Grim

[Tall Paul]

Equally, ALK could have financial problems unrelated to BFC and that could lead to non-payment of the debt to MSD.

In many ways it not being a debt of Burnley FC increases the clubs exposure but again we are getting away from the main point that there is a risk to the assets of Burnley FC.

I think we both agree on that point..!

Yes, I think we do.

It's in both ALK and BFC's interests for the club to be successful, so I'm choosing to give them the benefit of the doubt at least for the time being.

[ClaretPete001]

Which company is that and is it his?

He was fronting a bid for the St Louis Rams - his experience gives credibility to the NFL as to how the franchise would be managed, it is very much unclear how big his share of the bid was - that bid ended because one of the main backers turned out to be quite toxic on a reputational front. it is not unusual in the US for such partnerships - look at FSG (Red Sox and Liverpool) many believe it is just a couple of individuals when the reality is that 20 family offices are involved in the ownership group

Checketts had the Cardinals franchise taken off him by the league because he did not have the funds they deemed necessary to be competitive. Then league then managed the sale of that franchise, deciding who would be the next owner and at what price not Checketts.

Checketts stopped investing in Real Salt Lake (he had reach his ceiling of ability and was pushed out by the partner he brought in for that reason.

The reason very rich people get more wealthy is not because they invest their own money but that they can borrow money at rates that are low enough to then generate significant returns which increase their wealth. The deal with MSD does not appear match that pattern.

I think his WIkipedia page is incorrect.

[GodIsADeeJay81]

Hmmm no cigar is my blunt answer...! But once again Paul appreciate your time and efforts debating. I don't expect us to agree but it is good for us to lay out the arguments so others can see both sides of the argument.

Firstly, I don't dispute that AP was Global Head of Sales at Citibank until 2019. I still don't think that qualifies anyone to run a Premiership football club. In fact, he seems to have little experience running any business. I agree he is not fabulously wealthy in fact I doubt he has more money, or even as much, as the previous chairmen.

The issue I have with the investment argument is described very well in the article above - Burnley FC is not seen as investment worthy, or at least not at the price the previous owners wanted to sell at, which is why ALK was able to buy the club in the first places...! You accept this yourself, and with all due respect, this is an important point: if no one wanted to invest in the club when it had tens of million quid in the bank why would anyone want to invest in it with (potentially) £157 million quid's worth of debt?

I take your point that being very "clever" with the resources at their (ALKs) disposal is just about the only answer you (or I) could give but I do not think that is re-assuring because: (1) there is no evidence ALK is any cleverer than anyone else, (2) they have made it harder for themselves because of the additional debt (3) because of the lack of investment over the last three years means they now find themselves with playing assets that need considerable investment.

I accept that an investment banker should be good at raising capital but with little means at their disposal there is only so many times you can leverage your assets. I await to see whether ALK has more to offer but go back to the point above. Is Burnley FC an attractive investment proposition?

In summary, I think your argument boils down to one thing, which is that Burnley FC has exchanged £157 million quid's worth of debt on the back of a gamble that Alan Pace is able to run Burnley FC better than almost anyone else has run a club in the history of the Premier league.

I wish him well and respect (if not agree) with your view that there was little else on the table but I do not as yet see a sustainable business model.

Both Ed Woodward and his successor are accountants or investment bankers
Bruce Buck is a lawyer.

Football clubs are multimillion ££ businesses, it requires people who can handle large amounts of money to run them.

[ClaretPete001]

Not quite Pete

In the article I say that The ALK Three took advantage of circumstance, it was pretty obvious to observers that Dyche would walk at the end of his contract (or find a role elsewhere) if Garlick remained at the helm, none of the other directors had the means to buy Garlick out so it was down to who had offers on the table - Elkashashy partnered with the toxic Farnell and there have been so many dubious and ghostlike bids for teams in the England from the Middle East in the last decades that many prefer to steer clear. It seems that both old and new administrations had complete faith in his abilities,

I think your take on it is entirely plausible albeit I think it unlikely that the leveraged takeover was just serendipity.

Fundamentally, I can't see a sustainable business model, other, than Paul's view that ALK might turn out to be smarter than anyone else.

Brilliant research by Chester (and Paul) and it's good to get a chance to engage in the debate on this forum.

[Chester Perry]

I think your take on it is entirely plausible albeit I think it unlikely that the leveraged takeover was just serendipity.

Fundamentally, I can't see a sustainable business model, other, than Paul's view that ALK might turn out to be smarter than anyone else.

Brilliant research by Chester (and Paul) and it's good to get a chance to engage in the debate on this forum.

