Blimey, does anyone else long for the days when if you wanted a chat about football you only needed a working knowledge of the offside law and an out of date issue of the Rothmans yearbook? Not a degree in accountancy...
Thanks to AB and Serious for putting some flesh on the bones in light of this latest newspaper nonsense though.
I know, I know. However instead of despair I am attempting to imagine some kind of scenario to save the club. A scenario that assumes no sugar daddy/mummy will come in.
However
The choices seem to be;
Jonathan Acworth succeeds in persuading a mega rich person to invest. One of us wins big rollover euromillions. A sugar daddy/mummy wants us, and pays Tone and Co for the club. The present lot stumble on, gradually depleting our resources/or having vast good fortune as Chris Powell gets us promoted. Oil/Fracking is discovered in the car park as a pothole collapses to reveal untold riches. We plan for a bleak yet survivable future. The club ceases to exist any more. The present lot change their mind and Kevin Cash pours in the dosh.
Dunno. However musing on some kind of plan helps me to withhold despair.
Knowing our luck, someone will find a load of oil under The Valley but they have to bulldoze the Covered End to get to it!
I think the criticisms of seriously_red's attempts to put down numbers, are seriously unfair. I exclude Airman's comments from that, since he is trying to clarify the numbers. Surely it is better to try and understand the numbers than just to sit wringing your hands? And once you have a decent idea of the numbers you can think about what to do about the situation. Or of course you can sit there still wringing your hands, bickering with your own fellow fans, while both Charlton and English football generally goes to hell in a handcart.
Seriously_red is just another fan, like all of you. He doesn't have privileged information but he's made a bloody decent job of trying to work out the numbers. if like Airman you can point to different numbers, good, post them, SR will take them on board and we will all have better understanding. What is wrong with that?
As to what you do about it, of course the idea of 5k fans putting in 4k now is fantasy, on the face of it. But as Seth says, Swansea are a good example of what can be done, and it is clear that some of their fans put in sizeable amounts. And if big German clubs are 51% in the hands of their fans, then clearly a lot of those fans have put in more than 5 euros too.
It's a reasonable point to aim at those who criticise the Board, "Do you have their money to put in, and will you do so?". But when somebody comes along trying to work out how we can as supporters fill the funding gap, and he gets written off as a fantasist, that is a disappointingly negative reaction. Of course SR doesnt have all the answers now. Give him and the rest of his admirable team time, and they might get there. To my knowledge nobody else in the fanbase is trying.
Many thanks Prague, Bournemouth and TelMc32
It is the challenges on here which make me think about what can be done. It is not about convincing everyone for some will always sit on the fence.... some will always say no thanks. But so far a lot of fans have said "yes, tell me more"
Airman and I are talking about the same numbers - the 2012 accounts. I didn't get some of the criticism but so what... I am being precise about the creditors - spelling them out without spin... with the added irony that the overall creditors number of £40M is similar to the rumours of any bid on the club. Its an interesting question as to whether the club is in a better place now than it was 3 years ago - more debts but much higher up the leagues.
At the same time I am deliberately vague about what the Trust might do - apart from T-shirts, badges and pens of course!
The committee needs to discuss plans for this season now that we are established with 600+ members and 3,000 contacts - it probably needs to double in size again before it is credible! And at the same time it needs to sound out its ideas before making grandiose statements about how it might save the club etc.
But I have dropped a pretty big hint by referring to Charlton in the 90s and Leeds United opening game the other day - fans can do more than waiting for a car crash or simply put money in before/after that event.
For starters we are running with an e-petition on Asset of Community Value (ACV) status for The Valley. This has met with Club support, 800 signatures so far and some support, some questions and some scepticism on here. Let's see how many fans participate once the Trust canvasses at games? Let's see if the Trust cannot secure a decent number and the fans are interested.
And let's see how many fans volunteer to help the Trust Committee to reach out into the fanbase with this campaign.
I think the criticisms of seriously_red's attempts to put down numbers, are seriously unfair. I exclude Airman's comments from that, since he is trying to clarify the numbers. Surely it is better to try and understand the numbers than just to sit wringing your hands? And once you have a decent idea of the numbers you can think about what to do about the situation. Or of course you can sit there still wringing your hands, bickering with your own fellow fans, while both Charlton and English football generally goes to hell in a handcart.
Seriously_red is just another fan, like all of you. He doesn't have privileged information but he's made a bloody decent job of trying to work out the numbers. if like Airman you can point to different numbers, good, post them, SR will take them on board and we will all have better understanding. What is wrong with that?
As to what you do about it, of course the idea of 5k fans putting in 4k now is fantasy, on the face of it. But as Seth says, Swansea are a good example of what can be done, and it is clear that some of their fans put in sizeable amounts. And if big German clubs are 51% in the hands of their fans, then clearly a lot of those fans have put in more than 5 euros too.
It's a reasonable point to aim at those who criticise the Board, "Do you have their money to put in, and will you do so?". But when somebody comes along trying to work out how we can as supporters fill the funding gap, and he gets written off as a fantasist, that is a disappointingly negative reaction. Of course SR doesnt have all the answers now. Give him and the rest of his admirable team time, and they might get there. To my knowledge nobody else in the fanbase is trying.
