Burnley's MSD loan reduction essentially confirmed

[Chester Perry]

There has been a reduction on the related The International Stock Exchange in Guernsey for the loan related to Burnley

It suggests that the club has had to pay £15m (and likely the additional penalty of the lost interest over the original loan period) so less that £20m overall by my estimation

it seems like Pace and VSL have pulled this out of the bag to my eyes

https://tisegroup.com/market/companies/8061

[bfcjg]

That sounds like something positve at last regarding our finances or am I being naive?

[RVclaret]

Sorry, so the loan is now how much?

[clarethomer]

Depends how the finance has been repaid I guess?

[AwayClaret]

Does that mean we have £30m-£40m war chest

[spt_claret]

That sounds like something positve at last regarding our finances or am I being naive?

That's my read too. Awaiting confirmation from more knowledgeable posters as to the full implications of what it means but cautiously hopeful

[Chester Perry]

That sounds like something positve at last regarding our finances or am I being naive?

It could have been a lot worse - if we do not get promoted expect next summers payment to be bigger

still a payment due that is a fair bit bigger than that to the sellers at the end of the month - which is part of the £47m - my calculations - outstanding that has to be paid by the end of next season (again my calculation/speculation)

[Chester Perry]

Sorry, so the loan is now how much?

£50m

[RVclaret]

£50m

So they’ve paid 15m of the 65m and now it’s 50m.

What’s changed then?

[aggi]

Interesting bit of info there, well spotted. Certainly all seems to tie up.

I'm not sure whether there would be an interest penalty. MSD forcing repayment and lost interest is a bit having your cake and eating it.

I was expecting a figure at least double that and probably more. If it stops at that (rather than it just being the first installment of the season) then it puts us in quite a strong position for this year.

[Lancasterclaret]

So they’ve paid 15m of the 65m and now it’s 50m.

What’s changed then?

A lot more than £15m needed to be paid on relegation

[Lancasterclaret]

I reckon (fag packet accounting, loads of guesswork and wishful thinking ) that probably puts us in a position to challenge for three, rather than two years at this level

[bfcjg]

It could have been a lot worse - if we do not get promoted expect next summers payment to be bigger

still a payment due that is a fair bit bigger than that to the sellers at the end of the month - which is part of the £47m - my calculations - outstanding that has to be paid by the end of next season (again my calculation/speculation)

Thank you.

[RVclaret]

A lot more than £15m needed to be paid on relegation

Right - so the ‘significant chunk’ that the media had been praying on lately has turned out to be 15m.

But yeah, as aggi says, why would there be a penalty ChesterPerry? As that payment was already agreed, no?

[clarethomer]

I think (and Im no expert on this is btw) but the expectation was that it could have been called in full this year - so by only having to repay part of it, it potentially does give us a bit more breathing room for this season?

If we go back up then we can continue to repay interest as we would have been doing this year had we survived.

If we don't go back up, we will be expected to pay back the loan (unless we can renegotiate another partial settlement).

[NewClaret]

Presumably this confirms that MSD have agreed to renegotiate the relegation payback clause and accept a £15m reduction, which has been paid so no immediate pressure to sell our best players?

Excellent news.

[Chester Perry]

It will be very interesting to see how VSL have handled this in the club accounts

the last set of accounts suggested dividends

19 Financial commitments, guarantees, contingent assets and contingent liabilities
Group borrowings

....The capital element of the loan is due for repayment by Burnley FC Holdings Limited in December 2025 with interest only payments being required up to that point, providing the club remains in the Premier League. In the event of the club’s relegation from the Premier League, the repayments schedule for the capital element of the loan is brought forward, with a significant proportion falling due for repayment shortly after the end of the football season in which the relegation event takes place. This repayment would, therefore, be expected to fall due within less than one year from the balance sheet date in there circumstances. In a continuing relegation scenario, a further significant reduction of the loan balance would also take place in the following season. These amounts are subject to agreement between the parties.