Which takes us back to the underlying theme of the article and Tariq Panja's quip

the worry is some people think they are much cleverer than the rest - it is the old western gunslinger issue, there is always someone better that will come along - humility and caution always needs to be employed when so many elements are beyond your control.

[ClaretPete001]

Both Ed Woodward and his successor are accountants or investment bankers
Bruce Buck is a lawyer.

Football clubs are multimillion ££ businesses, it requires people who can handle large amounts of money to run them.

Indeed but Burnley is not a big club and it is not floated.

Both Woodward and Arnold are accountants and involved with the club prior to achieving their current position.

As was Buck who is a lawyer. I would say an accountant has a very different role to an investment banker but again I don't want to quibble over mute points.

I think anyone would agree that a job in an investment bank is not the best preparation to manage a provincial football club.

Clearly, a listed billion dollar football club with global revenues might require someone with significant experience of the markets etc.

[GodIsADeeJay81]

Indeed but Burnley is not a big club and it is not floated.

Both Woodward and Arnold are accountants and involved with the club prior to achieving their current position.

As was Buck who is a lawyer. I would say an accountant has a very different role to an investment banker but again I don't want to quibble over mute points.

I think anyone would agree that a job in an investment bank is not the best preparation to manage a provincial football club.

Clearly, a listed billion dollar football club with global revenues might require someone with significant experience of the markets etc.

Burnley is a decent sized business though, leave the "club" part to one side, part of a global brand shown around the world.

The business needs to be grown, revenue streams increased and to attract further investment.
That needs people who can handle a lot of money and are comfortable dealing with potential investors.

It doesn't need just a football person

[Chester Perry]

Burnley is a decent sized business though, leave the "club" part to one side, part of a global brand shown around the world.

The business needs to be grown, revenue streams increased and to attract further investment.
That needs people who can handle a lot of money and are comfortable dealing with potential investors.

It doesn't need just a football person

Everyone accepts the business needs to be grown, the question is how? and that is the magic dust that Velocity Sports Limited say they have brought to the table

This podcast from the Athletic last week provides some fascinating detail on how that can be done https://podcasts.apple.com/gb/podcast/g ... 549136782-

the problem is that much of what is discussed is not really available in much substance in and around the club. There are no doubt things that can be done (some like price increases require a cultural willingness which wasn't exhibited by the previous administration). Of course much of this requires investment and what we know from leveraged takeovers in football is that there is little if any of that available in the first 3 to 5 years.

I am currently looking at a model which suggest the club may have to find circa £40m this year and next and then circa £20m a year through to 2029 to fund the take over (assuming a repayment of the principal of the MSD loan and not accounting for director salaries, consultancy fees and dividends). That is a big jump in revenues to remain at current investment levels and why in a previous article for the London Clarets I suggested that the ideal for Velocity would be a wages + amortisation to revenue ration of around 70% - 75% which would likely see wages at close to 50% or less of revenue .

[KRBFC]

I wish people would stop conflating ALK's debt with BFC's

You're just being your usual petty self though, where else do you think the money is coming from... and if that money isn't repaid, it falls onto the clubs shoulders. So while yes, they lent to ALK, it is secured firmly against the clubs assets and will be repaid using the clubs cashflow.

[KRBFC]

I am currently looking at a model which suggest the club may have to find circa £40m this year and next and then circa £20m a year through to 2029 to fund the take over (assuming a repayment of the principal of the MSD loan and not accounting for director salaries, consultancy fees and dividends). That is a big jump in revenues to remain at current investment levels and why in a previous article for the London Clarets I suggested that the ideal for Velocity would be a wages + amortisation to revenue ration of around 70% - 75% which would likely see wages at close to 50% or less of revenue .

Is that why so many staff were let go? It wouldn't surprise me if we tried our hardest to replace them with robots, all of this point towards the team getting weaker on the field to squeeze every possible drop from the PL TV income to repay ALK debts. I'd have rather of seen a ballsy play, spend in the market and try trade for profit that way.

[Chester Perry]

Is that why so many staff were let go? It wouldn't surprise me if we tried our hardest to replace them with robots, all of this point towards the team getting weaker on the field to squeeze every possible drop from the PL TV income to repay ALK debts. I'd have rather of seen a ballsy play, spend in the market and try trade for profit that way.

who knows on the staff front

VSL's model will necessarily be based on increased revenues - next season is likely to see increased tv revenues as a result of overseas broadcast deals - what most people do not realise is that will not result in a increase in Parachute Payments of EFL Solidarity payments after the change in distribution of overseas rights at the beginning of this current cycle. It is the non tv revenues that need to grow and substantially. The current drive on attendances shows that they are struggling on that front though there has been some positive sounds (no big splash of news) about the additional revenues the new signage is generating - but it is the commercial partners where I was hoping/expecting to see real growth and that just doesn't seem to be happening from what I have seen. VSL were always open about the role of player trading in their overall model and from what I have seen that appears to be a small net spend of less than £5m (maybe quite a bit less as a result of conditional payments) but an overall short term cashflow gain of possibly £10m or more since they arrived.

