So let's take a step back and try to be a bit objective.
Firstly I have no objections to the staff being scattered in with the fans. In many ways that's inclusive, and I'd prefer that to a panel and their audience. I think the issue was that there were too many staff and too few fans. Personally I would have Katrien, David, Tony and Lisa in there from the club, have the layout the same and relax about where they're sat.
Secondly, on the subject of Katrien and Tony lying I'll say this: anyone who thinks we were told the whole truth and nothing but the truth by Richard Murray and Peter Varney is a fantasist. The issue is less that they don't always tell us the truth about everything than the subjects of their guardedness.
For example, why be so guarded about what Roland is actually trying to achieve? If the vision is for a break even club that can compete, spell it out in black and white. Involve us in the plans for how to achieve it. How can we increase revenues, how can we reduce costs, where are the spend to save opportunities, how can we increase productivity? etc. We all know it's a ludicrous vision that will keep us in the lower reaches at best, but what if? How amazing would it be to do something special at Charlton that could be a new model for other clubs? That's why I don't get their approach. (Powerpoint isn't a bad idea in itself, but the content was poor).
And why be guarded about the plans for the Jimmy Seed stand? Declare that you're looking into it, state that you're open to all kinds of ideas, invite them from the supporter base. Then when you're ready, put proposals before the supporters and see if they buy into them, see what pitfalls they can help you avoid.
Instead, we have what they presented on Thursday. An entrenched defensive position, none shall pass, barriers up, them and us attitude, laughing at fans who they thought were being naive. Awful awful awful.
Anyone notice how few of them talk about 'us' in the inclusive sense?
And the saddest thing about all of this is that many of them are really nice people. It could be so different.
Really not sure they were being guarded. As I heard it they just said we have started to look but nothing is on or off the table.
I saw this as actually fronting up at the first public opportunity to something effectively sensationalised in VOTV, here and elsewhere. I'd have been more alarmed if they tried to ignore it completely and refused to discuss at all.
Any business should always be looking at options and I think it's positive that they are. If in time the proposals are of concern we can object then.
I'm more inclined to see the positive that investment is planned to be ongoing. If I am proved wrong in the future so be it. The reason I remain optimistic on this aspect is the real investment at Sparrows Lane which does not appear to be short term to me and does not seem like the actions of someone content to lose money year on year.
The managerial merry go round must stop and likewise sound player investment to reassure me fully though - this has been indefensible to date.
The Jimmy Seed Stand stuff hasn't been sensationalised by me and frankly it's a bit naive to take what Keohane says at face value, especially given the nonsense talked on other subjects. I have never said it was advanced, but it is clearly news that they are talking about a JS Stand redevelopment at all. This has never previously been on the horizon under RD. It is also a fact that he has been discussing residential development as part of it. Mind you, the bloke didn't even appear to realise one of the old plans he's found is an office building.
We are a bit in the dark really unless you see the terms of the agreement.
I don't actually think the CFO meant anything by it though as was somewhat a passing comment off the cuff.
But Quasi equity COULD be a loan where the interest rate is variable based on revenue. So if the revenue increases above an agreed level (Target 20,000 or player sales) the interest rate increases. It could be a way to extract money out.
So let's take a step back and try to be a bit objective.
Firstly I have no objections to the staff being scattered in with the fans. In many ways that's inclusive, and I'd prefer that to a panel and their audience. I think the issue was that there were too many staff and too few fans. Personally I would have Katrien, David, Tony and Lisa in there from the club, have the layout the same and relax about where they're sat.
Secondly, on the subject of Katrien and Tony lying I'll say this: anyone who thinks we were told the whole truth and nothing but the truth by Richard Murray and Peter Varney is a fantasist. The issue is less that they don't always tell us the truth about everything than the subjects of their guardedness.