The idea was to have VSL's MSD related loan from Burnley FC Holdings Limited to have the same balance as the balance to MSD . There is the accumulated profit and cash generated this year to pay an interim dividend but there are a number of complications which makes me think it unlikely.

[Chester Perry]

Interesting bit of info there, well spotted. Certainly all seems to tie up.

I'm not sure whether there would be an interest penalty. MSD forcing repayment and lost interest is a bit having your cake and eating it.

I was expecting a figure at least double that and probably more. If it stops at that (rather than it just being the first installment of the season) then it puts us in quite a strong position for this year.

The penalties element for early repayment what ever the reason is a clear business model outline in their December 31 2020 accounts - not the loan agreement for sure but a statement of general intention

[Elbarad]

I still can't believe that anyone would loan Pace that amount of money for a club that every year is a favorite for relegation without clearly negotiating the terms ahead of time as to what would be required in the event of a relegation. I truly do not believe this came as a surprise to anyone and that there was a mad scramble selling grandma Pace's silver to stave off foreclosure.

But glad for the update Chester.

[RVclaret]

I wonder if Talksport et al will plaster this positive news everywhere?

[Chester Perry]

I wonder if Talksport et al will plaster this positive news everywhere?

waiting for it to appear on LancsLive now their research has been done for them

[RicardoMontalban]

waiting for it to appear on LancsLive now their research has been done for them

Savage

[Smile]

waiting for it to appear on LancsLive now their research has been done for them

Chester, not sure if it was you who said this, but someone posted that Pace was trying to get repayments deferred for 12 months? It was something like that. It was mentioned a few weeks ago.

[summitclaret]

How much have we saved by not having to pay staying up bonuses?

[Chester Perry]

The penalties element for early repayment what ever the reason is a clear business model outline in their December 31 2020 accounts - not the loan agreement for sure but a statement of general intention

The relevant comment in the accounts of MSD UK Holdings December 31 2020

Notes to the Financial Statements,
2 Significant Accounting Policies,
(d) Critical Accounting Judgements and Key Sources of Estimation Uncertainty, Critical Judgements in Applying the Company’s Accounting Policies,
Business Model Assessment
Paragraph 3 “…Whilst there are early repayment penalties, the Directors consider the penalty to be materially equivalent to the lost interest that would have been received, but would highlight that this is an area of judgement.”

[RVclaret]

How much have we saved by not having to pay staying up bonuses?

Don’t think there’s a % included in the accounts for how much of the wage bill is made up of bonus’. Unless aggi / CP has spotted something.

[Chester Perry]

How much have we saved by not having to pay staying up bonuses?

more or les what we will have to pay as promotion bonuses and ground upgrades for TV (always new requirements each cycle) if we go back up next season

[Chester Perry]

Don’t think there’s a % included in the accounts for how much of the wage bill is made up of bonus’. Unless aggi / CP has spotted something.

it was circa £15m in 2019/20 calculated thanks to the club telling us it paid circa £6m of wages in July 2020 (£101.1m for 13 months and £94m for 12 months)

my gues is it would have been close to £14m if we had finished 17th last season

[summitclaret]

it was circa £15m in 2019/20 calculated thanks to the club telling us it paid circa £6m of wages in July 2020 (£101.1m for 13 months and £94m for 12 months)

my gues is it would have been close to £14m if we had finished 17th last season

Equates to what has been paid off the debt then? If so we can yo yo for a few seasons and the loan has gone.

[Chester Perry]

Chester, not sure if it was you who said this, but someone posted that Pace was trying to get repayments deferred for 12 months? It was something like that. It was mentioned a few weeks ago.

It would have been the best solution if promotion could have been guaranteed

It would have required MSD to have played ball - and judging by an proposal that MSD made to the prospective buyers of Sheffield United and revealed by the Athletic on June 2nd would have led to an increase in the base interest rate while in the Championship of at least 1%

I would take it that the solution VSL have agreed is the best available of all the options they have sought to find

[RVclaret]

it was circa £15m in 2019/20 calculated thanks to the club telling us it paid circa £6m of wages in July 2020 (£101.1m for 13 months and £94m for 12 months)

my gues is it would have been close to £14m if we had finished 17th last season

Thanks - so, back of fag packet calcs here, from last accounts

87m wage bill - 14m bonus = 73

Then Tark, Mee, Cornet, Weghorst, Pope wages off the books (plus Pieters Lennon etc), all known to be top earners, probably looking at 13m a year from just the first 5 mentioned.

