ALK Capital or Farnell/Elkashashy takeover

[KateR]

So far I think everything has gone absolutely to plan and we are on track moving towards summer, where during the next seven months more will be revealed as the club push the new strategy.

The only big risk at this moment is relegation and even that would not stop the strategy, it just means you have to deflect some parts and bring other in to meet the objectives.

The objectives are what really matter, those are to improve BFC from how it was operated/managed upto December 2020.

[Paul Waine]

Think that may also prove difficult given their investments in other clubs.

It’s sometimes better to be a debt holder as you get secured income from the interest vs an unknown dividend from the equity. Often debt holders have a fair about of say in the running of the company though, even if technically they have no decision rights.

Hi New, I don't think MSD can have any rights to instruct the club what actions to take. If they did this they would become "shadow directors" with all the consequent responsibilities and liabilities as directors.

Exciting times.

UTC

[lrac]

You do not believe that paul

[paulatky]

So far I think everything has gone absolutely to plan and we are on track moving towards summer, where during the next seven months more will be revealed as the club push the new strategy.

The only big risk at this moment is relegation and even that would not stop the strategy, it just means you have to deflect some parts and bring other in to meet the objectives.

The objectives are what really matter, those are to improve BFC from how it was operated/managed upto December 2020.

Cant see SD buying into the new strategy.
Can see him leaving in the summer

[Boss Hogg]

Have they actually got a pot to p*ss in other than debt secured against the clubs’ assets ?

Some of the comments about having a good window, money to spend and over delivering are beginning to look foolish and at best naive.

First impressions are not good. We could have limped along as we were.

[Somethingfishy]

If the strategy is to spend little and rely on moving through players from the U23s to ultimately sell on then Dyche won't have that. He has clearly demonstrated he believes in players with experience and with nous. McNeil was thrown in an emergency and performed brilliantly straight away but that really is the exception rather than the rule. Benson was an emergency during a bad injury crisis and he performed ok but he has several experienced players in front of him. We are at least chasing players at the younger end with first team expereince in Collins and Kenny but their clubs will want paying for their star youngsters...just as we would. He will not enjoy being forced to blood youngsters. I just don't think it is the way he works.

[KateR]

Cant see SD buying into the new strategy.
Can see him leaving in the summer

I don't think so, I believe they will have outlined the long term strategy to improve from the previous era including it will take time but you will have new players to bring in, improve them and sell them as part of our player strategy. In addition we will mange the overall potential of the club and sell it globally, we will generate more funds this way, these funds will be used to improve facilities and also go to player recruitment. However this wont happen in 2021 and it will be into 2022 before we start seeing any meaning results.

Given I don't see SD going to any top 8/10 clubs it would mean either going overseas, or move to another club that is struggling, yes he might get more funds to spend but given the project on offer and the ability to shape a PL club in this way, where he will not get this type of opportunity at any other club (IMO) means he will stay and see how it goes for at least another season beyond this one.

[dsr]

So you think the value of the club has decreased by £50m?

Bearing in mind that MG & co owned an asset worth £170m before the sale and now have cash of £170m and ALK had nothing before the sale and now have an asset worth £120m and a debt of £120m, who has had the benefit of that £50m?

The club's balance sheet has the same value. That's the "clever" bit about it. Garlick has got a large sum of money out of the club without having to give any share to the minority shareholders.

In outline, the club's balance sheet at valuation (not historic cost accounts), as best we know it, was something like this:

CASH £50m
OTHER ASSETS AT VALUATION £150m
TOTAL ASSETS £200m

And we now have

ASSETS AT VALUATION £150m
LESS EXPENSIVE BANK LOAN £70m
ASSETS USABLE IN RUNNING THE CLUB £80m
add DODGY DEBT OWED TO THE CLUB BY HOLDING COMPANY £120m
TOTAL ASSETS £200m.

The assets we can use for BFC are very much reduced. The debt from the holding company is worth nothing unless and until they sell the club at a profit or at break even, because the holding company has no assets other than the club's shares. As long as ALK is the owner, that debt has no practical value.

[Vegas Claret]

If the strategy is to spend little and rely on moving through players from the U23s to ultimately sell on then Dyche won't have that. He has clearly demonstrated he believes in players with experience and with nous. McNeil was thrown in an emergency and performed brilliantly straight away but that really is the exception rather than the rule. Benson was an emergency during a bad injury crisis and he performed ok but he has several experienced players in front of him. We are at least chasing players at the younger end with first team expereince in Collins and Kenny but their clubs will want paying for their star youngsters...just as we would. He will not enjoy being forced to blood youngsters. I just don't think it is the way he works.

and maybe that's one of the reasons he's not considered for other jobs if what you suggest is correct (not saying it is or isn't)

[Chester Perry]

I don't think so, I believe they will have outlined the long term strategy to improve from the previous era including it will take time but you will have new players to bring in, improve them and sell them as part of our player strategy. In addition we will mange the overall potential of the club and sell it globally, we will generate more funds this way, these funds will be used to improve facilities and also go to player recruitment. However this wont happen in 2021 and it will be into 2022 before we start seeing any meaning results.

Given I don't see SD going to any top 8/10 clubs it would mean either going overseas, or move to another club that is struggling, yes he might get more funds to spend but given the project on offer and the ability to shape a PL club in this way, where he will not get this type of opportunity at any other club (IMO) means he will stay and see how it goes for at least another season beyond this one.

the interesting one is Crystal Palace, they are completely set-up for a refresh in the summer
Hodgson and his management team out of contract
13 players in the 1st team squad out of contract
newly revamped and funded youth system, and massive talent pool on their doorstep

of course they tend to run at a loss so need to sell a player every year or 2 - and financially they need to do it again in the summer, their accounts will be interesting for 2019/20

[Right_winger]

and maybe that's one of the reasons he's not considered for other jobs if what you suggest is correct (not saying it is or isn't)

It’s certainly a consideration. He hasn’t proven he has the contacts to attract and deal with high profile players.