This; even though SR did blow my theory out the water, Never mind I'll go get a knew one
I have read some of the comments and having interviewed Martin Simons ex chairman of the football club and one of the people who is 'owed money' he will not be driving down to the Valley on the day of our promotion to the Premiership to collect his money?. The interview is in the next issue of Trust news 4, out at the end of August. Now Martin has joined the trust, paid his £5......He was the 500th member. Perhaps some other posters might like to join, as wonderful as it is speculating with figures, who is owed what, and interest payments some of the energy spent might I suggest be more constructively used in supporting the trust, such as helping out at the matchday presence, and signing the petition , or even joining up to the trust on the day?...... and taking martins lead.
Sorry SR, this was the quote I was referring to. I accept that it says 'could' get you £120m so I accept that I misread it.
However, there is some support, from our fans on here, that suggests that the only (or the best) way forward is to 'invest' more money to get to the Premier League. This can only, realistically, be done with someone else's money. Thus if the Supporters Trust did manage to 'encourage' fans to raise c. £20m would that be used to stabilise the club in the Championship or would it be used for an all out assault to win promotion in the first (and then only) season a la Pardew?
This is why fans running football clubs (and I'd include Richard Murray in this) are always tempted to go the extra yard and spend money that shouldn't be spent to win promotion/avoid relegation.
Murray et al were taken in by Pardew. These are intelligent men who were fooled by a football manager who has proved to be happy spending someone else's money. As I had shares in CAFC (all be it not thousands of pounds worth) it was my money that was, in small part, gambled on a dream. I would be reluctant to do that again under any circumstances, but I certainly wouldn't give it to a group that thought the answer was so 'buy' promotion as it very rarely works.
Damn, just checked my coat pockets, back of the sofa, pot in the car and the copper jar, and it only come to £37m.
Oh well, this time next year Rodders....
Crazy price, but no doubt it covers all liabilities, including those contingent on promotion.
…but in the light of your post I thought I’d attempt to rationalise, not justify, the Owner’s (apparent) valuation.
Typically when people talk about a Company’s value they are referring to its stock market capitalisation or the value of its equity. However, in some ways a better measure is Enterprise Value (EV), essentially the sum of a Company’s debt and equity. We can be very confident that the £40m price tag being quoted is Baton’s EV, or, more precisely, the Owner’s optimistic appraisal of it.
Because Charlton isn’t quoted we don’t know the value of the Company’s equity (last time it traded the Club was worth £2). However, we can infer the Owner’s valuation from the Enterprise Value and what we know about the debt.
seriously_red has provided a very detailed and helpful account of the Company’s creditors (at end June ’12 with some estimated updates). Fortunately, however, we don’t need to worry about most of that for the purposes of valuation. I’m happy to be corrected, but I’d suggest the Club’s EV is derived, broadly, as follows;
The Club’s EV
Loans repayable to RBS by end 2015 - £4.2m. This will be non negotiable.
Overdraft with Bank - £0.8m. That's the limit, according to the accounts, and will likely be repayable with a change of control unless Richard Murray continues to guarantee.
Total non negotiable debt - £5m.
Loans to former Directors, including Richard Murray - £8.55m. This assumes Murray was not repaid the £250,000 he was due during the last financial year. All but £1.55m of this is not repayable until promotion to the Premier League.
Loans from CAFCH - £15.5m. This is simply an estimate based on the assumption that losses last year were circa £7m, but can't be far wrong.
Total debts - £29.05m.
Equity - £10.95m.
(Of which CAFCH equity - £9.855m)
Enterprise Value £40m
Price and deal structure
We all know that what a buyer might be prepared to pay is not the same thing as the seller’s asking price. The price paid for Baton will be a negotiation. However, a critical part of that negotiation will be deal structure and there are many, many options. It’s very important to note that £7m of the Club’s debt (which is included in the breakdown of EV above) is not repayable unless the Club is promoted to the Premier League. Could such an arrangement be made for the loans from Richard Murray and CAFCH? I would have thought it quite likely.
How would a deal then look? Well, suppose Richard Murray stays invested. A buyer would then pay the Owners £9.9m and secure complete control whilst being liable for the Club’s overdraft and the loan from RBS. The buyer would then need to pay a further £24m on promotion and even that might be staged over a number of seasons.
Put like this, what the Club might be asking doesn’t seem so ridiculous. If a buyer argued that the EV was “only” £35m then with the structure above they’d pay the Owners just over £5m upfront.
Frankly, I’m not sure why anybody would buy a Football Club in the Championship, but if you were minded, and it seems people are, then circa £5m for the equity of a Club like Charlton, or 90% of it, and immediate liabilities to the Banks of only another £5m may not seem unattractive.
All speculation obviously. Let’s see what happens.
Hang on KHA. As so often seems to happen when people discuss the "Murray years", people's memories seem to get a bit out of sync. When you bought the shares, that money helped the club on a strong upward trajectory, establishing itself in the FAPL. You call it gambling on a dream , well in fact those dreams were realised. It didn't fund the Pardew fiasco. I still don't understand exactly what went on in the boardroom after Curbs departure, but the fan investments came much earlier. Now in hindsight our mistake as fans was not to ask more carefully how we could safeguard our stake, and make sure the fans voice in the governance of the club was effectively sealed. The learning is that any fans stake in a club needs to be an undilutable share, and that as shareholders we all need to be active, so that the representative on the Board has a clear mandate.
