Not sure if this has been posted, and to drag it across and put it on here is far beyond my capabilities, but there is an article about the fee for Chris Wood. Put "Chronicle Live" in a search engine and click on NUFC in the banner.

I saw that we've taken out a £12.5m loan against an installation for the same amount that's due to us from NUFC next year. Standard practice, apparently.

Here you go…

https://www.chroniclelive.co.uk/sport/f ... 885741.amp

First a leveraged buy out.

Now leveraged player sales.

Apparently common-place with clubs to do this

First steps on the never-never.

It's concerning.

Will the new Government led owner's / owners' test stop people buying clubs in this ALK / Glazier method?

It is common place for buying clubs to spread a transfer fee over some months or years, not that common for the selling club to take out a bank loan for the remaining amount, as well as paying interest fees on top of that, whether we stay up or not, expect a relegation fight next year no matter what league we're in.

I doubt it's commonplace at all.

taio wrote: ↑

Sat May 07, 2022 10:31 am

I doubt it's commonplace at all.

Many clubs do it and has been discussed on the accounts thread with an example (Bournemouth) shown.

It has been done by other clubs but it is not that common. The practice stated as commonplace in the article is paying the transfer fee in instalments.

RVclaret wrote: ↑

Sat May 07, 2022 10:36 am

Many clubs do it and has been discussed on the accounts thread with an example (Bournemouth) shown.

Didn't realise that. I suppose the difference is those other clubs have owners with some money behind them.

It's still not commonplace

taio wrote: ↑

Sat May 07, 2022 10:40 am

Didn't realise that. I suppose the difference is those other clubs have owners with some money behind them.

It's still not commonplace

It is becoming more common in the past few years with FFP rules, spreading the transfer fee allows you to buy more players and stay within the FFP rules.

claretburns wrote: ↑

Sat May 07, 2022 10:45 am

It is becoming more common in the past few years with FFP rules, spreading the transfer fee allows you to buy more players and stay within the FFP rules.

Spreading the transfer fees is certainly common. What is less common is getting a loan with a high interest rate gainst that adding to an existing debt pile.

claretburns wrote: ↑

Sat May 07, 2022 10:30 am

It is common place for buying clubs to spread a transfer fee over some months or years, not that common for the selling club to take out a bank loan for the remaining amount, as well as paying interest fees on top of that, whether we stay up or not, expect a relegation fight next year no matter what league we're in.

That’s the spirit.

claretburns wrote: ↑

Sat May 07, 2022 10:30 am

It is common place for buying clubs to spread a transfer fee over some months or years, not that common for the selling club to take out a bank loan for the remaining amount, as well as paying interest fees on top of that, whether we stay up or not, expect a relegation fight next year no matter what league we're in.

Are you seeing a counsellor ? If not, treat yourself and improve
your outlook on things. Good luck.

It’s done in any business where a guaranteed payment is due at a later date but you need the readies (as you generally do) asap. It’s comes with interest of course but that would be dialled into the original price. No big deal at all , bearing in mind how far we pulled Newcastles pants down in the first place

AlargeClaret wrote: ↑

Sat May 07, 2022 11:40 am

It’s done in any business where a guaranteed payment is due at a later date but you need the readies (as you generally do) asap. It’s comes with interest of course but that would be dialled into the original price. No big deal at all , bearing in mind how far we pulled Newcastles pants down in the first place

Obviously for cash flow. It is a big deal though given the club will pay hundreds of thousands in interest adding to already significant liabilities. And it will become a much bigger deal if we go down.

Never knew we had so many football finance experts

gandhisflipflop wrote: ↑

Sat May 07, 2022 11:55 am

Never knew we had so many football finance experts

There are certainly a few on here with brilliant knowledge. But on this point especially it's pretty basic stuff.

Wolves did the same with Jota when they sold him to Liverpool. Think that transfer fee was £45m spread over 5 years.