Obviously unattractive football is another consideration.

If/when Dyche moves it won’t be to a club any better than Burnley and he won’t be afforded the same time to get results.

[Paul Waine]

You do not believe that paul

Hi lrac, the way I see it, looking at the more reliable facts and stuff that is verified from public documents:

1) ALK have acquired 84% of BFC for £170m;
2) Kettering Capital has £98m equity, paid in on 30th Dec 2020, as reported to Companies House;
3) 50,000 shares at £200/share and 49,000 shares at £1795/share;
4) Yes, we don't know the source of all the equity, or who paid £200/share and who paid £1,795/share;
5) Approx £105m has been paid to BFC's previous directors. The balance of £65m is reported to be payable to Mike Garlick and John B;
6) We don't know the payment schedule for the balance of £65m. It's been reported to be in 3 separate payments. if ALK fail to make these payments, then MG and JB will take back ownership of the club;
7) It is my hypothesis, that the 3 payments are linked to BFC performance targets. Alan Pace say the fans will like it when we know how this has been structured. My expectation is that the 3 payments are linked to BFC remaining in the Premier League for each of the next 3 seasons (or there may be one or two nearer term performance targets...);
8) ALK have borrowed from MSD. I forget whether this is said to be £60m or £80m. MSD have secured the loan with charges on BFC assets, so public record that this exists;
9) It is suggested that BFC cash has been taken by ALK and has been either (a) used to fund the purchase price or (b) has funded the equity in Kettering Capital. This cannot be correct. It ignores the cashflow situation for BFC - tv money in lump sums, wages paid out every month etc. It ignores the BFC directors' responsibilities and personal liabilities to maintain BFC finances - this is a legal duty of all directors for all companies. If it was breached by any of them they could be disqualified from being directors of any company in the UK. Let's imagine we don't know the ALK directors very well. We do know Mike G and John B - they both have their own separate successful UK businesses. Does anyone serious think they would risk losing their other businesses by getting things wrong as directors at BFC?

10) Somewhere in all of this, Alan Pace has done his interviews and has moved to live in the Burnley area. Is any of those actions suggestive of someone from "The Sting" or some other hustle?

11) We know that ALK has to raise more equity. We assume that the Twitter is referring to ALK, though it's not (yet) confirmed (unless I've missed something).
12) It is usual for new companies to have a number of funding rounds. It is usual for each funding round to place different valuations on the company and that, if things are going well, the price of new shares is higher than the price for shares bought in earlier. We've already seen a variation of this pattern with 50,000 at £200/share and 49,000 at £1,795/share.
13) BFC has had some good results in January: the first club to win at Anfield in (almost) 4 years and through to the 5th round of the FA Cup. Maybe ALK see these results as the basis for pursuing this new funding round.

14) If the reports on new funding is accurate, then this is only good news. If the reports on new funding are inaccurate, i.e. there's no new funding being sought by ALK/BFC at this time, then "there's nothing to see here..."

Either way

Exciting times.

UTC

[Long Time Lurker]

I find it hard to believe that nobody saw this coming when the details of the takeover were announced.

Prior to the takeover I estimated that we had 30-40m in the dry powder store. I still think that was very near the mark.

Covid probably cost us 5-10m, but we gained back some money because we lost some big wage earners that we didn't replace with new incomings. Three players at 50k per week over a year would equate to a saving of 7.5m. I suspect that the remainder of the reputed 55m was due to a cash flow spike resulting from funds allocated for bonuses that are yet to be paid.

Now, going back to before the take over we posted a small profit in our last set of accounts. That was only possible because of outstanding monies owed to us from some big transfer sales. In recent windows our expenditure on players has exceeded the revenue from selling players. In my books that means our future player trading account will see us post a deficit if nothing changes.

So, one or all of these things could be true

All of our dry powder money was swallowed up in the take over.
Our player trading account will be in the red.
Revenue will be down due to Covid for some time.
We may lose some of our sponsors or they refuse to pay.
We now have to service what could be a loan of 60m at 10% ( 6m a year )
Our new owners have no more money to put into the club.

The new owners have three further payments to make which could be 75-100m in total

And people think we have money to spend on transfers ?

We have no money, we have debt and the owners need to raise money to pay off all the outstanding amounts to our previous shareholders.

My prognosis is that we can't afford to stay in the Premier League. The only way we can settle all of our new debts and facilitate a positive cash flow is to get relegated. Selling Tarks, McNeil, Pope, Wood and Taylor would generate a considerable amount and reduce our wage bill. Waving goodbye to players at the end of their contracts will free up more cash and relegation wage reduction clauses will do the rest. Finally, the parachute payments will swell the coffers, especially with the reduced operational cost of a lower wage bill.

All told that should cover the repayment of 150m in debt and leave us a small amount to rebuild the team with free transfers and youngsters. If we stay up and we are running at a loss of 10m or so then every season will chip away at the equity in the club and we will eventually go bust. Relegation would pay off the debts, reduce ALK's investment and risk to zero and set them up for a big profit if we get promoted again.

If that sounds like a whacky assessment it is only because people are currently under the impression that Alan Pace is the controlling partner in ALK. I'm of the opinion that he is simply the face of the company and a place holder while Dave Checketts finishes up his missionary work so he can play a more active role in six months.

Dave Checketts leads from the front, being a back seat passenger ( director ) simply isn't part of his personality.

For those who haven't done their homework the strategy I previously outlined is the one that Checketts put in place when he was a minority owner of the St Louis Blues.

https://www.stlouisgametime.com/2012/5/ ... cketts-era

The sooner people dump their pie in the sky appraisals of a difficult financial situation and grasp the stark reality of our current predicament the better we will all be.

We were bought by a group of people that obviously have a sincere desire to develop and grow the club, but they don't have a pot to **** in between them.

[djemba-djemba]

So Chester..cards on the table, are you happy this takeover happened or do you think we were better off on the previous trajectory?

[HunterST_BFC]

Our owners have little to lose it seems...

We have everything on the table to lose...