I happen to agree with you that we should not raise funds with the goal of buying promotion or purchasing players, but we are at the discussion stage. If you join the Trust you can be constructive by discussing your many eloquent views with others, and coming to a consensus for action based on our combined inputs. And it costs a fiver.
Just to clarify I'm not criticising what the board did. I'm more than happy with what I received for the money I paid (and I'm including the season tickets I bought, the programs and food etc. that I bought at The Valley on match days and the replica shirts and other purchases from the club shop.
The shares that I bought were not part of the VIP Scheme, I bought a holding in the company, one which I fully expected to own for as long as I wished. I never expected any return on my money (neither in the form of dividends nor an increase in value). Was I disappointed when I lost my shares? Yes I was. Was I as disappointed as I was when my £15k of Bradford and Bingley shares were 'Nationalised'? No, clearly not. However the similarities are there. Both businesses managed to run the value of the stock below £0 and as a consequence my investment was 'lost'.
I was more than happy (all be it without the knowledge of the consequences - or even possible consequences) when we went out and spent £12.5m on players under Pardew but I believe that this was a major factor in the need for Richard Murray to wrestle control of the club - something else which I agree with as it was best for Charlton. The 'dream' was the return to the Premier League and it was not achieved.
Where I might stand out as being less supportive is that I would, probably, not make that kind of investment again, and since 1992 (which is, from memory, when I acquired my shares) I am in a much better financial position and could afford to contribute much more, but all the while football is so, so badly managed I'm tempted to keep my money, rather than have it line the pockets of young men (and their agents) that probably already have more than I do.
I fully support the sentiments of your last para. I too would not support a scheme of the type we bought into last time, with the lack of shareholder safeguards. So we have to find a better way. Because if we don't the whole thing is going to go to pot. And we, means us the fans, the ones for whom CAFC is for life.
I expect the FFP rules will provide a significant deflationary impact on players' wages outside of the Premiership, and indeed it is probably already happening although hard to tell. If over time the wage that a mediocre (ie. non-Premiership) player could command fell on average by say 50% (not impossible in my view) then suddenly clubs could be run profitably in theory, especially assuming the revenue side remains robust (tickets, TV etc.).
If you are say the 200th best midfield player in the country (let's call him Dale Stephens for example) then there is no strong economic argument why you might in due course only be able to command say £125k versus the current say £250k. Those of us working in financial services will have seen or directly experienced the signficant wage deflation that can occur following a exogenous shock to the system having previously felt quite secure.
This may well be the most significant (and often overlooked) aspect of FFP, with until now focus mainly being on the 'fairness' aspect (levelling the playing field).
Typically when people talk about a Company’s value they are referring to its stock market capitalisation or the value of its equity. However, in some ways a better measure is Enterprise Value (EV), essentially the sum of a Company’s debt and equity. We can be very confident that the £40m price tag being quoted is Baton’s EV, or, more precisely, the Owner’s optimistic appraisal of it.
Because Charlton isn’t quoted we don’t know the value of the Company’s equity (last time it traded the Club was worth £2). However, we can infer the Owner’s valuation from the Enterprise Value and what we know about the debt.
But if you were looking to buy a pharmaceutical company who were half way through clinical trials of a new drug and the initial results were very promising you would not be able to value that company by simply looking at its Balance Sheet or EV. You would have to try and value the potential of completing the trials of the new drug successfully and being able to market it. In trying to value Charlton Athletic you cannot ignore the fact that they are one promotion away from the windfall of the Premier league. And, as I said in another thread, Crystal Palace proved you do not need to spend a fortune to win that promotion. I would estimate that the potential to join the Premier League in the very near future is the most significant value that Charlton have.
Frankly, I’m not sure why anybody would buy a Football Club in the Championship, but if you were minded, and it seems people are, then circa £5m for the equity of a Club like Charlton, or 90% of it, and immediate liabilities to the Banks of only another £5m may not seem unattractive.
Only 24 football clubs in the world are invited to apply to join the most lucrative league in the world each year. One where the enormous TV money is shared equally and on merit. Isn't it the case that the bottom club get £60 million next season? The club that took the biggest chunk of prize money in last year's Champions League competition, got less than that. For clubs like Seville, Deportivo, Ajax, Lazio and 99% of the clubs in the top leagues in Europe, their only hope of getting getting a serious chunk of TV money is by qualifying for the group stages of the Champions League. In some ways it surprises me that there are not more potential buyers for all the clubs in the Championship.
I think the criticisms of seriously_red's attempts to put down numbers, are seriously unfair. I exclude Airman's comments from that, since he is trying to clarify the numbers. Surely it is better to try and understand the numbers than just to sit wringing your hands? And once you have a decent idea of the numbers you can think about what to do about the situation. Or of course you can sit there still wringing your hands, bickering with your own fellow fans, while both Charlton and English football generally goes to hell in a handcart.
Seriously_red is just another fan, like all of you. He doesn't have privileged information but he's made a bloody decent job of trying to work out the numbers. if like Airman you can point to different numbers, good, post them, SR will take them on board and we will all have better understanding. What is wrong with that?