If it allows team strengthening before payment is received you can see the logic behind it but it is a bit of a slippery slope. Didn’t Rangers FC start heavily borrowing against future income streams and payments before it went bust and reformed as ‘The’ Rangers FC ?

BFC123 wrote: ↑

Sat May 07, 2022 12:17 pm

Wolves did the same with Jota when they sold him to Liverpool. Think that transfer fee was £45m spread over 5 years.

Definitely done on the basis of installments which is normal these days. But it's completely different to what's happened here.

taio wrote: ↑

Sat May 07, 2022 12:26 pm

Definitely done on the basis of installments which is normal these days. But it's completely different to what's happened here.

That's exactly what we've done, brought the second installment forward 9 months.

claretandy wrote: ↑

Sat May 07, 2022 12:40 pm

That's exactly what we've done, brought the second installment forward 9 months.

At a cost

taio wrote: ↑

Sat May 07, 2022 10:40 am

Didn't realise that. I suppose the difference is those other clubs have owners with some money behind them.

It's still not commonplace

Hi taio, what's not commonplace? Clubs paying transfer fees? The buying club asking for time to pay and spreading the fee over extended periods? Or, the selling club getting in some of the money early by borrowing against the debt owed to them?

Why would a club with "owners with some money behind them" be the ones who report that they do this often? Logic suggests that all clubs would look at doing this to manage their cashflows.

Based on the information reported by Bournemouth in their accounts, it's significantly cheaper to use this form of borrowing than it is football clubs to use other forms of borrowing.

I'd expect that there are one or two staff at Macquarie who look at all the clubs involved in transfer deals and are straight on the phone to the clubs Finance Director/CFO to let them know that Macquarie can assist in accelerating the receipt of the instalments of the transfer fees. Their key words will be that Macquarie can do this type of structured finance cheaper (at lower interest rates) than any other borrowing the club may have or is looking at doing.

Paul Waine wrote: ↑

Sat May 07, 2022 1:10 pm

Hi taio, what's not commonplace? Clubs paying transfer fees? The buying club asking for time to pay and spreading the fee over extended periods? Or, the selling club getting in some of the money early by borrowing against the debt owed to them?

Why would a club with "owners with some money behind them" be the ones who report that they do this often? Logic suggests that all clubs would look at doing this to manage their cashflows.

Based on the information reported by Bournemouth in their accounts, it's significantly cheaper to use this form of borrowing than it is football clubs to use other forms of borrowing.

I'd expect that there are one or two staff at Macquarie who look at all the clubs involved in transfer deals and are straight on the phone to the clubs Finance Director/CFO to let them know that Macquarie can assist in accelerating the receipt of the instalments of the transfer fees. Their key words will be that Macquarie can do this type of structured finance cheaper (at lower interest rates) than any other borrowing the club may have or is looking at doing.

The latter is what I was referring to - that should have been blatantly obvious, particularly as I've already referred to transfer fees being spread over time being absolutely normal.

The difference here is we were already walking a very, very narrow path due to the club's financial position and especially what happens in the event of relegation which is a huge risk right now.

Exciting times.

Boss Hogg wrote: ↑

Sat May 07, 2022 12:23 pm

If it allows team strengthening before payment is received you can see the logic behind it but it is a bit of a slippery slope. Didn’t Rangers FC start heavily borrowing against future income streams and payments before it went bust and reformed as ‘The’ Rangers FC ?

Rangers financial mess was totally different.

Selling Chris Wood to NUFC and using the second instalment to secure a loan to get that cash in early is not "borrowing against future income streams." The income on the sale of Chris Wood was earned when the transfer was made. Helping NUFC out with payment in instalments, I'd assume, helped get the deal done. I think it's worth quite a lot to BFC to sell Chris Wood for £25 million - the amount in his release clause. Maybe the release clause always included "paid in two instalments" as part of the fee...

Paul Waine wrote: ↑

Sat May 07, 2022 1:17 pm

Rangers financial mess was totally different.