[Winstonswhite]

Article by David Conn in the guardian this morning:

Heady recent wins at Liverpool and Arsenal have helped keep Sean Dyche’s Burnley team eight points above the Premier League relegation zone, but at Turf Moor the air is still clearing over a £170m US takeover which has used the club’s own money and loaded it with debt.

The new chairman Alan Pace, a former Wall Street financier leading the US consortium ALK Capital that bought the club, has been a very vocal proponent of energetic plans to build on Dyche’s achievements and improve the club’s historic home. But he has not explained in detail the deal to buy the club from its long-term local owners and directors, led by outgoing chairman Mike Garlick, who owned 49.24% of the shares, and John Banaszkiewicz, who had 28.2%.

Responding to questions from the Guardian, Pace, citing confidentiality, declined to confirm precisely how the multimillions of pounds paid to those outgoing Burnley shareholders have been financed, although ALK maintains that its plans are sustainable and it intends to invest new money in the club. Sources with knowledge of the deal did, however, confirm some essential elements: the initial payments to Garlick, Banaszkiewicz and the other sellers have been financed with a loan from MSD UK Holdings, the investment firm of the US tech magnate Michael Dell, said to be approximately £60m. The loan is charged like a mortgage on Turf Moor and the club itself, which will have to repay it from its own revenues, with interest at a rate ALK has not yet publicly stated.

Initial reports that the club’s own cash reserves have also been used to pay the selling shareholders were accurate, the Guardian understands. Sources with knowledge of the deal put that figure at between £30m-£40m of the club’s money.

The club’s cash was built up handsomely in the Premier League years since promotion in 2016, through careful husbandry by Garlick and his fellow owners. Burnley’s most recently published accounts, for the year to 30 June 2019, stated that it had no borrowings at all, and £42m in the bank. That makes it difficult not to conclude that just to pay for ALK to take over, the club is now approximately £90m worse off, with interest to pay.

The deal is understood to value Burnley at more than £200m – presumably if certain circumstances are met including continued Premier League status – and will be completed with the payment of further instalments. ALK has not confirmed how much of its own capital it has paid for this first instalment in addition to the loan and club cash paid out. Bloomberg reported last month that the total first payment to Garlick, Banaszkiewicz and their fellow sellers was £102m, and if three further instalments are not paid, there is a mechanism by which ALK’s shares in the club go back to the outgoing shareholders.

Pace, who spent considerable time looking for a club ALK could buy, previously coming close to purchasing Sheffield United, argues that Burnley have great potential to grow commercially from shrewd recruitment of players, stadium improvements and wider marketing of the club. He has insisted that their financial structure is sustainable, suggesting it will still be so even if Burnley are relegated to the comparatively straitened circumstances of the Championship.

Dell’s MSD has lent money to other English football clubs during the pandemic, including Southampton and Derby County, also secured by charges, but these loans were not taken out to finance takeovers. Southampton recently published their accounts for the 2019-20 financial year, declaring that their loan from MSD is £78.8m, at an annual interest rate of 9.14%. By comparison, interest on their ordinary bank loan is just 1%. Pace has declined to say whether Burnley’s MSD loan has a similar 9% interest rate, which would cost the club approximately £5.4m interest a year. As the loan was taken out on 31 December, when the takeover was concluded, the interest rate is likely to be disclosed in Burnley’s annual accounts for the current 2020-21 financial year, but they are not due to be published until June 2022.

Pace has expressed some impatience with questions suggesting that this method of financing a takeover, including with the club’s cash, is not normal, and has compared ALK’s purchase to taking out a mortgage on a house. But for many seasoned campaigners, including the Football Supporters’ Association, investors using loans to pay for a takeover, then requiring the club itself to service them, is a “leveraged buyout” with uncomfortable similarities to the Glazer family’s debt-laden takeover of Manchester United in 2005.

The Glazers loaded £525m debts on United, that have since caused more than £1bn to be paid out by the club in interest, fees and refinancing charges, prompting an outcry and years of sustained campaigns by United supporters. Despite that, the Premier League still has no policy to bar the imposition of loans on clubs to pay for takeovers. The takeover process entails an “owners-and-directors test” that bans people with unspent criminal convictions from owning clubs, and requires the league to be satisfied that new owners have the resources to take over and a credible plan to keep the club in business. Asked about the Burnley takeover, and why it still approves such leveraged buyouts, the Premier League declined to comment.

Ashley Brown, head of governance at the FSA, said: “Historically, the FSA and our affiliated supporters’ groups have always opposed the concept of new owners ‘mortgaging’ a club during its takeover. Using club assets as security for loans taken out to purchase that club has the potential to put a financially solid football club into a less secure position.”

The Guardian asked Garlick and Banaszkiewicz, who have stayed on as Burnley directors, about the criticism that could be levelled at them as the major shareholders, that they appear to have made personal fortunes by concluding this deal to sell their shares, for which the club itself has been put into debt.

In response to that and other questions about the financing of the takeover, a spokesperson for the club and its directors said: “ALK Capital reiterates that its financial approach is reasonable and sustainable. Burnley Football Club’s cash reserves remain in a healthy position following the takeover and compare favourably to other Premier League clubs. It is well placed to thrive under its new ownership.

“ALK Capital’s business plan is about securing top-flight football in Burnley for decades to come, but its financial model considers all economic circumstances, both on and off the football pitch. The new owners of Burnley are committed to investing in this club, the team and facilities over the coming years. Their actions will speak louder than any words.”

[arise_sir_charge]

I find it hard to believe that nobody saw this coming when the details of the takeover were announced.

Prior to the takeover I estimated that we had 30-40m in the dry powder store. I still think that was very near the mark.

Covid probably cost us 5-10m, but we gained back some money because we lost some big wage earners that we didn't replace with new incomings. Three players at 50k per week over a year would equate to a saving of 7.5m. I suspect that the remainder of the reputed 55m was due to a cash flow spike resulting from funds allocated for bonuses that are yet to be paid.