For example, why be so guarded about what Roland is actually trying to achieve? If the vision is for a break even club that can compete, spell it out in black and white. Involve us in the plans for how to achieve it. How can we increase revenues, how can we reduce costs, where are the spend to save opportunities, how can we increase productivity? etc. We all know it's a ludicrous vision that will keep us in the lower reaches at best, but what if? How amazing would it be to do something special at Charlton that could be a new model for other clubs? That's why I don't get their approach. (Powerpoint isn't a bad idea in itself, but the content was poor).
And why be guarded about the plans for the Jimmy Seed stand? Declare that you're looking into it, state that you're open to all kinds of ideas, invite them from the supporter base. Then when you're ready, put proposals before the supporters and see if they buy into them, see what pitfalls they can help you avoid.
Instead, we have what they presented on Thursday. An entrenched defensive position, none shall pass, barriers up, them and us attitude, laughing at fans who they thought were being naive. Awful awful awful.
Anyone notice how few of them talk about 'us' in the inclusive sense?
And the saddest thing about all of this is that many of them are really nice people. It could be so different.
Really not sure they were being guarded. As I heard it they just said we have started to look but nothing is on or off the table.
I saw this as actually fronting up at the first public opportunity to something effectively sensationalised in VOTV, here and elsewhere. I'd have been more alarmed if they tried to ignore it completely and refused to discuss at all.
Any business should always be looking at options and I think it's positive that they are. If in time the proposals are of concern we can object then.
I'm more inclined to see the positive that investment is planned to be ongoing. If I am proved wrong in the future so be it. The reason I remain optimistic on this aspect is the real investment at Sparrows Lane which does not appear to be short term to me and does not seem like the actions of someone content to lose money year on year.
The managerial merry go round must stop and likewise sound player investment to reassure me fully though - this has been indefensible to date.
The Jimmy Seed Stand stuff hasn't been sensationalised by me and frankly it's a bit naive to take what Keohane says at face value, especially given the nonsense talked on other subjects. I have never said it was advanced, but it is clearly news that they are talking about a JS Stand redevelopment at all. This has never previously been on the horizon under RD. It is also a fact that he has been discussing residential development as part of it. Mind you, the bloke didn't even appear to realise one of the old plans he's found is an office building.
We are a bit in the dark really unless you see the terms of the agreement.
I don't actually think the CFO meant anything by it though as was somewhat a passing comment off the cuff.
But Quasi equity COULD be a loan where the interest rate is variable based on revenue. So if the revenue increases above an agreed level (Target 20,000 or player sales) the interest rate increases. It could be a way to extract money out.
My point though is that unless we're making a profit, he has to lump in cash to service that interest. So his net gain is, er, zero. If Staprix are profitable, it may avoid some tax by taking us no further than breakeven.
Yes the loan principle may never be repaid, that's what I understood David to mean, but what's the benefit of adding interest?
The problem is the status of Staprix in these loans. If it's equity, no problem - but then why interest? If it's a loan, then it has the potential of storing up problems unless RD is prepared - like Tony Fernandez was - to later convert to equity.
So let's take a step back and try to be a bit objective.
Firstly I have no objections to the staff being scattered in with the fans. In many ways that's inclusive, and I'd prefer that to a panel and their audience. I think the issue was that there were too many staff and too few fans. Personally I would have Katrien, David, Tony and Lisa in there from the club, have the layout the same and relax about where they're sat.
Secondly, on the subject of Katrien and Tony lying I'll say this: anyone who thinks we were told the whole truth and nothing but the truth by Richard Murray and Peter Varney is a fantasist. The issue is less that they don't always tell us the truth about everything than the subjects of their guardedness.
For example, why be so guarded about what Roland is actually trying to achieve? If the vision is for a break even club that can compete, spell it out in black and white. Involve us in the plans for how to achieve it. How can we increase revenues, how can we reduce costs, where are the spend to save opportunities, how can we increase productivity? etc. We all know it's a ludicrous vision that will keep us in the lower reaches at best, but what if? How amazing would it be to do something special at Charlton that could be a new model for other clubs? That's why I don't get their approach. (Powerpoint isn't a bad idea in itself, but the content was poor).