[GodIsADeeJay81]

Is that why so many staff were let go? It wouldn't surprise me if we tried our hardest to replace them with robots, all of this point towards the team getting weaker on the field to squeeze every possible drop from the PL TV income to repay ALK debts. I'd have rather of seen a ballsy play, spend in the market and try trade for profit that way.

How many staff have been let go, I've lost track?

Some were probably well past their sell by date tbh, especially when you see the number of changes/improvements that have taken place since then.

[Chester Perry]

How many staff have been let go, I've lost track?

Some were probably well past their sell by date tbh, especially when you see the number of changes/improvements that have taken place since then.

How many of those changes and improvements were on the plan before the VSL arrival - CT suggests that virtually all the Turf Moor Infrastructure ones were. Certainly the new boxes and refresh of the hospitality suites were planned for the summer of 2020 but could not happen as a result of Project restart. I believe (willing to be corrected here) that the electronic signage and even the painting was part of the existing road map too.

We would all benefit from a clear and precise list of what VSL have brought that is new and what was already part of the ongoing plan.

The only significant element that I am aware is VSL is Burnley FC Women and even the announcements around that have had to be scaled back in practice at least for now - particularly them being ensconced at Gawthorpe. There was never the required volume of facilities to facilitate it, pitches in particular will be a problem as there have been restrictions imposed on how many the planners would allow - that was from the time of the redevelopment 7 years ago

[ClaretTony]

How many of those changes and improvements were on the plan before the VSL arrival - CT suggests that virtually all the Turf Moor Infrastructure ones were. Certainly the new boxes and refresh of the hospitality suites were planned for the summer of 2020 but could not happen as a result of Project restart. I believe (willing to be corrected here) that the electronic signage and even the painting was part of the existing road map too.

We would all benefit from a clear and precise list of what VSL have brought that is new and what was already part of the ongoing plan.

The only significant element that I am aware is VSL is Burnley FC Women and even the announcements around that have had to be scaled back in practice at least for now - particularly them being ensconced at Gawthorpe. There was never the required volume of facilities to facilitate it, pitches in particular will be a problem as there have been restrictions imposed on how many the planners would allow - that was from the time of the redevelopment 7 years ago

I can confirm all the changes at the ground in terms of hospitality were in place some considerable time before the club was sold. They would have been in place ahead of last season but for the season extending into July.

Some of the exterior changes were also planned, including the screen at the traffic lights. I don’t know about any of the other electronic stuff though.

[KRBFC]

who knows on the staff front

VSL's model will necessarily be based on increased revenues - next season is likely to see increased tv revenues as a result of overseas broadcast deals - what most people do not realise is that will not result in a increase in Parachute Payments of EFL Solidarity payments after the change in distribution of overseas rights at the beginning of this current cycle. It is the non tv revenues that need to grow and substantially. The current drive on attendances shows that they are struggling on that front though there has been some positive sounds (no big splash of news) about the additional revenues the new signage is generating - but it is the commercial partners where I was hoping/expecting to see real growth and that just doesn't seem to be happening from what I have seen. VSL were always open about the role of player trading in their overall model and from what I have seen that appears to be a small net spend of less than £5m (maybe quite a bit less as a result of conditional payments) but an overall short term cashflow gain of possibly £10m or more since they arrived.

But that was on players (Wood/Gibson) who were here before they arrived, seems like they're trying to squeeze every margin and milk what was already here when they arrived. Will be interesting to see what we do in the summer with so many out of contract, I assume most will be kept to avoid paying on transfer fees.

[Chester Perry]

But that was on players (Wood/Gibson) who were here before they arrived, seems like they're trying to squeeze every margin and milk what was already here when they arrived. Will be interesting to see what we do in the summer with so many out of contract, I assume most will be kept to avoid paying on transfer fees.

You can only trade what you have, the Gibson deal was set up under Garlick as was the Wood release clause - VSL have benefitted and been impacted by both - there was also the sales of Benson and Dunne neither of which the club appeared to want to do but they did for the players (both would have likely featured at some point this season given the difficulties we have experienced.