Now, going back to before the take over we posted a small profit in our last set of accounts. That was only possible because of outstanding monies owed to us from some big transfer sales. In recent windows our expenditure on players has exceeded the revenue from selling players. In my books that means our future player trading account will see us post a deficit if nothing changes.

So, one or all of these things could be true

All of our dry powder money was swallowed up in the take over.
Our player trading account will be in the red.
Revenue will be down due to Covid for some time.
We may lose some of our sponsors or they refuse to pay.
We now have to service what could be a loan of 60m at 10% ( 6m a year )
Our new owners have no more money to put into the club.

The new owners have three further payments to make which could be 75-100m in total

And people think we have money to spend on transfers ?

We have no money, we have debt and the owners need to raise money to pay off all the outstanding amounts to our previous shareholders.

My prognosis is that we can't afford to stay in the Premier League. The only way we can settle all of our new debts and facilitate a positive cash flow is to get relegated. Selling Tarks, McNeil, Pope, Wood and Taylor would generate a considerable amount and reduce our wage bill. Waving goodbye to players at the end of their contracts will free up more cash and relegation wage reduction clauses will do the rest. Finally, the parachute payments will swell the coffers, especially with the reduced operational cost of a lower wage bill.

All told that should cover the repayment of 150m in debt and leave us a small amount to rebuild the team with free transfers and youngsters. If we stay up and we are running at a loss of 10m or so then every season will chip away at the equity in the club and we will eventually go bust. Relegation would pay off the debts, reduce ALK's investment and risk to zero and set them up for a big profit if we get promoted again.

If that sounds like a whacky assessment it is only because people are currently under the impression that Alan Pace is the controlling partner in ALK. I'm of the opinion that he is simply the face of the company and a place holder while Dave Checketts finishes up his missionary work so he can play a more active role in six months.

Dave Checketts leads from the front, being a back seat passenger ( director ) simply isn't part of his personality.

For those who haven't done their homework the strategy I previously outlined is the one that Checketts put in place when he was a minority owner of the St Louis Blues.

https://www.stlouisgametime.com/2012/5/ ... cketts-era

The sooner people dump their pie in the sky appraisals of a difficult financial situation and grasp the stark reality of our current predicament the better we will all be.

We were bought by a group of people that obviously have a sincere desire to develop and grow the club, but they don't have a pot to **** in between them.

What a bizarre hypothesis.

[dandeclaret]

It’s certainly a consideration. He hasn’t proven he has the contacts to attract and deal with high profile players.

Obviously unattractive football is another consideration.

If/when Dyche moves it won’t be to a club any better than Burnley and he won’t be afforded the same time to get results.

They won’t afford him just under half a season to reshape a club? Since that point at Burnley his results have been spectacular.

[Newcastleclaret93]

Hi lrac, the way I see it, looking at the more reliable facts and stuff that is verified from public documents:

1) ALK have acquired 84% of BFC for £170m;
2) Kettering Capital has £98m equity, paid in on 30th Dec 2020, as reported to Companies House;
3) 50,000 shares at £200/share and 49,000 shares at £1795/share;
4) Yes, we don't know the source of all the equity, or who paid £200/share and who paid £1,795/share;
5) Approx £105m has been paid to BFC's previous directors. The balance of £65m is reported to be payable to Mike Garlick and John B;
6) We don't know the payment schedule for the balance of £65m. It's been reported to be in 3 separate payments. if ALK fail to make these payments, then MG and JB will take back ownership of the club;
7) It is my hypothesis, that the 3 payments are linked to BFC performance targets. Alan Pace say the fans will like it when we know how this has been structured. My expectation is that the 3 payments are linked to BFC remaining in the Premier League for each of the next 3 seasons (or there may be one or two nearer term performance targets...);
8) ALK have borrowed from MSD. I forget whether this is said to be £60m or £80m. MSD have secured the loan with charges on BFC assets, so public record that this exists;
9) It is suggested that BFC cash has been taken by ALK and has been either (a) used to fund the purchase price or (b) has funded the equity in Kettering Capital. This cannot be correct. It ignores the cashflow situation for BFC - tv money in lump sums, wages paid out every month etc. It ignores the BFC directors' responsibilities and personal liabilities to maintain BFC finances - this is a legal duty of all directors for all companies. If it was breached by any of them they could be disqualified from being directors of any company in the UK. Let's imagine we don't know the ALK directors very well. We do know Mike G and John B - they both have their own separate successful UK businesses. Does anyone serious think they would risk losing their other businesses by getting things wrong as directors at BFC?

10) Somewhere in all of this, Alan Pace has done his interviews and has moved to live in the Burnley area. Is any of those actions suggestive of someone from "The Sting" or some other hustle?

11) We know that ALK has to raise more equity. We assume that the Twitter is referring to ALK, though it's not (yet) confirmed (unless I've missed something).
12) It is usual for new companies to have a number of funding rounds. It is usual for each funding round to place different valuations on the company and that, if things are going well, the price of new shares is higher than the price for shares bought in earlier. We've already seen a variation of this pattern with 50,000 at £200/share and 49,000 at £1,795/share.
13) BFC has had some good results in January: the first club to win at Anfield in (almost) 4 years and through to the 5th round of the FA Cup. Maybe ALK see these results as the basis for pursuing this new funding round.

14) If the reports on new funding is accurate, then this is only good news. If the reports on new funding are inaccurate, i.e. there's no new funding being sought by ALK/BFC at this time, then "there's nothing to see here..."

Either way

Exciting times.

UTC

Paul I just don’t understand how you can say it is exciting times? What is exciting about this situation?
Quite clearly they don’t have any money, we have just finished our first transfer window under Dyche without signing anyone and now the owners are trying to flip shares to raise money. All looks like they haven’t got a penny to there name.

You seem to have a lot of faith in someone that has failed at the first hurdle.

[Newcastleclaret93]

Article by David Conn in the guardian this morning:

Heady recent wins at Liverpool and Arsenal have helped keep Sean Dyche’s Burnley team eight points above the Premier League relegation zone, but at Turf Moor the air is still clearing over a £170m US takeover which has used the club’s own money and loaded it with debt.