And why be guarded about the plans for the Jimmy Seed stand? Declare that you're looking into it, state that you're open to all kinds of ideas, invite them from the supporter base. Then when you're ready, put proposals before the supporters and see if they buy into them, see what pitfalls they can help you avoid.
Instead, we have what they presented on Thursday. An entrenched defensive position, none shall pass, barriers up, them and us attitude, laughing at fans who they thought were being naive. Awful awful awful.
Anyone notice how few of them talk about 'us' in the inclusive sense?
And the saddest thing about all of this is that many of them are really nice people. It could be so different.
Really not sure they were being guarded. As I heard it they just said we have started to look but nothing is on or off the table.
I saw this as actually fronting up at the first public opportunity to something effectively sensationalised in VOTV, here and elsewhere. I'd have been more alarmed if they tried to ignore it completely and refused to discuss at all.
Any business should always be looking at options and I think it's positive that they are. If in time the proposals are of concern we can object then.
I'm more inclined to see the positive that investment is planned to be ongoing. If I am proved wrong in the future so be it. The reason I remain optimistic on this aspect is the real investment at Sparrows Lane which does not appear to be short term to me and does not seem like the actions of someone content to lose money year on year.
The managerial merry go round must stop and likewise sound player investment to reassure me fully though - this has been indefensible to date.
The Jimmy Seed Stand stuff hasn't been sensationalised by me and frankly it's a bit naive to take what Keohane says at face value, especially given the nonsense talked on other subjects. I have never said it was advanced, but it is clearly news that they are talking about a JS Stand redevelopment at all. This has never previously been on the horizon under RD. It is also a fact that he has been discussing residential development as part of it. Mind you, the bloke didn't even appear to realise one of the old plans he's found is an office building.
I did point that out to him afterwards.
Amazing what they might learn if they actually listen instead of trying to lecture.
Ok, I am not at all financially qualified, but I am a co-director of a business in which I have an equity investment. My understanding is that you can take a return on equity through dividend payments but only if the company is profitable.
Otherwise you make a director's loan, then you can take interest out regardless of whether the company is profitable or not - I believe this is what RD is doing. The interest repayment then hits the P&L of the company, making it even less profitable. The latter may have tax advantages but I am not in any way qualified / knowledgeable enough to say that.
I think you might be reading more into the CFO's comment than he probably meant in the context that he said it..... however.......
RD could have just put the cash into CAFC i.e. he just purchases the equity and adds cash. My understanding is one of his companies (Stadprix) put the money in as a loan, and thats the important part.
If CAFC is ever sold, that money will still be owed to Stadprix, if he had just put the cash in he'd get back whatever the sale price is and no debt.
Therefore despite all this from KM as to how much he's invested, I think we might find it's a loan, all be it to himself at the moment, but if he sells........
It does depend on the terms, the repayment schedule is usually based on future cash flow projections, if the projections are wrong then depending which way the loanees will either make less or more. so it could be 3.5%, if we drop down to league 1 and revenues reduce that could drop to 1%, if we got promoted to the premier league (HA!) it could go to 15%........
This is absolutely my fear - but Joyes has told me once it's "essentially equity" and another time it's "quasi equity". In both circumstances the presence of interest payable to Staprix says to me it's a loan, unless I'm missing something in terms of how the interest benefits Duchatelet.
The critical thing is his exit strategy. The debt is a leverage in terms of value - he might get a bigger price if he's prepared to write off all of the debt than if it didn't exist at all. But then if I was a buyer I'd only want to pay what I felt the club was worth, regardless of the 'friendly' debt.
Seriously - am I missing something here? Might give David Joyes a call and talk it through with him.
EDIT: The biggest question I have is how does Duchatelet benefit from the interest chargeable if Staprix are anything other than a creditor?