I would not necessarily expect a significant number of contract renewals this summer, there will be a desire to keep the wage bill under tight control and there are a lot more free agents these days.

[KRBFC]

who knows on the staff front

VSL's model will necessarily be based on increased revenues - next season is likely to see increased tv revenues as a result of overseas broadcast deals - what most people do not realise is that will not result in a increase in Parachute Payments of EFL Solidarity payments after the change in distribution of overseas rights at the beginning of this current cycle. It is the non tv revenues that need to grow and substantially. The current drive on attendances shows that they are struggling on that front though there has been some positive sounds (no big splash of news) about the additional revenues the new signage is generating - but it is the commercial partners where I was hoping/expecting to see real growth and that just doesn't seem to be happening from what I have seen. VSL were always open about the role of player trading in their overall model and from what I have seen that appears to be a small net spend of less than £5m (maybe quite a bit less as a result of conditional payments) but an overall short term cashflow gain of possibly £10m or more since they arrived.

Gibson and Wood were here before ALK arrived though, seems to me like they wanna squeeze margins as tight as will allow, the yearly interest on the loan was £7mish minus from TV income? cut costs, sell everything that breathes, reinvest as little as possible all while praying Dyche can keep the club in the PL. They aren't football people and I don't think they're aware how shite we are on the pitch atm and how badly upgrades were needed. I'd rather they went balls to the wall and speculated to accumulate on signings, I fear a long painful decline of the team under this lot, gradually they'll sell and invest little of it.

If Garlick went balls to the wall on signings, £20m from the club coffers and £60m from MSD, £80m summer budget, we'd be in a far better financial position than we are currently and we'd likely be a better team on the pitch.

[KRBFC]

weird I didn't see my previous response, so rewrote it.

[Tall Paul]

You're just being your usual petty self though, where else do you think the money is coming from... and if that money isn't repaid, it falls onto the clubs shoulders. So while yes, they lent to ALK, it is secured firmly against the clubs assets and will be repaid using the clubs cashflow.

I've already explained where I think the money will come from, the future sale of the club.

[GodIsADeeJay81]

How many of those changes and improvements were on the plan before the VSL arrival - CT suggests that virtually all the Turf Moor Infrastructure ones were. Certainly the new boxes and refresh of the hospitality suites were planned for the summer of 2020 but could not happen as a result of Project restart. I believe (willing to be corrected here) that the electronic signage and even the painting was part of the existing road map too.

We would all benefit from a clear and precise list of what VSL have brought that is new and what was already part of the ongoing plan.

The only significant element that I am aware is VSL is Burnley FC Women and even the announcements around that have had to be scaled back in practice at least for now - particularly them being ensconced at Gawthorpe. There was never the required volume of facilities to facilitate it, pitches in particular will be a problem as there have been restrictions imposed on how many the planners would allow - that was from the time of the redevelopment 7 years ago

Didn't we let go a senior person, who'd been with the club for years, to do with marketing etc?

[Chester Perry]

If Garlick went balls to the wall on signings, £20m from the club coffers and £60m from MSD, £80m summer budget, we'd be in a far better financial position than we are currently and we'd likely be a better team on the pitch.

You have to go back to the summer of our record ever spend: Vydra, Gibson, Hart etc - now there is a question mark as to whose signings these are but it does not indicate just chucking money at it is the best way for our club to go about it's business. The repercussions of that window have been significant though, the initial thought was we had assets to improve and sell on for a significant profit the churn of which would develop the squad further, we have clearly seen that didn't happen. Sean likes to talk of fine margins on the pitch but they appear in the finances too. In the same way you can point to the significant non revenue generating infrastructure expense at the Turf and in the staffing at Gawthope that Sean insisted on (it did need doing) but hampered investments in areas that would generate revenue.

At the end of the day we were trying to grow organically and sustainably the problem is that feels snail like in pace when billionaires trot up at city clubs and literally chuck hundreds of millions at their club to push them in advance of us while at the same time destabilising our business model. I have seen nothing yet from VSL that disrupts the models of our competitors for all the noise about their microscopic holdings in AiScout and Player Lens

[Chester Perry]

I've already explained where I think the money will come from, the future sale of the club.

That has always been my thought on the subject

[JohnDearyMe]

Aggi is right - there are a number of errors (some I am very very embarrassed about) and I am working on a much corrected article. I would strongly suggest anyone who has not read it to wait for the corrected version, otherwise you may get some seriously wrong ideas into your heads

thanks for your kind words Papa

Really enjoyed your article in the London Clarets magazine too. For the first time i felt like i had an understanding of ALK's background and their potential strengths and weaknesses. I look forward to the reading the updated one.