The new chairman Alan Pace, a former Wall Street financier leading the US consortium ALK Capital that bought the club, has been a very vocal proponent of energetic plans to build on Dyche’s achievements and improve the club’s historic home. But he has not explained in detail the deal to buy the club from its long-term local owners and directors, led by outgoing chairman Mike Garlick, who owned 49.24% of the shares, and John Banaszkiewicz, who had 28.2%.

Responding to questions from the Guardian, Pace, citing confidentiality, declined to confirm precisely how the multimillions of pounds paid to those outgoing Burnley shareholders have been financed, although ALK maintains that its plans are sustainable and it intends to invest new money in the club. Sources with knowledge of the deal did, however, confirm some essential elements: the initial payments to Garlick, Banaszkiewicz and the other sellers have been financed with a loan from MSD UK Holdings, the investment firm of the US tech magnate Michael Dell, said to be approximately £60m. The loan is charged like a mortgage on Turf Moor and the club itself, which will have to repay it from its own revenues, with interest at a rate ALK has not yet publicly stated.

Initial reports that the club’s own cash reserves have also been used to pay the selling shareholders were accurate, the Guardian understands. Sources with knowledge of the deal put that figure at between £30m-£40m of the club’s money.

The club’s cash was built up handsomely in the Premier League years since promotion in 2016, through careful husbandry by Garlick and his fellow owners. Burnley’s most recently published accounts, for the year to 30 June 2019, stated that it had no borrowings at all, and £42m in the bank. That makes it difficult not to conclude that just to pay for ALK to take over, the club is now approximately £90m worse off, with interest to pay.

The deal is understood to value Burnley at more than £200m – presumably if certain circumstances are met including continued Premier League status – and will be completed with the payment of further instalments. ALK has not confirmed how much of its own capital it has paid for this first instalment in addition to the loan and club cash paid out. Bloomberg reported last month that the total first payment to Garlick, Banaszkiewicz and their fellow sellers was £102m, and if three further instalments are not paid, there is a mechanism by which ALK’s shares in the club go back to the outgoing shareholders.

Pace, who spent considerable time looking for a club ALK could buy, previously coming close to purchasing Sheffield United, argues that Burnley have great potential to grow commercially from shrewd recruitment of players, stadium improvements and wider marketing of the club. He has insisted that their financial structure is sustainable, suggesting it will still be so even if Burnley are relegated to the comparatively straitened circumstances of the Championship.

Dell’s MSD has lent money to other English football clubs during the pandemic, including Southampton and Derby County, also secured by charges, but these loans were not taken out to finance takeovers. Southampton recently published their accounts for the 2019-20 financial year, declaring that their loan from MSD is £78.8m, at an annual interest rate of 9.14%. By comparison, interest on their ordinary bank loan is just 1%. Pace has declined to say whether Burnley’s MSD loan has a similar 9% interest rate, which would cost the club approximately £5.4m interest a year. As the loan was taken out on 31 December, when the takeover was concluded, the interest rate is likely to be disclosed in Burnley’s annual accounts for the current 2020-21 financial year, but they are not due to be published until June 2022.

Pace has expressed some impatience with questions suggesting that this method of financing a takeover, including with the club’s cash, is not normal, and has compared ALK’s purchase to taking out a mortgage on a house. But for many seasoned campaigners, including the Football Supporters’ Association, investors using loans to pay for a takeover, then requiring the club itself to service them, is a “leveraged buyout” with uncomfortable similarities to the Glazer family’s debt-laden takeover of Manchester United in 2005.

The Glazers loaded £525m debts on United, that have since caused more than £1bn to be paid out by the club in interest, fees and refinancing charges, prompting an outcry and years of sustained campaigns by United supporters. Despite that, the Premier League still has no policy to bar the imposition of loans on clubs to pay for takeovers. The takeover process entails an “owners-and-directors test” that bans people with unspent criminal convictions from owning clubs, and requires the league to be satisfied that new owners have the resources to take over and a credible plan to keep the club in business. Asked about the Burnley takeover, and why it still approves such leveraged buyouts, the Premier League declined to comment.

Ashley Brown, head of governance at the FSA, said: “Historically, the FSA and our affiliated supporters’ groups have always opposed the concept of new owners ‘mortgaging’ a club during its takeover. Using club assets as security for loans taken out to purchase that club has the potential to put a financially solid football club into a less secure position.”

The Guardian asked Garlick and Banaszkiewicz, who have stayed on as Burnley directors, about the criticism that could be levelled at them as the major shareholders, that they appear to have made personal fortunes by concluding this deal to sell their shares, for which the club itself has been put into debt.

In response to that and other questions about the financing of the takeover, a spokesperson for the club and its directors said: “ALK Capital reiterates that its financial approach is reasonable and sustainable. Burnley Football Club’s cash reserves remain in a healthy position following the takeover and compare favourably to other Premier League clubs. It is well placed to thrive under its new ownership.

“ALK Capital’s business plan is about securing top-flight football in Burnley for decades to come, but its financial model considers all economic circumstances, both on and off the football pitch. The new owners of Burnley are committed to investing in this club, the team and facilities over the coming years. Their actions will speak louder than any words.”

I said it yesterday il say it again. Everything at the moment is leaning towards ALK shafting this club long term.

Hope I am wrong but I have a really bad feeling about all of this.

[arise_sir_charge]

Paul I just don’t understand how you can say it is exciting times? What is exciting about this situation?
Quite clearly they don’t have any money, we have just finished our first transfer window under Dyche without signing anyone and now the owners are trying to flip shares to raise money. All looks like they haven’t got a penny to there name.

You seem to have a lot of faith in someone that has failed at the first hurdle.

Failed at the first hurdle?

That being based purely on no signing in January.

The message has been loud and clear, the manger will be backed.