As to what you do about it, of course the idea of 5k fans putting in 4k now is fantasy, on the face of it. But as Seth says, Swansea are a good example of what can be done, and it is clear that some of their fans put in sizeable amounts. And if big German clubs are 51% in the hands of their fans, then clearly a lot of those fans have put in more than 5 euros too.
It's a reasonable point to aim at those who criticise the Board, "Do you have their money to put in, and will you do so?". But when somebody comes along trying to work out how we can as supporters fill the funding gap, and he gets written off as a fantasist, that is a disappointingly negative reaction. Of course SR doesnt have all the answers now. Give him and the rest of his admirable team time, and they might get there. To my knowledge nobody else in the fanbase is trying.
This; even though SR did blow my theory out the water, Never mind I'll go get a knew one
Thanks Loco - wasn't trying to blow up your numbers just amend them based on work done by myself and others. Definitely looks like £7M loss last season and shaping up for £5M this season
For anyone interested, Swiss Ramble has just updated his blog after requests from the CASTrust and others... still 2011/12 numbers but he has given a much fuller picture swissramble.blogspot.co.uk/...Apart from Portsmouth and Coventry who are yet to file accounts!
Charlton probably sit halfway in all of the graphs on revenue and costs for last season once accounts are filed and numbers are collated ... One interesting quote from Swiss Ramble:
"Incredibly nine Championship clubs had a wages to turnover ratio above 100%: Bristol City 157%, Reading 135%, Leicester 130%, Southampton 125%, Ipswich 119%, Middlesbrough 119%, Nottingham Forest 119%, Doncaster Rovers 113% and Cardiff City 103%.
Given the massive financial prizes available on promotion to the Premier League, this willingness to push the boat out is understandable to a certain extent, but is also one of the reasons that Championship clubs have embraced Financial Fair Play
At the other extreme, fans of Blackpool (42%) and Leeds United (57%) might feel that their clubs could have shown a little more ambition. Peterborough's low 57% ratio reflects their sustainable business model."
Clubs in bold will need to work hard to reduce their losses to meet FFP limits which kick in this season or as New York Addick has just posted, perhaps they won't be paying what they used to pay when contracts are renewed if indeed they are renewed.
Damn, just checked my coat pockets, back of the sofa, pot in the car and the copper jar, and it only come to £37m.
Oh well, this time next year Rodders....
Crazy price, but no doubt it covers all liabilities, including those contingent on promotion.
…but in the light of your post I thought I’d attempt to rationalise, not justify, the Owner’s (apparent) valuation.
Typically when people talk about a Company’s value they are referring to its stock market capitalisation or the value of its equity. However, in some ways a better measure is Enterprise Value (EV), essentially the sum of a Company’s debt and equity. We can be very confident that the £40m price tag being quoted is Baton’s EV, or, more precisely, the Owner’s optimistic appraisal of it.
Because Charlton isn’t quoted we don’t know the value of the Company’s equity (last time it traded the Club was worth £2). However, we can infer the Owner’s valuation from the Enterprise Value and what we know about the debt.
seriously_red has provided a very detailed and helpful account of the Company’s creditors (at end June ’12 with some estimated updates). Fortunately, however, we don’t need to worry about most of that for the purposes of valuation. I’m happy to be corrected, but I’d suggest the Club’s EV is derived, broadly, as follows;
The Club’s EV
Loans repayable to RBS by end 2015 - £4.2m. This will be non negotiable.
Overdraft with Bank - £0.8m. That's the limit, according to the accounts, and will likely be repayable with a change of control unless Richard Murray continues to guarantee.
Total non negotiable debt - £5m.
Loans to former Directors, including Richard Murray - £8.55m. This assumes Murray was not repaid the £250,000 he was due during the last financial year. All but £1.55m of this is not repayable until promotion to the Premier League.
Loans from CAFCH - £15.5m. This is simply an estimate based on the assumption that losses last year were circa £7m, but can't be far wrong.
Total debts - £29.05m.
Equity - £10.95m.
(Of which CAFCH equity - £9.855m)
Enterprise Value £40m
Price and deal structure
We all know that what a buyer might be prepared to pay is not the same thing as the seller’s asking price. The price paid for Baton will be a negotiation. However, a critical part of that negotiation will be deal structure and there are many, many options. It’s very important to note that £7m of the Club’s debt (which is included in the breakdown of EV above) is not repayable unless the Club is promoted to the Premier League. Could such an arrangement be made for the loans from Richard Murray and CAFCH? I would have thought it quite likely.
How would a deal then look? Well, suppose Richard Murray stays invested. A buyer would then pay the Owners £9.9m and secure complete control whilst being liable for the Club’s overdraft and the loan from RBS. The buyer would then need to pay a further £24m on promotion and even that might be staged over a number of seasons.
Put like this, what the Club might be asking doesn’t seem so ridiculous. If a buyer argued that the EV was “only” £35m then with the structure above they’d pay the Owners just over £5m upfront.
Frankly, I’m not sure why anybody would buy a Football Club in the Championship, but if you were minded, and it seems people are, then circa £5m for the equity of a Club like Charlton, or 90% of it, and immediate liabilities to the Banks of only another £5m may not seem unattractive.