Selling Chris Wood to NUFC and using the second instalment to secure a loan to get that cash in early is not "borrowing against future income streams." The income on the sale of Chris Wood was earned when the transfer was made. Helping NUFC out with payment in instalments, I'd assume, helped get the deal done. I think it's worth quite a lot to BFC to sell Chris Wood for £25 million - the amount in his release clause. Maybe the release clause always included "paid in two instalments" as part of the fee...

Of course it's borrowing against future income streams. It's exactly what it is.

taio wrote: ↑

Sat May 07, 2022 1:16 pm

The latter is what I was referring to - that should have been blatantly obvious, particularly as I've already referred to transfer fees being spread over time being absolutely normal.

The difference here is we were already walking a very, very narrow path due to the club's financial position and especially what happens in the event of relegation which is a huge risk right now.

Exciting times.

Yes, I kind of guessed. But, why say that it was done by clubs with wealthy owners? Surely, those aren't the ones who'd need to do this by your argument?

We know from the accounts that a "significant" amount will need to be paid to MSD if the club is relegated. (The accounts also say that the "significant" amount needs to be agreed between the club and MSD). Isn't a good idea to bring in the cash due next 1st Feb early, so that it is immediately available to pay to MSD if it is required? This borrowing costs a lot less than any other borrowing available to BFC. It's good risk management to be ready in my view.

Yes, smart financial business can justify exciting times. However, I'm reserving my acclamation until the end of the season.

UTC

taio wrote: ↑

Sat May 07, 2022 1:21 pm

Of course it's borrowing against future income streams. It's exactly what it is.

No. We'd already sold Chris Wood. We can't sell him again.

Paul Waine wrote: ↑

Sat May 07, 2022 1:25 pm

Yes, I kind of guessed. But, why say that it was done by clubs with wealthy owners? Surely, those aren't the ones who'd need to do this by your argument?

We know from the accounts that a "significant" amount will need to be paid to MSD if the club is relegated. (The accounts also say that the "significant" amount needs to be agreed between the club and MSD). Isn't a good idea to bring in the cash due next 1st Feb early, so that it is immediately available to pay to MSD if it is required? This borrowing costs a lot less than any other borrowing available to BFC. It's good risk management to be ready in my view.

Yes, smart financial business can justify exciting times. However, I'm reserving my acclamation until the end of the season.

UTC

I said it's not commonplace. It wasn't me who said it's done by other clubs regularly. I was responding to the suggestion it was and purely speculating that if it is a regular thing - which I don't believe it is at all - then other clubs would be taking much less of a risk because of our precarious financial position. I believe this arrangement reflects the fragility of our financial position.

taio wrote: ↑

Sat May 07, 2022 1:21 pm

Of course it's borrowing against future income streams. It's exactly what it is.

It's a bit of a technicality. It's borrowing against future cash, not against future income.

That income has already been booked, it's recognised as profit.

Borrowing against future income (pretty sure Leeds were doing this when they were in dire straits) is against income that hasn't yet been recorded, e.g. next season's ticket income.

Paul Waine wrote: ↑

Sat May 07, 2022 1:26 pm

No. We'd already sold Chris Wood. We can't sell him again.

Yes but the at least £12.5m is still due so it's future income which we have borrowed against

aggi wrote: ↑

Sat May 07, 2022 1:33 pm

It's a bit of a technicality. It's borrowing against future cash, not against future income.

That income has already been booked, it's recognised as profit.

Borrowing against future income (pretty sure Leeds were doing this when they were in dire straits) is against income that hasn't yet been recorded, e.g. next season's ticket income.

I'm not thinking of it in technical or accounting terms. We have borrowed against income, cash, revenue or whatever other term best describes it that is outstanding albeit guaranteed. The point is it is not a typical arrangement and one that reflects well on our financial position.

I thought the point of a buyout clause was that the fee would be paid for in full

Paul Waine wrote: ↑

Sat May 07, 2022 1:26 pm

No. We'd already sold Chris Wood. We can't sell him again.