Son on that basis, let’s see what SD has to say. He’s been vocal in the past about budgets and transfers but this time he’s seemed content with the situation. If there wasn’t a player he wanted to sign available at a price he was was willing to pay them should we just sign anyone?

[Tall Paul]

The club's balance sheet has the same value. That's the "clever" bit about it. Garlick has got a large sum of money out of the club without having to give any share to the minority shareholders.

In outline, the club's balance sheet at valuation (not historic cost accounts), as best we know it, was something like this:

CASH £50m
OTHER ASSETS AT VALUATION £150m
TOTAL ASSETS £200m

And we now have

ASSETS AT VALUATION £150m
LESS EXPENSIVE BANK LOAN £70m
ASSETS USABLE IN RUNNING THE CLUB £80m
add DODGY DEBT OWED TO THE CLUB BY HOLDING COMPANY £120m
TOTAL ASSETS £200m.

The assets we can use for BFC are very much reduced. The debt from the holding company is worth nothing unless and until they sell the club at a profit or at break even, because the holding company has no assets other than the club's shares. As long as ALK is the owner, that debt has no practical value.

I know how the accounting entries work, my post that you quoted was in response to one that said the club had lost £50m in asset value, which it hasn't.

Again, this is all conjecture until we see the accounts, but if the balance sheet is carrying a £120m "dodgy debt" as an asset, do you think the auditors will let that fly, especially as the fair value of the holding company's shares in the club will be less than the amount owed for those shares? How is it recoverable?

[Winstonswhite]

Failed at the first hurdle?

That being based purely on no signing in January.

The message has been loud and clear, the manger will be backed.

Son on that basis, let’s see what SD has to say. He’s been vocal in the past about budgets and transfers but this time he’s seemed content with the situation. If there wasn’t a player he wanted to sign available at a price he was was willing to pay them should we just sign anyone?

Do you honestly think Dyche is going to be anything but positive about his new bosses?!!

[claretonthecoast1882]

I find it hard to believe that nobody saw this coming when the details of the takeover were announced.

Prior to the takeover I estimated that we had 30-40m in the dry powder store. I still think that was very near the mark.

Covid probably cost us 5-10m, but we gained back some money because we lost some big wage earners that we didn't replace with new incomings. Three players at 50k per week over a year would equate to a saving of 7.5m. I suspect that the remainder of the reputed 55m was due to a cash flow spike resulting from funds allocated for bonuses that are yet to be paid.

Now, going back to before the take over we posted a small profit in our last set of accounts. That was only possible because of outstanding monies owed to us from some big transfer sales. In recent windows our expenditure on players has exceeded the revenue from selling players. In my books that means our future player trading account will see us post a deficit if nothing changes.

So, one or all of these things could be true

All of our dry powder money was swallowed up in the take over.
Our player trading account will be in the red.
Revenue will be down due to Covid for some time.
We may lose some of our sponsors or they refuse to pay.
We now have to service what could be a loan of 60m at 10% ( 6m a year )
Our new owners have no more money to put into the club.

The new owners have three further payments to make which could be 75-100m in total

And people think we have money to spend on transfers ?

We have no money, we have debt and the owners need to raise money to pay off all the outstanding amounts to our previous shareholders.

My prognosis is that we can't afford to stay in the Premier League. The only way we can settle all of our new debts and facilitate a positive cash flow is to get relegated. Selling Tarks, McNeil, Pope, Wood and Taylor would generate a considerable amount and reduce our wage bill. Waving goodbye to players at the end of their contracts will free up more cash and relegation wage reduction clauses will do the rest. Finally, the parachute payments will swell the coffers, especially with the reduced operational cost of a lower wage bill.

All told that should cover the repayment of 150m in debt and leave us a small amount to rebuild the team with free transfers and youngsters. If we stay up and we are running at a loss of 10m or so then every season will chip away at the equity in the club and we will eventually go bust. Relegation would pay off the debts, reduce ALK's investment and risk to zero and set them up for a big profit if we get promoted again.

If that sounds like a whacky assessment it is only because people are currently under the impression that Alan Pace is the controlling partner in ALK. I'm of the opinion that he is simply the face of the company and a place holder while Dave Checketts finishes up his missionary work so he can play a more active role in six months.

Dave Checketts leads from the front, being a back seat passenger ( director ) simply isn't part of his personality.

For those who haven't done their homework the strategy I previously outlined is the one that Checketts put in place when he was a minority owner of the St Louis Blues.

https://www.stlouisgametime.com/2012/5/ ... cketts-era

The sooner people dump their pie in the sky appraisals of a difficult financial situation and grasp the stark reality of our current predicament the better we will all be.

We were bought by a group of people that obviously have a sincere desire to develop and grow the club, but they don't have a pot to **** in between them.

I thought your transfer posts would take some beating

[arise_sir_charge]

Do you honestly think Dyche is going to be anything but positive about his new bosses?!!

Bearing in mind he’s never seemingly held back about his bosses before and he doesn’t have much to lose in any event, then why would he be positive for the sake of being positive?

[Paul Waine]

Paul I just don’t understand how you can say it is exciting times? What is exciting about this situation?
Quite clearly they don’t have any money, we have just finished our first transfer window under Dyche without signing anyone and now the owners are trying to flip shares to raise money. All looks like they haven’t got a penny to there name.

You seem to have a lot of faith in someone that has failed at the first hurdle.

Hi Newcastle93, as I posted, what we know is that ALK have paid in £98 million to Kettering Capital in two groups of shares, 50,000 at £200/share and 49,000 at £1795/share. We also know that ALK have a loan from MSD. I don't know if we've got independent proof that the loan is for £60m or £80m, or is for some other amount. We don't know that any money borrowed from MSD has been used to pay for any of the shares in Kettering Capital. We don't know that ALK have taken cash out of BFC to pay Mike Garlick, John B and the other ex-BFC directors. It is extremely unlikely that they would need to do that or that they could do that or that the BFC directors would be able to allow them to do that, companies cannot just give money away, not even to their own shareholders unless they remain solvent after doing it and it is by way of a dividend to all shareholders. It is entirely logical that ALK are seeking to raise more equity, it is usual for companies to have multiple funding rounds - and for shares to be offered and paid for at different prices in each of these rounds. It is very common for companies to conduct "road shows" where they visit multiple potential investors in order to sell additional shares.