[ClaretPete001]

That has always been my thought on the subject

I think it unlikely that the club is more saleable now with £200 million quid's worth of debt than it was when it had a healthy bank balance.

If there are people queuing up to buy the club - why on earth did the former owners risk £68 million quid selling it to ALK?

[KateR]

So very true, The buy out is not at all unusual and the interest is very reasonable in my mind, the good thing about these types of leans are that loan companies don't want the assets on their books or to become the management arm of a football club in this instance and also go through the process of selling assets, anymore than banks want to own houses they provide mortgages on.

As we know the more you owe the more leeway you get and extending those loans and contracts means you end up with more profits at the end of the day so you help in instances where it is going to completely fail. For these reasons I have no worries regarding the structure of the buy out and I see definite advantages to team/facilities improvements rather than build a cash surplus in an account for very little reward.

AP was very clear early days to say the model was based on being in the Championship and that it was sustainable, obviously staying in the EPL is the best scenario but I am going to go out on a limb and confidently say they will also have run risk analysis and relegation would be the high one and to some extent the loss of SD. Therefore, I am not that interested in the minutia of the deal and prefer to look at the macro level of the change in ownership, I've seen positive signs of change, even though at the very beginning I was skeptical about the deal and business sense.

Clearly staying up is the number one priority and that is now in SD's hand to a great extent, loans and free agents could be utilized still to help the chances of that happening, however I feel the ownership will sanction what SD brings to them providing it makes financial sense.

[KateR]

sorry clearly missing something from CP, which was: The reason very rich people get more wealthy is not because they invest their own money but that they can borrow money at rates that are low enough to then generate significant returns which increase their wealth. The deal with MSD does not appear match that pattern. The rest I was replying to that part of CP's post earlier.

[Tall Paul]

I think it unlikely that the club is more saleable now with £200 million quid's worth of debt than it was when it had a healthy bank balance.

IT ISN'T THE CLUB'S DEBT.

The value of the club is pretty much unchanged from when ALK bought it. The cash at bank will have been replaced with an equivalent loan due from one of ALK's companies and the balance sheet value will be more or less the same. Although market value is probably lower due to the threat of relegation this season.

If there are people queuing up to buy the club - why on earth did the former owners risk £68 million quid selling it to ALK?

Who said there are people queuing up to buy the club? I expect ALK's objective is to increase the value of the club and make it more saleable, find a buyer, make a profit on disposal and repay all outstanding loans (including the loan from the club itself) with the proceeds.

[ClaretPete001]

Therefore, I am not that interested in the minutia of the deal and prefer to look at the macro level of the change in ownership, I've seen positive signs of change, even though at the very beginning I was skeptical about the deal and business sense.

Is this you Kate or Chester?

[ClaretPete001]

IT ISN'T THE CLUB'S DEBT.

The value of the club is pretty much unchanged from when ALK bought it. The cash at bank will have been replaced with an equivalent loan due from one of ALK's companies and the balance sheet value will be more or less the same. Although market value is probably lower due to the threat of relegation this season.



Who said there are people queuing up to buy the club? I expect ALK's objective is to increase the value of the club and make it more saleable, find a buyer, make a profit on disposal and repay all outstanding loans (including the loan from the club itself) with the proceeds.

The value of BFC will be based upon ALK making money. The semantic of where the debt lies is irrelevant to the sale value of the club or the consequences to the club if ALK fail.

If ALK buys a business that fails it could affect their ability to pay MSDs loan and no doubt would likely increase the amount of return the Directors would want should they need to sell the club. As I said above Burnley cannot escape the consequences of its relationship with ALK based on the semantics of an argument of where the debt lies.

In terms of objectives, I have no doubt that is ALKs intention but most of this thread has been discussing their ability to do that....!

[KateR]

Is this you Kate or Chester?

It's Kate, as I said it got a little screwed up with CP's name and the edit wouldn't let me correct.

[dsr]

IT ISN'T THE CLUB'S DEBT.

The value of the club is pretty much unchanged from when ALK bought it. The cash at bank will have been replaced with an equivalent loan due from one of ALK's companies and the balance sheet value will be more or less the same. Although market value is probably lower due to the threat of relegation this season.

It's an strange definition of "equivalent". If it was truly equivalent, then we could presumably use it to sign players with. Instead of offering £10m cash for a player, we could offer £10m of ALK loans. Then we'll find out just how "equivalent" it is.