All speculation obviously. Let’s see what happens.
Thank you Mundell for expressing/presenting the numbers in a way which ties to the supposed price tag of £40M
The big question is how does one arrive at £40M? Yes it is the debts + an estimate of the equity value but this number must vary in the purchasers eyes depending upon what they think it will take to achieve Premier League status.
I can see why people would come in with £5M down and the rest later and I can also see why banks and other creditors might be unhappy to allow such a sale if the purchaser could not show that they had the collateral to keep the show on the road should promotion to the Premier League be elusive.
Typically when people talk about a Company’s value they are referring to its stock market capitalisation or the value of its equity. However, in some ways a better measure is Enterprise Value (EV), essentially the sum of a Company’s debt and equity. We can be very confident that the £40m price tag being quoted is Baton’s EV, or, more precisely, the Owner’s optimistic appraisal of it.
Because Charlton isn’t quoted we don’t know the value of the Company’s equity (last time it traded the Club was worth £2). However, we can infer the Owner’s valuation from the Enterprise Value and what we know about the debt.
But if you were looking to buy a pharmaceutical company who were half way through clinical trials of a new drug and the initial results were very promising you would not be able to value that company by simply looking at its Balance Sheet or EV.
Frankly, I’m not sure why anybody would buy a Football Club in the Championship, but if you were minded, and it seems people are, then circa £5m for the equity of a Club like Charlton, or 90% of it, and immediate liabilities to the Banks of only another £5m may not seem unattractive.
Only 24 football clubs in the world are invited to apply to join the most lucrative league in the world each year.
In your example, the EV of the pharmaceutical company would include the (market) value of the company's equity which would, in turn, reflect the perceived future value of the new drug.
Similarly, the value of Charlton's equity (whatever that is, positive or negative) ought to reflect the potential future value of the Club playing in the Premier League.
If you're saying that you believe that potential would justify an equity value of, say, £5m or more, then it's a shame you don't have the money!! I assume you don't!!
The good news is that it seems that there are potential buyers around and I think we can expect the Club to be sold during the coming months. However, if and when that happens, I hope the buyer is patient and knows what they are doing. Promotion to the Premier League will not only be difficult to achieve it will also be highly uncertain. Of the 24 Clubs "invited" to the Premier League each year only 3 (1 in 8) actually make the party and of the 24 some are at an "unfair" advantage over Charlton. Our chances, on a season by season basis, are unlikely to be much better than 1 in 8. Palace had Wilfred Zaha and they got lucky.
What I don't understand is how some on here think £40m price tag is gospel but five potential buyers is made up.
Either the whole article is true or the whole article is bollox.
Certain people seem to have an agenda and only want to look at the bad instead of look at the situation (from the outside I may add) even-handedly.
It could be about right. Secured loans (say) £25m existing shareholder investment (say) £15m
The secured loans are well documented. More like £12m than £25m.
However, from recollection this regime didn't set up the deferrals and while I'm sure the bank and former directors would like their money back now, we can't assume they wouldn't roll them over again to the right new owners.
The problem for the owners is their exposure is only going to increase unless they sell and the value of the club isn't going to rise with it unless something miraculous happens.
Total club debts are around £40M of which just £5M is secured against the Freehold of the Valley by the bank which funded the North Upper. The rest of the debt is owed to the new crowd (£15M) Richard Murray (£5M) and the old board (£10M). The last bit has been deferred until promotion to the Premier League is achieved.
That's not right and doesn't add up of itself! The debts to the former directors are £4.4m, unless you think they have been putting in money in 2012/13 (!) and Richard Murray was owed £4.15m at June 30th, 2012, of which only £1.55m is repayable in instalments now and the rest is deferred on the same basis as that to the ex-directors, i.e. promotion to the Premier League. This is all in the 2011/12 accounts.
OK here are the full numbers and why it "doesn't add up" ! Bank Overdraft £2.2M Trade Creditors and HMRC £2.5M Bank Mortgage £4.2M Parent Co. £14M** Directors payable upon Premier League Promotion £8.5M Accruals and deferred income £8M * Other £0.5M Total £40M of which Trade Creditors, HMRC and 50% of the deferred income is short term (<1yr) *Accruals and deferred income will mainly relate to Season Tickets sold before June, VIP monies and grants secured to build the Valley which are released over the life of the asset - I wouldn't class these as creditors as no one is going to reclaim the money! ** Assuming that last seasons losses met by the parent co.
Hopefully it is very clear for all that creditors like HMRC are in a minority which is why administration is unlikely.
I am referring to the accounts and being precise in order to make the following point very clearly:
There are several interested parties in any transaction around selling the club. This is not the world of Goldberg or Jordan where there is no ground and no balancing interests and where the club ends up falling over because they won't deal with anyone until it's too late. It appears that by design all of the current board AND the bank have an interest in securing the best deal for the future of the club and themselves and none of them have any interest in letting a creditor like HMRC become a risk.