Yes, there are a lot of things that, at this time, we don't know.

We have new investors with strong investment banking experience. Alan Pace seems a "nice guy." If nothing else, he has done all Burnley fans the courtesy of moving to live in the area. I think there's a lot more good things ahead of us. I don't share all the "doom and gloom" views expressed by others. Maybe I'm the one who is misunderstanding what has happened over the last few weeks or maybe my understanding is closer to the realities.

Exciting times.

UTC

[jrgbfc]

Maybe Dyche has already made his mind up he won't sign a new contract, so he isn't particularly bothered either way? No point rocking the boat with only 18 months left.

[NewClaret]

I said it yesterday il say it again. Everything at the moment is leaning towards ALK shafting this club long term.

Hope I am wrong but I have a really bad feeling about all of this.

The only folk who have shafted this club are MG and JB.

They sold out to what they knew was a leveraged buyout. And, moreover, they seemingly under-invested in the team and stockpiled cash so that they could fund their own exit. An utter disgrace in my opinion.

Commonly held view on here was that they were saving money to cover the cost of relegation and had some delightful model to achieve sustainability - BS, they were just fattening the goose for Christmas.

No wonder Dyche was furious with them. We'd better just hope he can keep on performing miracles.

[NewClaret]

Maybe Dyche has already made his mind up he won't sign a new contract, so he isn't particularly bothered either way? No point rocking the boat with only 18 months left.

Wouldn't shock me, unless he knows things we don't. We need him now more than ever though.

[dandeclaret]

Maybe Dyche has already made his mind up he won't sign a new contract, so he isn't particularly bothered either way? No point rocking the boat with only 18 months left.

Managers generally do not do this do they? Especially managers at premier league clubs. Either they leave because they are sacked, or they leave for a better job. They aren't like footballers, they don't tend to get better the more they are out of the side (no names mentioned), they tend to be under rated by fans generally.

[Grumps]

Those on here who seem to understand the financial side of things, cannot agree what's happened, or whether it's good or bad.
Perhaps it's time that those with even less knowledge stop trying to work out what has, or has not happened, its not really getting us anywhere, and at times embarrassing.

[dsr]

I know how the accounting entries work, my post that you quoted was in response to one that said the club had lost £50m in asset value, which it hasn't.

Again, this is all conjecture until we see the accounts, but if the balance sheet is carrying a £120m "dodgy debt" as an asset, do you think the auditors will let that fly, especially as the fair value of the holding company's shares in the club will be less than the amount owed for those shares? How is it recoverable?

You're right that it hasn't lost asset value in theory.

But what it has done is pay out £100m in hard cash (some of it borrowed at eye watering interest rates) and replace it by a loan which has no current value and may have no long term value. That is where the asset value has been lost - replacing a very valuable asset with a very dodgy one.

The holding company has one asset - 85% of BFC - and two liabilities - £120m owed to BFC and £35m owed to Garlick. Roughly speaking, because they won't tell us the details until they are legally obliged to, which is in March 2022. They can only repay the debt if the sell the football club for at least what they paid for it; so as long as the football club is in the Premier League, then they can keep the debt in the accounts at full value.

If we get relegated, that debt becomes more or less worthless.

[jrgbfc]

Managers generally do not do this do they? Especially managers at premier league clubs. Either they leave because they are sacked, or they leave for a better job. They aren't like footballers, they don't tend to get better the more they are out of the side (no names mentioned), they tend to be under rated by fans generally.

Yes its rare, but has to be a possibility surely? If he sees his contract out he'll have done 10 years with us, which is an eternity in this day and age.
Also if he isn't going to be backed in the transfer market he may think there's not much longer he can keep our ageing squad up, so best to get out before he risks getting a relegation on his CV.

[NottsClaret]

I've read loads of these posts from some clever chaps on here about accounting but still understand none of it. Weirdly like reading it though.

One thing I don't get is the grief Garlick and JB get for selling. Plenty of fans - and Dyche - were grumbling and whining about how they were running it for ages. Fair enough, they sell up. But who did you think they were going to sell to? Other than oil money or a dodgy Russian, what did anyone think was going to happen? US leveraged buy-outs are the only game in town for Prem clubs.

There isn't that much more money to be made from Burnley than we were already making. Certainly not now we're servicing all that debt. OK, the commercial side is poor and the retail is very League Two but even if you get that right, is it really going to bring in the tens of millions you need to make any sort of progress?

One thing I'm pretty confident of, whenever the time comes, is that we'll want our next owners to be the steady-away, cautious, debt-averse types we moaned about previously.

[BurnleyFC]

There’s no way ALK would screw us over.

They’re going to be big players in the ‘Northern Powerhouse’, remember?

[fatboy47]

"" If we get relegated, that debt becomes more or less worthless.""

Well.... No, not really... That's where Pope, Taylor, McNeil and Tarkowski come in....well..go out I should say.

[dandeclaret]

Yes its rare, but has to be a possibility surely? If he sees his contract out he'll have done 10 years with us, which is an eternity in this day and age.
Also if he isn't going to be backed in the transfer market he may think there's not much longer he can keep our ageing squad up, so best to get out before he risks getting a relegation on his CV.

A relegation is inevitable on a lower league prem manager's CV, he already has one. He, in what is a rarity, got instant promotion back to the premier league. There's no pay if you're not employed. That will be the point that keeps managers in jobs.

[MACCA]

The only folk who have shafted this club are MG and JB.

They sold out to what they knew was a leveraged buyout. And, moreover, they seemingly under-invested in the team and stockpiled cash so that they could fund their own exit. An utter disgrace in my opinion.

Commonly held view on here was that they were saving money to cover the cost of relegation and had some delightful model to achieve sustainability - BS, they were just fattening the goose for Christmas.