As for the shouting about the MSD loan, you can stop shouting. We all know that BFC do not have any obligation to pay MSD today and therefore the £60m is not the club's debt. What concerns other people - not you, obviously - is that in certain far-from-unlikely circumstances we may have to pay it and then it will be the club's debt even by the strictest definition of debt. You do need to be properly Johnny Head-In-Air not to be concerned about that.

[Tall Paul]

Not the best example, the cash wasn't being used to sign players, so in that respect it is equivalent.

I'll stop shouting when people stop saying the club is in debt, or I see some accounts that show that it is.

And I'm not sure when I said I'm not concerned about it. I acknowledge its a risk - a big risk, the risk is no doubt bigger than the potential rewards - but its done and there's nothing we can do about it so I'd rather be optimistic and believe that ALK will succeed in their objectives which will ultimately be good for the club.

[ClaretPete001]

Not the best example, the cash wasn't being used to sign players, so in that respect it is equivalent.

I'll stop shouting when people stop saying the club is in debt, or I see some accounts that show that it is.

And I'm not sure when I said I'm not concerned about it. I acknowledge its a risk - a big risk, the risk is no doubt bigger than the potential rewards - but its done and there's nothing we can do about it so I'd rather be optimistic and believe that ALK will succeed in their objectives which will ultimately be good for the club.

If ALK can't pay the MSD loan what are you going to do when the Bailiff turns up - show them Burnley FCs accounts and say "look ...... No debt"?

It would make a good John Cleese sketch but ultimately it wouldn't get you anywhere

[JohnMcGreal]

Who said there are people queuing up to buy the club? I expect ALK's objective is to increase the value of the club and make it more saleable, find a buyer, make a profit on disposal and repay all outstanding loans (including the loan from the club itself) with the proceeds.

Considering ALK bought the club at a very high price, how realistic was it that they would actually increase the value of the club? Were they ever going to invest enough money into the playing side in order for us to compete with clubs just above us, like Brighton, Palace or Southampton?

I think they banked pretty much everything on Dyche being able to keep a threadbare squad in the PL on the cheap (which he's successfully done for years) whilst maybe increasing some of the other revenue streams. A high risk strategy which may well backfire this season. In which case the club will be worth nowhere near the price they paid for it. What happens then? Where does the money come from to cover the losses and repay the MSD and directors loans? Presumably our parachute payments and player sales.

[JohnMcGreal]

Edit - duplicate post

[Tall Paul]

If ALK can't pay the MSD loan what are you going to do when the Bailiff turns up - show them Burnley FCs accounts and say "look ...... No debt"?

It would make a good John Cleese sketch but ultimately it wouldn't get you anywhere

Don't be silly. Of course if an event happens in the future circumstances will change. You (and others) seem to be assuming that event is inevitable and assigning the debt to the club now, when it might never happen. It's like saying the bank own my house because I have a mortgage.

[dsr]

Don't be silly. Of course if an event happens in the future circumstances will change. You (and others) seem to be assuming that event is inevitable and assigning the debt to the club now, when it might never happen. It's like saying the bank own my house because I have a mortgage.

The mortgage parallel would be if your neighbour had a mortgage, and you guaranteed it in case he couldn't afford to pay and the house fell down. You wouldn't get any benefit apart from warm fuzzy feelings about how nice you were being to your neighbour, and of course you wouldn't be in debt. But that wouldn't make it any easier if your neighbour's house fell down.

[Paul Waine]

Hmmm no cigar is my blunt answer...! But once again Paul appreciate your time and efforts debating. I don't expect us to agree but it is good for us to lay out the arguments so others can see both sides of the argument.

Firstly, I don't dispute that AP was Global Head of Sales at Citibank until 2019. I still don't think that qualifies anyone to run a Premiership football club. In fact, he seems to have little experience running any business. I agree he is not fabulously wealthy in fact I doubt he has more money, or even as much, as the previous chairmen.

The issue I have with the investment argument is described very well in the article above - Burnley FC is not seen as investment worthy, or at least not at the price the previous owners wanted to sell at, which is why ALK was able to buy the club in the first places...! You accept this yourself, and with all due respect, this is an important point: if no one wanted to invest in the club when it had tens of million quid in the bank why would anyone want to invest in it with (potentially) £157 million quid's worth of debt?

I take your point that being very "clever" with the resources at their (ALKs) disposal is just about the only answer you (or I) could give but I do not think that is re-assuring because: (1) there is no evidence ALK is any cleverer than anyone else, (2) they have made it harder for themselves because of the additional debt (3) because of the lack of investment over the last three years means they now find themselves with playing assets that need considerable investment.