I don't begin to claim an understanding of the way finance works but I once looked at the option of buying out the company I worked for. My boss kept telling me that as he had borrowed money to construct buildings, he expected all these loans to be paid by me no matter what the business was valued at.
Several potential buyers have tried to negotiate with him to my knowlege. He still owns the company 4 years later.
Ok, I am not at all financially qualified, but I am a co-director of a business in which I have an equity investment. My understanding is that you can take a return on equity through dividend payments but only if the company is profitable.
Otherwise you make a director's loan, then you can take interest out regardless of whether the company is profitable or not - I believe this is what RD is doing. The interest repayment then hits the P&L of the company, making it even less profitable. The latter may have tax advantages but I am not in any way qualified / knowledgeable enough to say that.
That's my understanding - but as I understand it the investment is from Staprix rather than the director himself? And we're definitely not profitable as we know.
I think you might be reading more into the CFO's comment than he probably meant in the context that he said it..... however.......
RD could have just put the cash into CAFC i.e. he just purchases the equity and adds cash. My understanding is one of his companies (Stadprix) put the money in as a loan, and thats the important part.
If CAFC is ever sold, that money will still be owed to Stadprix, if he had just put the cash in he'd get back whatever the sale price is and no debt.
Therefore despite all this from KM as to how much he's invested, I think we might find it's a loan, all be it to himself at the moment, but if he sells........
It does depend on the terms, the repayment schedule is usually based on future cash flow projections, if the projections are wrong then depending which way the loanees will either make less or more. so it could be 3.5%, if we drop down to league 1 and revenues reduce that could drop to 1%, if we got promoted to the premier league (HA!) it could go to 15%........
This is absolutely my fear - but Joyes has told me once it's "essentially equity" and another time it's "quasi equity". In both circumstances the presence of interest payable to Staprix says to me it's a loan, unless I'm missing something in terms of how the interest benefits Duchatelet.
The critical thing is his exit strategy. The debt is a leverage in terms of value - he might get a bigger price if he's prepared to write off all of the debt than if it didn't exist at all. But then if I was a buyer I'd only want to pay what I felt the club was worth, regardless of the 'friendly' debt.
Seriously - am I missing something here? Might give David Joyes a call and talk it through with him.
EDIT: The biggest question I have is how does Duchatelet benefit from the interest chargeable if Staprix are anything other than a creditor?
I don't begin to claim an understanding of the way finance works but I once looked at the option of buying out the company I worked for. My boss kept telling me that as he had borrowed money to construct buildings, he expected all these loans to be paid by me no matter what the business was valued at.
Several potential buyers have tried to negotiate with him to my knowlege. He still owns the company 4 years later.
Quite - and the creditors are still receiving their interest and repayments whilst the value of the company probably hasn't changed much for prospective buyers. Exactly my point, although the risk isn't there whilst RD owns the club as he's made the loans through Staprix, right?
I think you might be reading more into the CFO's comment than he probably meant in the context that he said it..... however.......
RD could have just put the cash into CAFC i.e. he just purchases the equity and adds cash. My understanding is one of his companies (Stadprix) put the money in as a loan, and thats the important part.
If CAFC is ever sold, that money will still be owed to Stadprix, if he had just put the cash in he'd get back whatever the sale price is and no debt.
Therefore despite all this from KM as to how much he's invested, I think we might find it's a loan, all be it to himself at the moment, but if he sells........
It does depend on the terms, the repayment schedule is usually based on future cash flow projections, if the projections are wrong then depending which way the loanees will either make less or more. so it could be 3.5%, if we drop down to league 1 and revenues reduce that could drop to 1%, if we got promoted to the premier league (HA!) it could go to 15%........
This is absolutely my fear - but Joyes has told me once it's "essentially equity" and another time it's "quasi equity". In both circumstances the presence of interest payable to Staprix says to me it's a loan, unless I'm missing something in terms of how the interest benefits Duchatelet.