All of the numbers are 7 figure so a few grand here or there simply doesn't matter does it? I trust that any deal for sale (or more financing) can be struck swiftly in order to facilitate the continuing rise of CAFC from mid-table 3rd tier back to the Premier League.</p>
I was simply trying to explain the £40m. If you have £30m of debt and your enterprise value is £40m then your equity is "worth" £10m. That's the arithmetic. Whether the equity is actually worth £10m is another matter. That's in the eye of the beholder.
I dont know much to anything about football finances, but having 30 mill debt and 10 mill equity to explain 40mill doesn't make any sense to me.
Having 30 mill debt and 10 mill equity means overall you have 20 mill debt.
I don't see why they would get added together to make a chargeable amount to a potential buyer.
The logic of why it's 40 mill is this:
You want to start a photographic business.
I say ok G that's an excellent idea. Tell you what I'll lend you £3k and I'll give you another £1k for 10% of your business.
A few years down the line, when you're bigger than David Bailey and Lord Lichfield combined, I then come up to you and say ok you're established now G how about me pulling out? All I want is what I put in.
You then give me back my £3k loan and buy back my 10% of your business with the other £1k.
That's why 30mill debt and 10mill equity adds up to 40 mill.
EDIT: This is a very simplistic scenario for explanatory purposes only before the nitpickers start!
I dont know much to anything about football finances, but having 30 mill debt and 10 mill equity to explain 40mill doesn't make any sense to me.
Having 30 mill debt and 10 mill equity means overall you have 20 mill debt.
I don't see why they would get added together to make a chargeable amount to a potential buyer.
The logic of why it's 40 mill is this:
You want to start a photographic business.
I say ok G that's an excellent idea. Tell you what I'll lend you £3k and I'll give you another £1k for 10% of your business.
A few years down the line, when you're bigger than David Bailey and Lord Lichfield combined, I then come up to you and say ok you're established now G how about me pulling out? All I want is what I put in.
You then give me back my £3k loan and buy back my 10% of your business with the other £1k.
That's why 30mill debt and 10mill equity adds up to 40 mill.
EDIT: This is a very simplistic scenario for explanatory purposes only before the nitpickers start!
As a photographer and a nitpicker, Len, I have to say that Lord Lichfield is dead and was never that good anyway.
I have read some of the comments and having interviewed Martin Simons ex chairman of the football club and one of the people who is 'owed money' he will not be driving down to the Valley on the day of our promotion to the Premiership to collect his money?. The interview is in the next issue of Trust news 4, out at the end of August.
Well, no he won't, because he isn't one of the ex-directors owed money . . .
The assumption that £40m is in someway made up of lots of debt the new buyer would have to take on has been great reading, if lots of it, but it's simply misguided. The figures is as follows £5m of bank debt which you have to pay ( RBS and HSBC) or they simply won't sanction the deal, the rest is for Tone and Kev as they think their investment has doubled in value. Therefore 5 buyers plus many others have had to go straight to hospital with split sides from laughter, this is why the nationals have picked up,as we are a laughing stock. Simples who needs accountants!
I have read some of the comments and having interviewed Martin Simons ex chairman of the football club and one of the people who is 'owed money' he will not be driving down to the Valley on the day of our promotion to the Premiership to collect his money?. The interview is in the next issue of Trust news 4, out at the end of August.
Well, no he won't, because he isn't one of the ex-directors owed money . . .
The assumption that £40m is in someway made up of lots of debt the new buyer would have to take on has been great reading, if lots of it, but it's simply misguided. The figures is as follows £5m of bank debt which you have to pay ( RBS and HSBC) or they simply won't sanction the deal, the rest is for Tone and Kev as they think their investment has doubled in value. Therefore 5 buyers plus many others have had to go straight to hospital with split sides from laughter, this is why the nationals have picked up,as we are a laughing stock. Simples who needs accountants!
Except you're not saying much different to Mundell are you? £5M bank debt + £15M parent company loan(what you call investment) and £20M to whoever owns Baton equity (10% is Richard Murray).
The only difference is that the old board including Richard Murray are not paid off their £8.5M and have to wait for CAFC to get promoted. I don't know what rights the deferred creditors have in this regard - let's see what happens?
The real question is what is someone prepared to pay above and beyond the parent company loans and the bank mortgage / overdraft?
I think it's quite clear that £40m upfront plus take on all the creditors discussed and on going losses of say £5m means it won't be a quick sale as yes it's about what someone will pay and no one would pay that unless they had motives we should all be suspicious of, or Airman win the Euro millions!
Comments
Thanks to AB and Serious for putting some flesh on the bones in light of this latest newspaper nonsense though.
It is the challenges on here which make me think about what can be done. It is not about convincing everyone for some will always sit on the fence.... some will always say no thanks. But so far a lot of fans have said "yes, tell me more"
Airman and I are talking about the same numbers - the 2012 accounts. I didn't get some of the criticism but so what... I am being precise about the creditors - spelling them out without spin... with the added irony that the overall creditors number of £40M is similar to the rumours of any bid on the club. Its an interesting question as to whether the club is in a better place now than it was 3 years ago - more debts but much higher up the leagues.
At the same time I am deliberately vague about what the Trust might do - apart from T-shirts, badges and pens of course!
The committee needs to discuss plans for this season now that we are established with 600+ members and 3,000 contacts - it probably needs to double in size again before it is credible! And at the same time it needs to sound out its ideas before making grandiose statements about how it might save the club etc.