73 - 15 = 58

Speculated 50% wage cuts on the rest of the team

58 / 2 = 29m wage bill this season currently (that’s great)

Obviously I understand other factors at play and this isn’t meant to be absolutely accurate but that can’t be too far away. Gives some decent breathing room to add new wages of course too.

[Lancasterclaret]

It would have been the best solution if promotion could have been guaranteed

It would have required MSD to have played ball - and judging by an proposal that MSD made to the prospective buyers of Sheffield United and revealed by the Athletic on June 2nd would have led to an increase in the base interest rate while in the Championship of at least 1%

I would take it that the solution VSL have agreed is the best available of all the options they have sought to find

But essentially this is a good outcome for us, certainly short term?

[dsr]

I suspect the point is that now we can use this year's parachute payment to try and get promotion. Next year's parachute payment, on the other hand ...

[Chester Perry]

Equates to what has been paid off the debt then? If so we can yo yo for a few seasons and the loan has gone.

not sure I would say that - it is kicking the can down the road - it will certainly make it a lot harder to stay up if we do go up

my main issue is that the financial strategy (was it ever more than finding an investment partner to pay an inflated price for shares) is pretty much overridden by having scramble to meet new payments every few months

[Chester Perry]

Thanks - so, back of fag packet calcs here, from last accounts

87m wage bill - 14m bonus = 73

Then Tark, Mee, Cornet, Weghorst, Pope wages off the books (plus Pieters Lennon etc), all known to be top earners, probably looking at 13m a year from just the first 5 mentioned.

73 - 15 = 58

Speculated 50% wage cuts on the rest of the team

58 / 2 = 29m wage bill this season currently (that’s great)

Obviously I understand other factors at play and this isn’t meant to be absolutely accurate but that can’t be too far away. Gives some decent breathing room to add new wages of course too.

The underlying basic wage bill will have risen last year - possibly as high as £80m

there are the cash advances/related party loans too - we know of £10m but there could be as much as another £37m more to pay for the stage payments (March and June in the payment schedule) to the sellers by the time we see the accounts - which would still see over £20m due by the end of next season.

[CrosspoolClarets]

All of this needs paying back, that hasn’t changed, what the old owners receive for selling the club remains what they receive, but the advantage of delay is twofold, one giving us a bigger chance of promotion and two giving a chance for inflation to erode the debt.

On the face of it we have two lots of good news today. I may be optimistic, but thinking ahead any legal claims for the Everton issue could end up being something else to stabilise financially and give us a good crack at promotion. We need luck now in all those stars aligning.

We are up against it due to this sale, but we hardly spent much under the old owners anyway, even if the bank account was healthier, so maybe on the pitch it won’t feel any worse? I’m being optimistic again, can’t be healthy.

[NewClaret]

Massive kudos for CP finding this, by the way. The man’s a font of BFC finance knowledge

[Nori1958]

There has been a reduction on the related The International Stock Exchange in Guernsey for the loan related to Burnley

It suggests that the club has had to pay £15m (and likely the additional penalty of the lost interest over the original loan period) so less that £20m overall by my estimation

it seems like Pace and VSL have pulled this out of the bag to my eyes

https://tisegroup.com/market/companies/8061

Well, surprise surprise... Even us none accountants on here suggested that the loan had been renegotiated weeks ago, yet you laughed at us.......

[Chester Perry]

Great news

It all depends where the money to pay for it has come from

[NewClaret]

It all depends where the money to pay for it has come from

My opinion is that it’s mainly the Wood 2nd instalment?

Is it a coincidence this has occurred on the same day as VK’s appointment though?