The critical thing is his exit strategy. The debt is a leverage in terms of value - he might get a bigger price if he's prepared to write off all of the debt than if it didn't exist at all. But then if I was a buyer I'd only want to pay what I felt the club was worth, regardless of the 'friendly' debt.
Seriously - am I missing something here? Might give David Joyes a call and talk it through with him.
EDIT: The biggest question I have is how does Duchatelet benefit from the interest chargeable if Staprix are anything other than a creditor?
Surely any cash that is introduced that is not for the purchase of additional equity is automatically treated by accounting practice as a loan? There needs to be an agreement as to the interest payable thereon even if it remains on the balance sheet as acruing to the loanee. Staprix may well be the legal entity making the loan rather than RD in his personal capacity.
Quasi equity was what was said. If I understood it that was because David asserted that in practice it would not be repayable until the club returned to the PL. The meaning of that seemed pretty clearly that finances will not allow the loan to be repaid in any other circumstance. He didnt speculate that in the case of RD selling up it could be repaid (or written off in part or in full at that time), or that RD/Staprix could decide to convert the debt to equity.
This 'investment' by RD convinces me less and less.
So he is worth minimum 500 million, probably more - the figure of 25 million keeps being mentioned as the investment sum, therefore 5% of his 'savings' ... nothing spectacular in that, many people would think nothing of spending 5% of their savings on a holiday.
But he has invested his 5% in our club and is receiving 3% interest on that amount, i.e. 750k p.a. - not bad even if it is chicken-feed to him. The beauty is that he has lent the money to himself as he is the majority shareholder of the lender, Staprix, and the majority owner of the borrower, Charlton.
And, as others have pointed out, there are also bound to be tax 'efficiencies'.
If he sells us, someone would have to buy the debt that he has now enforced on our club, meaning he cannot lose money ... unless we go down. Fair enough, he has screwed up so badly on the managerial and player side that this has become a possibility, but I still believe we will stay up.
He seems to be in a rather secure 'win-win' situation ... no wonder he is not interested in selling.
I know the above is rather generic and I may have misinterpreted some of the issues, but is it far from actuality?
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
"...there is nothing sinister in it."
...except that it makes any notional sale price paid for the club higher.
It doesn't really. The club is worth whatever someone is prepared to pay. If he wants to sell, and buyers think it's only worth £30m, he has to write off some of the debt same as he would an equity investment
Can anybody simplify all this? I am only concerned about the financial risk to Charlton Athletic as in the Bolton or Administration scenario. I get that we are in debt, and we have to pay 3% on that debt to someone or some company. What is the collateral for that debt, and is that collateral at risk of being called in?
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
"...there is nothing sinister in it."
...except that it makes any notional sale price paid for the club higher.
No, it doesn't. The existence or not of any shareholder loans will not change the selling price at all. As Alwaysneil says, the club is only worth what somebody else is prepared to pay for it. Some or all of the loans (including the rolled up interest) will just have to be written off at the time of sale, if the price is lower. Shareholder loans are quasi-equity & are not actually expected to be repaid.
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
"...there is nothing sinister in it."
...except that it makes any notional sale price paid for the club higher.
No, it doesn't. The existence or not of any shareholder loans will not change the selling price at all. As Alwaysneil says, the club is only worth what somebody else is prepared to pay for it. Some or all of the loans (including the rolled up interest) will just have to be written off at the time of sale, if the price is lower. Shareholder loans are quasi-equity & are not actually expected to be repaid.
But if you have an owner who doesn't want to sell (as recently quoted), RD will expect the loans repaid in full, and will not write anything off.
How much do you think he would have accepted from the Varney investors for the club as a minimum? The £14m he paid, or the £14m he paid plus all of the money he has "invested" since?
My view is that he will want everything back, including 3% p.a interest. If we say that is £14m plus £9m (again, quoting...) then any potential buyer would require an offer to be made of at least £27m (and that's just of RD sells at no loss and no profit other than the Staprix interest rate). You can add to that any losses made over the last two years (at least £6m), and then anything invested so far into the academy (up to £12m) and pitch/stadium (£2.5m) and all of a sudden the asking price is close to £40m.
