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The 3%

edited February 2016 in General Charlton
Serious question. There are those who are happy to say our survival depends on Roland Duchatalet baling us out, but I have seen a couple of people suggesting he is actually putting in money as a loan with a 3% interest rate. I asume the 3% is payable to Staprix or some sort of back hander to Roly. However, to me this seems like unfriendly debt, given how he's behaving towards the club. If he suddenly pulled out, as a lot of us fervently want, would we be hit with a demand for 9m pounds plus associated interest, as that changes him from a gentle samaritan into a blood sucking parasite.
Is there anyone ITK out there, or people who know more about economics than me who can say where we are going with monies owed to the Belgian, as a worst scenario with this sort of debt sounds a lot more worrying tan our rush to play league 1 football. Or did I misread the whole thing, and Roland is having the bills sent to the bunker, and paying them cheerfully away while we wicked souls pour scorn on him and his evil hench people?


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    edited February 2016
    The debt to Staprix (Roland) is said to be about £40M now & yes he is charging 3%, so over £1m pa.

    However, if he refused to fund the club further (like Bolton) and the club actually entered administration, then RD will lose most of his money.

    If the club is bought, it is unlikely the buyers would take on all his debt. Why should they ?

    This is why David Joyes (Chief Financial Officer), described the loan as quasi equity, as in it is virtually shares as opposed to a loan. The money is put in as a loan, because it ranks higher than equity if we did go into administration.

    (This may not be 100% accurate, but it's close enough).
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    Okay, nice answer (what is quasi equity? That means it is attached to a sale in some way, as a purchaser would have to take on the debt, or buying the club would be expensive as they would effectively be taking on Roland's overspending?)
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    edited February 2016
    Quasi equity means that the loan (ever growing), is almost as if it isn't a loan, but simply a shareholding, because it's likely that it won't be repaid.
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    Quasi equity means anything that's not pure equity and not pure loan and the terms determine exactly how it works.

    It is a loan of capital but the "Interest" rate instead of being fixed can vary according to either profits or revenue. As RD intends to only break even I assume it could be related to revenue. So we can make a thumping loss but as long as we have sold players and the revenue is healthy Staprix get a higher return. If revenue goes down the loan amount repayable goes down. It's the latter effect that makes it "quasi equity" in that you might not get your money back if revenues/profits (however its framed) goes down.

    If its based on profits then he gets less revenue but the loan repayable goes down as well so Staprix potentially lose.

    Which is it profit or revenue if it's "quasi equity" instead of a conventional fixed interest rate???

    Whatever, there is an enormous conflict of interest between how the club is run and the impact on Staprix. It's an obvious example of where transparency would remove conspiracy theories about what he is doing and why.
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    My limited knowledge with some guess work thrown in:

    If it is a loan, it is a loan, no debt is "friendly" but some is more aggressive in its ownership. RD as owner can't just walk out and demand repayment as the club is owned directly by the company who lends to it - although see point 5 below.

    A loan has nothing to do with the purchase price as people will pay what they think a business is worth, not take on huge loans or pay them up.

    Any loans are technically an 'asset' to the lender (in this case Strapix), but realistically they can be sold at well below 'par' (I think Palace were bought for 1p in the £ by their current owners) or written off altogether and I dare say we are close to if not already insolvent and entirely reliant on our parent co to continue fading.

    Interest on loans is normal practice and 3% does not seem unreasonable as a level to set, given we make a loss every year this is really just an accounting point as I believe by not charging a 'commercial level of interest' the loan would not have taxable benefits or something like that.

    Ultimately, as I see it, RD is so wealthy he will not be compelled to sell for lack of 'cash' for many years yet (by which time age would likely have caught up on him anyway), unless he changes his strategy massively and starts chucking cash at us in fistfuls (unlikely).

    As such, one of five things happens:

    1. He doesn't sell us and keeps funding ever increasing losses in lower leagues all to prove some strange point which he will never prove. He seems obstinate and weird enough that this may happen

    2. We get promoted to the PL and become self sustaining (won't happen under him).

    3. We find a £5-10M player in the youth every season to break even. (Never happened for any club before and won't happen to us.)

    4. He gets bored and sells us for next to nowt, writing off all or the majority of his debts in the process (the dream scenario).

    5. He realises he has sunk £40M into the club with absolutely no possible return on investment ever. We are relegated and no one values us at more than £1 given the ongoing 'contingent liabilities' of future losses to fund (like Bolton seem to be heading now effectively). He does not wish to walk away from £40M debt or whatever it has risen to, but likewise does not want to continue putting more money into the club (either via debt or equity). He therefore sells every player he can sell, sells any non playing assets, obvious ones being The Valley and Sparrows Lane then gives the club away/collapses it into administration and walks away (the night-Meire scenario).

    Re number 5, I think I am right in saying RM and chums hold first charges on The Valley which could mean selling that is more difficult and unlikely to realise much in revenue so there is just a chance RM becomes our saviour again?
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Roland Out Forever!