But I have dropped a pretty big hint by referring to Charlton in the 90s and Leeds United opening game the other day - fans can do more than waiting for a car crash or simply put money in before/after that event.
For starters we are running with an e-petition on Asset of Community Value (ACV) status for The Valley. This has met with Club support, 800 signatures so far and some support, some questions and some scepticism on here. Let's see how many fans participate once the Trust canvasses at games? Let's see if the Trust cannot secure a decent number and the fans are interested.
And let's see how many fans volunteer to help the Trust Committee to reach out into the fanbase with this campaign.
Now Martin has joined the trust, paid his £5......He was the 500th member.
Perhaps some other posters might like to join, as wonderful as it is speculating with figures, who is owed what, and interest payments some of the energy spent might I suggest be more constructively used in supporting the trust, such as helping out at the matchday presence, and signing the petition , or even joining up to the trust on the day?...... and taking martins lead.
However, there is some support, from our fans on here, that suggests that the only (or the best) way forward is to 'invest' more money to get to the Premier League. This can only, realistically, be done with someone else's money. Thus if the Supporters Trust did manage to 'encourage' fans to raise c. £20m would that be used to stabilise the club in the Championship or would it be used for an all out assault to win promotion in the first (and then only) season a la Pardew?
This is why fans running football clubs (and I'd include Richard Murray in this) are always tempted to go the extra yard and spend money that shouldn't be spent to win promotion/avoid relegation.
Murray et al were taken in by Pardew. These are intelligent men who were fooled by a football manager who has proved to be happy spending someone else's money. As I had shares in CAFC (all be it not thousands of pounds worth) it was my money that was, in small part, gambled on a dream. I would be reluctant to do that again under any circumstances, but I certainly wouldn't give it to a group that thought the answer was so 'buy' promotion as it very rarely works.
I wasn’t going to add to my pithy comment below; …but in the light of your post I thought I’d attempt to rationalise, not justify, the Owner’s (apparent) valuation.
Typically when people talk about a Company’s value they are referring to its stock market capitalisation or the value of its equity. However, in some ways a better measure is Enterprise Value (EV), essentially the sum of a Company’s debt and equity. We can be very confident that the £40m price tag being quoted is Baton’s EV, or, more precisely, the Owner’s optimistic appraisal of it.
Because Charlton isn’t quoted we don’t know the value of the Company’s equity (last time it traded the Club was worth £2). However, we can infer the Owner’s valuation from the Enterprise Value and what we know about the debt.
seriously_red has provided a very detailed and helpful account of the Company’s creditors (at end June ’12 with some estimated updates). Fortunately, however, we don’t need to worry about most of that for the purposes of valuation. I’m happy to be corrected, but I’d suggest the Club’s EV is derived, broadly, as follows;
The Club’s EV
Loans repayable to RBS by end 2015 - £4.2m. This will be non negotiable.
Overdraft with Bank - £0.8m. That's the limit, according to the accounts, and will likely be repayable with a change of control unless Richard Murray continues to guarantee.
Total non negotiable debt - £5m.
Loans to former Directors, including Richard Murray - £8.55m. This assumes Murray was not repaid the £250,000 he was due during the last financial year. All but £1.55m of this is not repayable until promotion to the Premier League.
Loans from CAFCH - £15.5m. This is simply an estimate based on the assumption that losses last year were circa £7m, but can't be far wrong.
Total debts - £29.05m.
Equity - £10.95m.
(Of which CAFCH equity - £9.855m)
Enterprise Value £40m
Price and deal structure
We all know that what a buyer might be prepared to pay is not the same thing as the seller’s asking price. The price paid for Baton will be a negotiation. However, a critical part of that negotiation will be deal structure and there are many, many options. It’s very important to note that £7m of the Club’s debt (which is included in the breakdown of EV above) is not repayable unless the Club is promoted to the Premier League. Could such an arrangement be made for the loans from Richard Murray and CAFCH? I would have thought it quite likely.
How would a deal then look? Well, suppose Richard Murray stays invested. A buyer would then pay the Owners £9.9m and secure complete control whilst being liable for the Club’s overdraft and the loan from RBS. The buyer would then need to pay a further £24m on promotion and even that might be staged over a number of seasons.
Put like this, what the Club might be asking doesn’t seem so ridiculous. If a buyer argued that the EV was “only” £35m then with the structure above they’d pay the Owners just over £5m upfront.
Frankly, I’m not sure why anybody would buy a Football Club in the Championship, but if you were minded, and it seems people are, then circa £5m for the equity of a Club like Charlton, or 90% of it, and immediate liabilities to the Banks of only another £5m may not seem unattractive.
All speculation obviously. Let’s see what happens.
I happen to agree with you that we should not raise funds with the goal of buying promotion or purchasing players, but we are at the discussion stage. If you join the Trust you can be constructive by discussing your many eloquent views with others, and coming to a consensus for action based on our combined inputs. And it costs a fiver.
Top post. I'm going to copy it and keep it handy. Thanks.
Just to clarify I'm not criticising what the board did. I'm more than happy with what I received for the money I paid (and I'm including the season tickets I bought, the programs and food etc. that I bought at The Valley on match days and the replica shirts and other purchases from the club shop.