It would be lovely if we could get RD to write off all of these loans and accept a minimal offer for the club but that simply will not happen.
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
"...there is nothing sinister in it."
...except that it makes any notional sale price paid for the club higher.
No, it doesn't. The existence or not of any shareholder loans will not change the selling price at all. As Alwaysneil says, the club is only worth what somebody else is prepared to pay for it. Some or all of the loans (including the rolled up interest) will just have to be written off at the time of sale, if the price is lower. Shareholder loans are quasi-equity & are not actually expected to be repaid.
But if you have an owner who doesn't want to sell (as recently quoted), RD will expect the loans repaid in full, and will not write anything off.
How much do you think he would have accepted from the Varney investors for the club as a minimum? The £14m he paid, or the £14m he paid plus all of the money he has "invested" since?
My view is that he will want everything back, including 3% p.a interest. If we say that is £14m plus £9m (again, quoting...) then any potential buyer would require an offer to be made of at least £27m (and that's just of RD sells at no loss and no profit other than the Staprix interest rate). You can add to that any losses made over the last two years (at least £6m), and then anything invested so far into the academy (up to £12m) and pitch/stadium (£2.5m) and all of a sudden the asking price is close to £40m.
It would be lovely if we could get RD to write off all of these loans and accept a minimal offer for the club but that simply will not happen.
That sounds like an accurate reading of things to me.
Interesting that £45m was the amount that Jimensz & Slater were initially touting the club around the City for. No takers at that price, including Duchatelet. Duchatelet picked the club at £14m. Doubt that a new owner would want to pick up what is effectively RD debt just to ensure RD pockets continue to be lined. RD will need to want to sell to accommodate a more reasonable price.
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
The odd thing is that he's already at bottom of the list, excluding day to day trading.
Debt is a lit cheaper than equity. It is even more cheap when it's a debt to yourself.
Loan interest due will be deductible from CAFC's UK tax liability. Loan interest received by Staprix may be taxed at a low rate in Belgium (cannot bring myself to Google belgian tax rates on a Sunday).
A new buyer will take on all liabilities hence why the sale of a club at a notional value of a quid don't reveal the true picture ie Bolton could sell for a pound tomorrow but new owner immediately inherits £40m of debt day one.
Unless negotiated otherwise I expect Duchatelet will get all his spend back plus interest. Will also likely make a profit on top of that with increased sale value assuming we aren't relegated.
We are trying to get to the bottom of how exactly he has exited Standard. The Socios speak bitterly of him emptying the bank account of €30m but stop short of saying he did anything illegal. That sounds to me like he had loaned Standard the money, and recalled it when he exited. It is also now increasingly said that Venanzi didn't have anything like the money to meet RDs asking price, so he has quietly done a deal with him. It may involve RD getting a cut of player sales as part of the repayment terms.
I think it is important to get to the bottom of the Standard sale, because it will tell us a lot about what he will look for in selling us.
We are trying to get to the bottom of how exactly he has exited Standard. The Socios speak bitterly of him emptying the bank account of €30m but stop short of saying he did anything illegal. That sounds to me like he had loaned Standard the money, and recalled it when he exited. It is also now increasingly said that Venanzi didn't have anything like the money to meet RDs asking price, so he has quietly done a deal with him. It may involve RD getting a cut of player sales as part of the repayment terms.
I think it is important to get to the bottom of the Standard sale, because it will tell us a lot about what he will look for in selling us.
Interesting point and theory.
How would the Bulot sale / non sale fit into all that ?
Debt is a lit cheaper than equity. It is even more cheap when it's a debt to yourself.
Loan interest due will be deductible from CAFC's UK tax liability. Loan interest received by Staprix may be taxed at a low rate in Belgium (cannot bring myself to Google belgian tax rates on a Sunday).