No wonder Dyche was furious with them. We'd better just hope he can keep on performing miracles.

Nail on head.

Some people saw what was happening.

I got wind they were looking to get shut 18+ months ago, their actions or lack of show exactly what the plan was.

Garlick knew it, Dyche could see it, a lot of fans could even see it.
I think a few are just more upset they fell for it for so long

[Stevie Morgan]

You're right that it hasn't lost asset value in theory.

But what it has done is pay out £100m in hard cash (some of it borrowed at eye watering interest rates) and replace it by a loan which has no current value and may have no long term value. That is where the asset value has been lost - replacing a very valuable asset with a very dodgy one.

The holding company has one asset - 85% of BFC - and two liabilities - £120m owed to BFC and £35m owed to Garlick. Roughly speaking, because they won't tell us the details until they are legally obliged to, which is in March 2022. They can only repay the debt if the sell the football club for at least what they paid for it; so as long as the football club is in the Premier League, then they can keep the debt in the accounts at full value.

If we get relegated, that debt becomes more or less worthless.

Sorry dsr - genuine question. Can you explain to me how the holding company owe 120m to BFC?

[ClaretAL]

Nail on head.

Some people saw what was happening.

I got wind they were looking to get shut 18+ months ago, their actions or lack of show exactly what the plan was.

Garlick knew it, Dyche could see it, a lot of fans could even see it.
I think a few are just more upset they fell for it for so long

I can see the reasoning, and could very well be true, but we also heard that there was a lot of infighting and disagreement within the board and a couple of references that JB was not on board or the same page with what MG was doing, but again could conjecture.

[Socrates]

Our new owners don’t have any money - our old ones didn’t.

We’ve not signed anybody this window - didn’t happen under our old ones.

Our new owners have been trying to sell shares and raise money - wait till you hear what Garlick and John B have been up to the last 18 months.


The debt is a concern. But I’m not a financial expert and I’d wager that a lot of you worrying about this aren’t either. Some people on here know a lot and they’ve written well, but even they are admitting this could go either way.

If you’ve made your mind up based on one transfer window in the midst of a pandemic you’re an idiot. Sorry to be so brusque, but you are. Some of the stuff I saw on Twitter last night was crackers.

Do you support a balance sheet or a football team?

[Tall Paul]

You're right that it hasn't lost asset value in theory.

But what it has done is pay out £100m in hard cash (some of it borrowed at eye watering interest rates) and replace it by a loan which has no current value and may have no long term value. That is where the asset value has been lost - replacing a very valuable asset with a very dodgy one.

The holding company has one asset - 85% of BFC - and two liabilities - £120m owed to BFC and £35m owed to Garlick. Roughly speaking, because they won't tell us the details until they are legally obliged to, which is in March 2022. They can only repay the debt if the sell the football club for at least what they paid for it; so as long as the football club is in the Premier League, then they can keep the debt in the accounts at full value.

If we get relegated, that debt becomes more or less worthless.

"they can keep the debt in the accounts at full value"

They can't. There's no way any decent auditor would allow it as the fair value of the holding company's asset (and therefore the recoverability of the debt) has to include a provision for the club being relegated, which has a reasonable likelihood of happening in the foreseeable future.

[MACCA]

I can see the reasoning, and could very well be true, but we also heard that there was a lot of infighting and disagreement within the board and a couple of references that JB was not on board or the same page with what MG was doing, but again could conjecture.

Well JB is nice guy, and a Burnley fan, so wouldn't surprise me if he wasnt in board with MG plans, but MG held all the cards.
It was either go a long with it, or cut his nose off to spite his face type scenario

[dsr]

Sorry dsr - genuine question. Can you explain to me how the holding company owe 120m to BFC?

Everything the holding company has taken out has been (we are told) by way of loan. In theory they have to pay it back. In practice they can only pay it back if they ever get money to do so. And their only asset is BFC, so to pay the loan back they have to either take money out of BFC to do it (directors' fees an so on) or sell the club at a profit.

[dsr]

Well JB is nice guy, and a Burnley fan, so wouldn't surprise me if he wasnt in board with MG plans, but MG held all the cards.
It was either go a long with it, or cut his nose off to spite his face type scenario

As long as he is on the board of directors, he is going along with it.

[PremierLeagueClass]

Do you support a balance sheet or a football team?

This!

[dsr]

"they can keep the debt in the accounts at full value"

They can't. There's no way any decent auditor would allow it as the fair value of the holding company's asset (and therefore the recoverability of the debt) has to include a provision for the club being relegated, which has a reasonable likelihood of happening in the foreseeable future.

The purchase price of the club, they would argue, did include a provision against relegation. As long as they can argue that BFC is still worth what they paid for it, they would be able to keep the loan in at that value.

Anyway, we will see in March 2022 unless the board of directors sees fit to tell us sooner. They have already told us it is a wonderful loan and we will love it when we see it - surely they will let us see it soon? Or perhaps not?

[dsr]

"" If we get relegated, that debt becomes more or less worthless.""

Well.... No, not really... That's where Pope, Taylor, McNeil and Tarkowski come in....well..go out I should say.

If we get relegated, we sell all the best players to pay the club's debts, the club becomes worth less, the value of the debtor goes down. It's a double whammy - the value of players and ground are in the accounts in their own right, and they're in effect there again as part of the value of the holding company loan.

[RVclaret]

https://www.theguardian.com/football/20 ... -with-debt

New article by David Conn who is to be respected in the world of football finance.

Basically tells us somewhat we already knew albeit with more ‘directors’ statements about the financing of it.

[Stevie Morgan]

Everything the holding company has taken out has been (we are told) by way of loan. In theory they have to pay it back. In practice they can only pay it back if they ever get money to do so. And their only asset is BFC, so to pay the loan back they have to either take money out of BFC to do it (directors' fees an so on) or sell the club at a profit.

Is this not really saying that the holding company, and by extension BFC, owe the 120m to the bank/MSD?