The shares that I bought were not part of the VIP Scheme, I bought a holding in the company, one which I fully expected to own for as long as I wished. I never expected any return on my money (neither in the form of dividends nor an increase in value). Was I disappointed when I lost my shares? Yes I was. Was I as disappointed as I was when my £15k of Bradford and Bingley shares were 'Nationalised'? No, clearly not. However the similarities are there. Both businesses managed to run the value of the stock below £0 and as a consequence my investment was 'lost'.
I was more than happy (all be it without the knowledge of the consequences - or even possible consequences) when we went out and spent £12.5m on players under Pardew but I believe that this was a major factor in the need for Richard Murray to wrestle control of the club - something else which I agree with as it was best for Charlton. The 'dream' was the return to the Premier League and it was not achieved.
Where I might stand out as being less supportive is that I would, probably, not make that kind of investment again, and since 1992 (which is, from memory, when I acquired my shares) I am in a much better financial position and could afford to contribute much more, but all the while football is so, so badly managed I'm tempted to keep my money, rather than have it line the pockets of young men (and their agents) that probably already have more than I do.
I fully support the sentiments of your last para. I too would not support a scheme of the type we bought into last time, with the lack of shareholder safeguards. So we have to find a better way. Because if we don't the whole thing is going to go to pot. And we, means us the fans, the ones for whom CAFC is for life.
If you are say the 200th best midfield player in the country (let's call him Dale Stephens for example) then there is no strong economic argument why you might in due course only be able to command say £125k versus the current say £250k. Those of us working in financial services will have seen or directly experienced the signficant wage deflation that can occur following a exogenous shock to the system having previously felt quite secure.
This may well be the most significant (and often overlooked) aspect of FFP, with until now focus mainly being on the 'fairness' aspect (levelling the playing field).
For anyone interested, Swiss Ramble has just updated his blog after requests from the CASTrust and others... still 2011/12 numbers but he has given a much fuller picture swissramble.blogspot.co.uk/...Apart from Portsmouth and Coventry who are yet to file accounts!
Charlton probably sit halfway in all of the graphs on revenue and costs for last season once accounts are filed and numbers are collated ... One interesting quote from Swiss Ramble:
"Incredibly nine Championship clubs had a wages to turnover ratio above 100%: Bristol City 157%, Reading 135%, Leicester 130%, Southampton 125%, Ipswich 119%, Middlesbrough 119%, Nottingham Forest 119%, Doncaster Rovers 113% and Cardiff City 103%.
Given the massive financial prizes available on promotion to the Premier League, this willingness to push the boat out is understandable to a certain extent, but is also one of the reasons that Championship clubs have embraced Financial Fair Play
At the other extreme, fans of Blackpool (42%) and Leeds United (57%) might feel that their clubs could have shown a little more ambition. Peterborough's low 57% ratio reflects their sustainable business model."
Clubs in bold will need to work hard to reduce their losses to meet FFP limits which kick in this season or as New York Addick has just posted, perhaps they won't be paying what they used to pay when contracts are renewed if indeed they are renewed.
The big question is how does one arrive at £40M? Yes it is the debts + an estimate of the equity value but this number must vary in the purchasers eyes depending upon what they think it will take to achieve Premier League status.
I can see why people would come in with £5M down and the rest later and I can also see why banks and other creditors might be unhappy to allow such a sale if the purchaser could not show that they had the collateral to keep the show on the road should promotion to the Premier League be elusive.
Similarly, the value of Charlton's equity (whatever that is, positive or negative) ought to reflect the potential future value of the Club playing in the Premier League.
If you're saying that you believe that potential would justify an equity value of, say, £5m or more, then it's a shame you don't have the money!! I assume you don't!!
The good news is that it seems that there are potential buyers around and I think we can expect the Club to be sold during the coming months. However, if and when that happens, I hope the buyer is patient and knows what they are doing. Promotion to the Premier League will not only be difficult to achieve it will also be highly uncertain. Of the 24 Clubs "invited" to the Premier League each year only 3 (1 in 8) actually make the party and of the 24 some are at an "unfair" advantage over Charlton. Our chances, on a season by season basis, are unlikely to be much better than 1 in 8. Palace had Wilfred Zaha and they got lucky.
Having 30 mill debt and 10 mill equity means overall you have 20 mill debt.
I don't see why they would get added together to make a chargeable amount to a potential buyer.
You want to start a photographic business.
I say ok G that's an excellent idea. Tell you what I'll lend you £3k and I'll give you another £1k for 10% of your business.
A few years down the line, when you're bigger than David Bailey and Lord Lichfield combined, I then come up to you and say ok you're established now G how about me pulling out? All I want is what I put in.
You then give me back my £3k loan and buy back my 10% of your business with the other £1k.
That's why 30mill debt and 10mill equity adds up to 40 mill.
EDIT: This is a very simplistic scenario for explanatory purposes only before the nitpickers start!
so who is owed money AB
The only difference is that the old board including Richard Murray are not paid off their £8.5M and have to wait for CAFC to get promoted. I don't know what rights the deferred creditors have in this regard - let's see what happens?
The real question is what is someone prepared to pay above and beyond the parent company loans and the bank mortgage / overdraft?