A new buyer will take on all liabilities hence why the sale of a club at a notional value of a quid don't reveal the true picture ie Bolton could sell for a pound tomorrow but new owner immediately inherits £40m of debt day one.
Unless negotiated otherwise I expect Duchatelet will get all his spend back plus interest. Will also likely make a profit on top of that with increased sale value assuming we aren't relegated.
I make no pretensions to be a tax expert (company or personal) but it might be that losses from Charlton can be group relieved against Belgian (Staprix) income to reduce Roland's overall corporate tax liabilities.
I don't have a scooby re the group structure but I reckon there is more chance of Murray winning the Australian Open (Andy not Richard or perhaps that should read Richard not Andy) than Duchatelet not offsetting Charlton losses against tax somehow.
EDIT: Should have said that I am assuming no UK corporation tax liability for Charlton as we are forever being told the Club is in a loss situation.
Ok, I am not at all financially qualified, but I am a co-director of a business in which I have an equity investment. My understanding is that you can take a return on equity through dividend payments but only if the company is profitable. solvent.
Otherwise you make a director's loan, then you can take interest out regardless of whether the company is profitable or not - I believe this is what RD is doing. The interest repayment then hits the P&L of the company, making it even less profitable. The latter may have tax advantages but I am not in any way qualified / knowledgeable enough to say that.
It is possible to take dividends from a loss making company provided that the balance sheet remains solvent.
Payments of dividends are illegal by an insolvent company however.
Not trying to nitpick but since Charlton apparently makes losses if he (Staprix) is taking a dividend then it will be old reserves unless he is breaching company law which seems unlikely with Meire on board.
If a shareholder's loan does NOT bear an interest charge then it will almost certainly be deemed to be equity in the event of a winding up. This would place the shareholder's equity & his loan at the bottom of the list to receive any distributions from the liquidation of any assets. Hence shareholders loans almost always pay notional interest, to ensure this doesn't happen. In the real world however, shareholder's loans are quasi-equity & will never be repaid until the shareholder exits the business. The interest is notional as it is never actually paid to the shareholder but just rolled up into his outstanding loan amount. This is totally standard practice & there is nothing sinister in it.
The odd thing is that he's already at bottom of the list, excluding day to day trading.
Yes, correct. His loans will rank behind all the secured creditors, including the special football secured creditors (players wages etc.) but the notional interest on the loan will ensure that he ranks equal to all other non-secured creditors (the sandwich supplier, the electricity company etc. etc.). If there was no interest charge then his loan would rank behind everybody in the event of a winding up, as it would be deemed to be equity.
Comments
I don't actually think the CFO meant anything by it though as was somewhat a passing comment off the cuff.
But Quasi equity COULD be a loan where the interest rate is variable based on revenue. So if the revenue increases above an agreed level (Target 20,000 or player sales) the interest rate increases. It could be a way to extract money out.
Yes the loan principle may never be repaid, that's what I understood David to mean, but what's the benefit of adding interest?
The problem is the status of Staprix in these loans. If it's equity, no problem - but then why interest? If it's a loan, then it has the potential of storing up problems unless RD is prepared - like Tony Fernandez was - to later convert to equity.
Otherwise you make a director's loan, then you can take interest out regardless of whether the company is profitable or not - I believe this is what RD is doing. The interest repayment then hits the P&L of the company, making it even less profitable. The latter may have tax advantages but I am not in any way qualified / knowledgeable enough to say that.
Several potential buyers have tried to negotiate with him to my knowlege. He still owns the company 4 years later.
We are not fooled by your spin Katrein
If Cafc disagree they will have to repay the debt and find a cheaper rate, but who will loan a failing business say 50mill.
So starprix could put that interest at 1600% just like pay day loan people do.
I would imagine there is also a term of agreement, if he is smart this will be one year so every year the rate is assessed.
I bet SL have the same setup, and can be used as leverage against there players, hence the latest one to join us!
The best debt to have is either debt that is offset as assets preferibly liquid assets, cash etc...
