

[Charly]

The maximum facility was £350m, but the borrowing never reached that level, according to the accounts.

The accounts only show year end. You may well be right though. Its not the point I was trying ot make. Our interest payments are already high. It only makes things worse if we are paying those levels on a smaller debt.

No offence, but do you even understand what an SPV is? KFHL hasn't been set up as an SPV, it's simply a holding company. The loans are mostly secured on G&Hs personal assets, so even if it was an SPV it still wouldn't place the majority of the liability on the Club, as the majority of the liability doesn't subsist in KFHL in the first place.

None taken, mate.

It looks like it to me (its not my area of expertise by any means). Are you forgetting that we will need to borrow for the stadium, and these various companies may have been set up to facilitate this. Why else would we be owned by that many companies? to place the debt in a slightly different place so its not seen as directly against the club...? Unless you can explain the need for the current set up, which as you have stated has the club with 4 parent companies

Incidently, how do you know exactly what the debts are secured against?

[James P]

It looks like it to me (its not my area of expertise by any means). Are you forgetting that we will need to borrow for the stadium, and these various companies may have been set up to facilitate this. Why else would we be owned by that many companies? to place the debt in a slightly different place so its not seen as directly against the club...? Unless you can explain the need for the current set up, which as you have stated has the club with 4 parent companies

The reason that I ask is that SPVs/SPEs are pretty specialist, are set up in a particular way to ringfence a particular risk, and are very closely scrutinised by the regulators, particularly in the wake of Enron where SPVs were used inappropriately. I doubt very much that the bank would want to lend to a structure where an SPV is the borrowing entity.

I don't think that the structure is particularly intended to hide anything, as the disclosure requirements make it very difficult for the debt to be shown in a misleading way.

Having four parent companies isn't the norm, but nor is it particularly odd. Bear in mind that the directors are mostly non-resident, so having a US parent makes sense. The intermediate companies may well be in place as there are plans to develop other revenue streams (including the stadium) that the directors would like to put in different companies. I'm a chartered accountant, and have seen far more complicated structures in businesses with far less turnover, so it doesn't ring any alarm bells with me particularly.

Incidently, how do you know exactly what the debts are secured against?

As said, I'm a chartered accountant, so getting hold of a set of the latest KFHL accounts wasn't much of a problem! The information is all disclosed in the creditors and investment notes, and the directors' report.

[Charly]

So where are the companies domiciled?

Kop Investment LLC - US?
Kop Football (Cayman) Limited (KFCL), Cayman Islands
Kop Football (Holdings) Limited (KFHL) Uk?
Kop Football Limited UK?

[James P]

So where are the companies domiciled?

Kop Investment LLC - US?
Kop Football (Cayman) Limited (KFCL), Cayman Islands
Kop Football (Holdings) Limited (KFHL) Uk?
Kop Football Limited UK?

Yes to all of the above, as far as the accounts tell us.

The only odd one is the Caymen one, but that will be for tax purposes (the Caymans are a commonly used tax haven).

[Fivex]

Keep it up James, most of us don't have a clue about this side of things so credit where it's due (pun intended). You're explaining these things with such clarity and it's much better - for me at least - getting this type of insight rather than the random figures the papers like to make up.

[Charly]

My feeling is that the stadium will built by one of the companies and not be owned by the club, so if they did sell up, they could charge us for using their stadium. Its one way around the debt ruling, although the way things are going we wont make the Champions league anyway...

[James P]

Keep it up James, most of us don't have a clue about this side of things so credit where it's due (pun intended). You're explaining these things with such clarity and it's much better - for me at least - getting this type of insight rather than the random figures the papers like to make up.

Thanks, and no problem. As I say, it irritates me when the media make claims and quote figures that have no basis in fact.

[Shanks]

Nicked from RAWK..




Hicks:....."and then I said we'd spend in the summer."



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[James P]

My feeling is that the stadium will built by one of the companies and not be owned by the club, so if they did sell up, they could charge us for using their stadium. Its one way around the debt ruling, although the way things are going we wont make the Champions league anyway...

I think that you're absolutely right about the stadium - it will sit in one of the other companies, or indeed in a new company. I'll be shocked if the asset is in the Club.

[Charly]

I think that you're absolutely right about the stadium - .

Ya see? Im not a total idiot .... all of the time