I accept that an investment banker should be good at raising capital but with little means at their disposal there is only so many times you can leverage your assets. I await to see whether ALK has more to offer but go back to the point above. Is Burnley FC an attractive investment proposition?

In summary, I think your argument boils down to one thing, which is that Burnley FC has exchanged £157 million quid's worth of debt on the back of a gamble that Alan Pace is able to run Burnley FC better than almost anyone else has run a club in the history of the Premier league.

I wish him well and respect (if not agree) with your view that there was little else on the table but I do not as yet see a sustainable business model.

Hi Pete001, so, "no cigar?" Good job I'm a non-smoker!

What does qualify someone to run a Premier League football club? All the other owners you quoted were billionaires. Is that all it takes, lots and lots and lots of money?

The ALK team include people with extensive experience in running sports clubs including a US "soccer" team.

You recognise that "an investment banker should be good at raising capital." But, then you get confused by thinking that you can only raise capital on the assets you already own. That's not how investment banking works. These investment banks raise capital from people who have got money and want to invest their money, either as equity or debt, in activities that they consider they can make a return on. If you understand portfolio investing, you can spread your money around across numerous different areas with the aim that your portfolio grows in value, even if individual investments don't come off.

That's what ALK is about, attracting others to join ALK in investing in Burnley Football Club (via ALK, of course). That's how the NFL sports star has got involved with the club. It's possible that others are also involved, though have chosen to invest without the need for a public announcement.

I'm struggling to understand what you are trying to say when you say "Burnley FC is not seen as investment worthy, or at least not at the price the previous owners wanted to sell at, which is why ALK was able to buy the club in the first places.." It's not the "investment worthy" bit, but "at the price the previous owners wanted to sell at" and "which is why ALK was able to buy the club." Is it not logical that the previous owners would want to achieve the highest price possible? Isn't it true that a sale and purchase is agreed when the price the seller wants crosses with the price the buyers are willing to pay? The sellers will always want the higher price. The buyers will always want the lowest possible price. If their respective prices don't meet somewhere then there is no deal, the sellers don't sell and the buyers don't buy. (These, of course, are general statements. They apply as much to the sale of BFC as they do to the sale of a house, a car or any other asset).

Then you go on to say "if no one wanted to invest in the club when it had tens of million quid in the bank why would anyone want to invest in it with (potentially) £157 million quid's worth of debt?" Again, let's take the first part, ALK did invest in the club with all it's assets and liabilities, the contract situations and ages of the playing squad and the "tens of million quid in the bank." We are also led to believe an Egyptian guy was interested. However, I'm more interested in your figure of "(potentially) £157 million quid's worth of debt." Somewhere else on this thread your figure appears to have grown further to £200 million.

Where are you getting all your debt figures from?

Let's accept that ALK have taken out a medium term loan from MSD. That's widely reported and there's public domain evidence that confirms this. Let's accept that the amount is as reported, £60 million (though, I don't think there is any public domain data available at this time that can confirm and corroborate the exact figure). We also know that Burnley FC Holdings and subsidiaries have a charge on assets that forms part of the security for that debt. In corporate terms, I'd expect that to be considered a contingent liability of BFC. I expect we will learn more when BFC publishes the accounts in April. Let's call that £60 million debt - even though it will also continue as a debt of Calder Vale and contingent liability of Kettering Capital.

We understand that some of the cash on BFC balance sheet has been used to pay for the shares bought by ALK/Calder Vale. To do this, BFC would have to lend the money to Calder Vale. So, BFC swaps cash in bank for money owed by Calder Vale to BFC. Maybe Calder Vale repays that money or maybe it doesn't get repaid. Whatever happens it is not a debt. BFC doesn't owe anything to anyone as a result of BFC cash being used, by Calder Vale to pay towards the shares bought from the previous owners.

If we stick with the acquisition figures as reported in Jan-2021, ALK have a further £68 million to pay to the previous shareholders. Let's assume that whatever conditions apply to these further instalments those conditions are met. So, ALK owe the former shareholders £68 million. Are you suggesting that BFC will, somehow, also provide them with the money so that ALK can pay that £68 million? If BFC had the money to lend to ALK/Calder Vale great - though most of us consider that BFC doesn't have that sort of "surplus funds" - it's exactly the same analysis as above, it doesn't become a debt of BFC. In this case, ALK either pay the former shareholders, in which case the £68 million owed has been settled, or they don't pay them and the former shareholders have other remedies. Whatever happens, there's no £68 million debt for BFC.

So, you've quoted £157 million, above and elsewhere, £200 million. I'm at £60 million. How do you arrive at your figures?