We could try though? Neil Warnock's always in the market for a striker.

All we need is some fake IDs and we'll maybe pull it off.

taio wrote: ↑

Sat May 07, 2022 1:33 pm

Yes but the at least £12.5m is still due so it's future income which we have borrowed against

Hi taio, yes, no probs that you are not thinking of this in technical or accounting terms. The way this works is that NUFC owe BFC £12,5 million which is due to be paid by 1st Feb 2023. There's a risk that this money due from NUFC isn't paid. Yes, of course, given NUFC's new owners and that NUFC are already secured to be playing in the Premier League next season, plus given the way that football debts are treated by Premier League (and other football authorities) the risk that NUFC don't pay this amount is extremely small. However, money owed by NUFC to BFC is no use to BFC if BFC need cash more immediately. Thus, it's better for BFC and reduces any risks BFC may have to have the cash now. Yes, there's a discount for cash now versus cash at a later date, but in this transaction with Macquarie that discount is small. My estimate, based on the figures reported by Bournemouth in their latest set of accounts, who have done a very similar deal with Macquarie, is that it is costing BFC no more than 4%. That's good business and good risk management.

UTC

joey13 wrote: ↑

Sat May 07, 2022 1:47 pm

I thought the point of a buyout clause was that the fee would be paid for in full

I guess we all did, but this deal with Macquarie shows that we were all wrong.

Another guess from me: it appears transfer fees paid in instalments is more the norm than the exception. If this is the case, it's easy to draft the release clause to say the agreed release fee is £X and the agreed instalments are due (1) 50% on completing the deal and (2) 50% 12 months after completing the deal. Maybe the player or the agent would be concerned that a "pay 100% on completion" requirement would stop the release clause being triggered, especially if they'd prefer a lower release clause. So an agreement to be reached on the amount that triggers the clause and a further agreement to be reached on the timings of payments - and, all facilitated by Macquarie (and maybe others) being ready to allow the selling club to borrow against the cash that is due should they wish to do that.

Paul Waine wrote: ↑

Sat May 07, 2022 2:32 pm

Hi taio, yes, no probs that you are not thinking of this in technical or accounting terms. The way this works is that NUFC owe BFC £12,5 million which is due to be paid by 1st Feb 2023. There's a risk that this money due from NUFC isn't paid. Yes, of course, given NUFC's new owners and that NUFC are already secured to be playing in the Premier League next season, plus given the way that football debts are treated by Premier League (and other football authorities) the risk that NUFC don't pay this amount is extremely small. However, money owed by NUFC to BFC is no use to BFC if BFC need cash more immediately. Thus, it's better for BFC and reduces any risks BFC may have to have the cash now. Yes, there's a discount for cash now versus cash at a later date, but in this transaction with Macquarie that discount is small. My estimate, based on the figures reported by Bournemouth in their latest set of accounts, who have done a very similar deal with Macquarie, is that it is costing BFC no more than 4%. That's good business and good risk management.

UTC

I know how it works. You may be pleased with the arrangement but you won't convince me it is a good thing. I don't believe it's good risk management. It's kicking the can down the road and if we go down we will be in a financial mess and this will just add to that. If we stay up then it is obviously much less of an issue but that's far from guaranteed. It's risky rather than good risk management and reflects where the club now is financially.

taio wrote: ↑

Sat May 07, 2022 5:07 pm

I know how it works. You may be pleased with the arrangement but you won't convince me it is a good thing. I don't believe it's good risk management. It's kicking the can down the road and if we go down we will be in a financial mess and this will just add to that. If we stay up then it is obviously much less of an issue but that's far from guaranteed. It's risky rather than good risk management and reflects where the club now is financially.

Ok, taio, you believe what you want to believe. Alan Pace and ALK will know that this is sensible risk management.

Of course, Burnley continue to need Leeds to do no better than the Clarets across their respective 3 remaining games.

UTC

aggi wrote: ↑

Sat May 07, 2022 1:33 pm

It's a bit of a technicality. It's borrowing against future cash, not against future income.