[Nori1958]

Massive kudos for CP finding this, by the way. The man’s a font of BFC finance knowledge

Not sure about that, can certainly read accounts better than us mere mortals, and seems surprised by this find today, yet many have been saying for a while things were not as bad as suggested on here by so called experts

[Chester Perry]

Well, surprise surprise... Even us none accountants on here suggested that the loan had been renegotiated weeks ago, yet you laughed at us.......

The loan has not been renegotiated from what I see - The reality is that a capital reduction has been made in line with the terms of the original loan agreement - all of which has been thoroughly outlined and discussed from even before it appeared in the accounts - such discussion was first discussed following publication of West Ham's accounts

The only surprise is how little the capital reduction had been been

you seem to have taken a very personal issue with me simply because I once said I could not find a single thing to agree with in a post you made, that appeared and remains to appear incorrect - I did not laugh at you just made a simple statement - we all make mistakes, some of us acknowledge and try to learn from them and move on - others.....

[KRBFC]

still a payment due that is a fair bit bigger than that to the sellers at the end of the month - which is part of the £47m - my calculations - outstanding that has to be paid by the end of next season (again my calculation/speculation)

Yikes

[KRBFC]

I guess any reduction is good news, but still owing MSD £50m and Garlick £47m, kicking the can further down the road as income decreases is a dangerous game and not one that should be celebrated.

[Chester Perry]

My opinion is that it’s mainly the Wood 2nd instalment?

Is it a coincidence this has occurred on the same day as VK’s appointment though?

I am more inclined to think that met the overdue Q1 stage payment - though there are a wide range of potential homes for those monies

[RVclaret]

I guess any reduction is good news, but still owing MSD £50m and Garlick £47m, kicking the can further down the road as income decreases is a dangerous game and not one that should be celebrated.

Think they’ll still look to use player sales to chip away at the MSD loan but perhaps now this means VK gets to re spend let’s say 50% of any player sale. Then I’m sure what the idea will be with Pace / VK is to recruit younger players, utilise the 23s and then we’ll have more saleable assets next season etc to keep paying off the loan.

[Chester Perry]

I guess any reduction is good news, but still owing MSD £50m and Garlick £47m, kicking the can further down the road as income decreases is a dangerous game and not one that should be celebrated.

That's £50m plus interest of 8% + LIBOR (3 month rate is 1.69% currently) which is £4.85m a year and we have at least 3.5 years outstanding though I suspect there is a quarterly interest payment due at the end of the month

[RVclaret]

That's £50m plus interest of 8% + LIBOR (3 month rate is 1.69% currently) which is £4.85m a year and we have at least 3.5 years outstanding though I suspect there is a quarterly interest payment due at the end of the month

As mentioned above the massive decrease in the wage bill should mean the interest is manageable. Also regarding LIBOR I’d hope guys involved in investment banking for decades would have hedged the coming rise in rates at the time.

[dsr]

As mentioned above the massive decrease in the wage bill should mean the interest is manageable. Also regarding LIBOR I’d hope guys involved in investment banking for decades would have hedged the coming rise in rates at the time.

It's an expensive business to hedge long term against rising interest rates, when rising interest rates are more or less inevitable. I doubt there would have been significant hedging.

[Chester Perry]

Think they’ll still look to use player sales to chip away at the MSD loan but perhaps now this means VK gets to re spend let’s say 50% of any player sale. Then I’m sure what the idea will be with Pace / VK is to recruit younger players, utilise the 23s and then we’ll have more saleable assets next season etc to keep paying off the loan.

It is not possible to just pay down the capital on the MSD loan whenever it takes your fancy. Early repayment of the loan capital requires a specific triggers the payment of penalties as Southampton's new owners are finding. It is also the clear intention of VSL to replay the capital by way of dividend to themselves which will then be paid to (as a loan repayment) to Burnley FC Holdings Limited and then forward to MSD at the end of December 2025 - this requires the necessary accumulated profit and cash holding. By that date VSL are scheduled to hold (and just as importantly paid for) around 99% of the total shareholding in the club.