The worst debt is interest charged debt.
Guess what we have
Quasi equity was what was said. If I understood it that was because David asserted that in practice it would not be repayable until the club returned to the PL. The meaning of that seemed pretty clearly that finances will not allow the loan to be repaid in any other circumstance. He didnt speculate that in the case of RD selling up it could be repaid (or written off in part or in full at that time), or that RD/Staprix could decide to convert the debt to equity.
So he is worth minimum 500 million, probably more - the figure of 25 million keeps being mentioned as the investment sum, therefore 5% of his 'savings' ... nothing spectacular in that, many people would think nothing of spending 5% of their savings on a holiday.
But he has invested his 5% in our club and is receiving 3% interest on that amount, i.e. 750k p.a. - not bad even if it is chicken-feed to him. The beauty is that he has lent the money to himself as he is the majority shareholder of the lender, Staprix, and the majority owner of the borrower, Charlton.
And, as others have pointed out, there are also bound to be tax 'efficiencies'.
If he sells us, someone would have to buy the debt that he has now enforced on our club, meaning he cannot lose money ... unless we go down. Fair enough, he has screwed up so badly on the managerial and player side that this has become a possibility, but I still believe we will stay up.
He seems to be in a rather secure 'win-win' situation ... no wonder he is not interested in selling.
I know the above is rather generic and I may have misinterpreted some of the issues, but is it far from actuality?
...except that it makes any notional sale price paid for the club higher.
I am only concerned about the financial risk to Charlton Athletic as in the Bolton or Administration scenario.
I get that we are in debt, and we have to pay 3% on that debt to someone or some company.
What is the collateral for that debt, and is that collateral at risk of being called in?
How much do you think he would have accepted from the Varney investors for the club as a minimum? The £14m he paid, or the £14m he paid plus all of the money he has "invested" since?
My view is that he will want everything back, including 3% p.a interest. If we say that is £14m plus £9m (again, quoting...) then any potential buyer would require an offer to be made of at least £27m (and that's just of RD sells at no loss and no profit other than the Staprix interest rate). You can add to that any losses made over the last two years (at least £6m), and then anything invested so far into the academy (up to £12m) and pitch/stadium (£2.5m) and all of a sudden the asking price is close to £40m.
It would be lovely if we could get RD to write off all of these loans and accept a minimal offer for the club but that simply will not happen.
Interesting that £45m was the amount that Jimensz & Slater were initially touting the club around the City for. No takers at that price, including Duchatelet. Duchatelet picked the club at £14m. Doubt that a new owner would want to pick up what is effectively RD debt just to ensure RD pockets continue to be lined. RD will need to want to sell to accommodate a more reasonable price.
Loan interest due will be deductible from CAFC's UK tax liability. Loan interest received by Staprix may be taxed at a low rate in Belgium (cannot bring myself to Google belgian tax rates on a Sunday).
A new buyer will take on all liabilities hence why the sale of a club at a notional value of a quid don't reveal the true picture ie Bolton could sell for a pound tomorrow but new owner immediately inherits £40m of debt day one.
Unless negotiated otherwise I expect Duchatelet will get all his spend back plus interest. Will also likely make a profit on top of that with increased sale value assuming we aren't relegated.
I think it is important to get to the bottom of the Standard sale, because it will tell us a lot about what he will look for in selling us.
How would the Bulot sale / non sale fit into all that ?
I don't have a scooby re the group structure but I reckon there is more chance of Murray winning the Australian Open (Andy not Richard or perhaps that should read Richard not Andy) than Duchatelet not offsetting Charlton losses against tax somehow.
EDIT: Should have said that I am assuming no UK corporation tax liability for Charlton as we are forever being told the Club is in a loss situation.
Payments of dividends are illegal by an insolvent company however.
Not trying to nitpick but since Charlton apparently makes losses if he (Staprix) is taking a dividend then it will be old reserves unless he is breaching company law which seems unlikely with Meire on board.