That income has already been booked, it's recognised as profit.

Borrowing against future income (pretty sure Leeds were doing this when they were in dire straits) is against income that hasn't yet been recorded, e.g. next season's ticket income.

as you know perhaps better than anybody on this board we have borrowed against future income a few times in the last decade or so to ease/bring forward cashflow, but not since we steadied the ship in the Premier League - certainly in the first and second Premier League season and also in the first two parachute years of 2011 and 2012

taio wrote: ↑

Sat May 07, 2022 1:39 pm

I'm not thinking of it in technical or accounting terms. We have borrowed against income, cash, revenue or whatever other term best describes it that is outstanding albeit guaranteed. The point is it is not a typical arrangement and one that reflects well on our financial position.

I'd agree that it doesn't reflect that well.

I'd say it's not as bad as borrowing against future revenue but it does make you curious as to why it's happening.

Have I got this right? Newcastle are paying for Wood in instalments so as to circumnavigate FFP rules. So we then take out a loan, with interest, against the future payments that we will receive. I presume the fee had a bit for the interest added on?

RMutt wrote: ↑

Mon May 09, 2022 4:28 pm

Have I got this right? Newcastle are paying for Wood in instalments so as to circumnavigate FFP rules. So we then take out a loan, with interest, against the future payments that we will receive. I presume the fee had a bit for the interest added on?

No. Nothing to do with FFP.

aggi wrote: ↑

Mon May 09, 2022 4:31 pm

No. Nothing to do with FFP.

Thanks. Why the staged payments then? Newcastle are loaded.

RMutt wrote: ↑

Mon May 09, 2022 4:34 pm

Thanks. Why the staged payments then? Newcastle are loaded.

it is the key question - kind of suggests that the release clause wasn't active - just that the agent knew what it was and that we needed the cash flow - that does not mean it wasn't great value as a transaction for the club given a true market valuation of Wood to anyone else

Paul Waine wrote: ↑

Sat May 07, 2022 2:42 pm

I guess we all did, but this deal with Macquarie shows that we were all wrong.

Another guess from me: it appears transfer fees paid in instalments is more the norm than the exception. If this is the case, it's easy to draft the release clause to say the agreed release fee is £X and the agreed instalments are due (1) 50% on completing the deal and (2) 50% 12 months after completing the deal. Maybe the player or the agent would be concerned that a "pay 100% on completion" requirement would stop the release clause being triggered, especially if they'd prefer a lower release clause. So an agreement to be reached on the amount that triggers the clause and a further agreement to be reached on the timings of payments - and, all facilitated by Macquarie (and maybe others) being ready to allow the selling club to borrow against the cash that is due should they wish to do that.

Chester Perry wrote: ↑

Mon May 09, 2022 4:55 pm

it is the key question - kind of suggests that the release clause wasn't active - just that the agent knew what it was and that we needed the cash flow - that does not mean it wasn't great value as a transaction for the club given a true market valuation of Wood to anyone else

Hi CP, see what I posted on Saturday, copied above. All the media reports I've seen re the Macquarie loan continue to report that Wood's release clause was triggered by NUFC. As I've said, above, there's no reason why the release clause doesn't include a "paid in two instalments" requirement.

If BFC needed the cashflow in Jan, surely there was a deal to be done with NUFC to get paid in full in Jan. Easier to see that the club is doing some risk management and being prepared if significant repayment is required to MSD in near term.

UTC

Large business spend an obscene amount of money on managing cash flow. It’s nothing to be concerned about at all

Villa did something similar when we signed Ashley Westwood....

https://www.mirror.co.uk/sport/football ... a-12655774

They took cash early for the sale (and paid a penalty for it) rather than waiting for when it was due.

I can't quite grasp what we did in the article.

We have 12 million due from Wood next year.

Did we take a loan now and then need to pay back more with interest next year?

Why couldn't we have taken 10 or 11 right now for the 12 we are due?