[Tall Paul]

The mortgage parallel would be if your neighbour had a mortgage, and you guaranteed it in case he couldn't afford to pay and the house fell down. You wouldn't get any benefit apart from warm fuzzy feelings about how nice you were being to your neighbour, and of course you wouldn't be in debt. But that wouldn't make it any easier if your neighbour's house fell down.

If I was trying to compare what ALK have done to a mortgage you might have a (really tenuous and badly made) point, but I wasn't so you don't.

[gandhisflipflop]

At this present time, I think staying up will be far more of a financial burden than being relegated.

Staying up means a huge financial cost in replacing OOC players. Going down will reduce the wage bill by about 50% ? and make the cost of replacing players significantly cheaper whilst still maintaining parachute payments.

Interesting summer either way then! UTC.

[randomclaret2]

All of this is way over my head, but I am able to work out that after their first 3 transfer windows, the new owners have a Nett transfer spend of less than £5m. ( Based on transfer fees in and out quoted in the press etc.and all the usual caveats etc.)

[aggi]

Considering ALK bought the club at a very high price, how realistic was it that they would actually increase the value of the club? Were they ever going to invest enough money into the playing side in order for us to compete with clubs just above us, like Brighton, Palace or Southampton?

I think they banked pretty much everything on Dyche being able to keep a threadbare squad in the PL on the cheap (which he's successfully done for years) whilst maybe increasing some of the other revenue streams. A high risk strategy which may well backfire this season. In which case the club will be worth nowhere near the price they paid for it. What happens then? Where does the money come from to cover the losses and repay the MSD and directors loans? Presumably our parachute payments and player sales.

Why do you think they bought it at a very high price? It seems fairly much in line with valuation models (we're in at £350m here! http://priceoffootball.com/2728-2/ ) and other transactions.

[JohnMcGreal]

Why do you think they bought it at a very high price? It seems fairly much in line with valuation models (we're in at £350m here! http://priceoffootball.com/2728-2/ ) and other transactions.

I suppose my thinking is based on the likelihood of BFC retaining its PL status (which is where the majority of the club's value lies) in the early years of ALK's ownership. £200 million might be a good price for a club that's more likely to stay in the PL year on year, but for a team that's constantly flirting with relegation and looked pretty close to dropping on a couple of occasions, it seems like a pretty big gamble.

Especially on the back of years of under investment which left the team in a pretty poor state, a state that hasn't drastically improved since the takeover.

So I wouldn't say the only direction was going to be down in terms of club valuation, but it was probably always more likely than the alternative.

Also worth saying that it may well still increase in value. The season isn't over yet, and we could still drag ourselves out of the bottom three. In which case everything looks brighter. For another year at least.

[fatboy47]

Is it only me who thinks we only have any kind of value because of our Prem status?

I'm not sure you'd be able give Burnley FC away if that goes.

[aggi]

I suppose my thinking is based on the likelihood of BFC retaining its PL status (which is where the majority of the club's value lies) in the early years of ALK's ownership. £200 million might be a good price for a club that's more likely to stay in the PL year on year, but for a team that's constantly flirting with relegation and looked pretty close to dropping on a couple of occasions, it seems like a pretty big gamble.

Especially on the back of years of under investment which left the team in a pretty poor state, a state that hasn't drastically improved since the takeover.

So I wouldn't say the only direction was going to be down in terms of club valuation, but it was probably always more likely than the alternative.

Also worth saying that it may well still increase in value. The season isn't over yet, and we could still drag ourselves out of the bottom three. In which case everything looks brighter. For another year at least.

If we were guaranteed to stay in the PL year-on-year then you'd be looking at more like £350m - £400m as a valuation. The ~ £200m is discounted to reflect the risk of relegation.

If you look on a break-up basis there's probably in excess of £150m value there so you'd expect a going concern valuation to be higher.

As you say, a lot of the negativity is related to the league position, a lot of people have us already relegated.

[Jakubclaret]

Considering ALK bought the club at a very high price, how realistic was it that they would actually increase the value of the club? Were they ever going to invest enough money into the playing side in order for us to compete with clubs just above us, like Brighton, Palace or Southampton?

I think they banked pretty much everything on Dyche being able to keep a threadbare squad in the PL on the cheap (which he's successfully done for years) whilst maybe increasing some of the other revenue streams. A high risk strategy which may well backfire this season. In which case the club will be worth nowhere near the price they paid for it. What happens then? Where does the money come from to cover the losses and repay the MSD and directors loans? Presumably our parachute payments and player sales.

Spot on, even if we were to avoid relegation this season things wouldn’t massively improve it’d just delay it for another season & with the summer rebuild ahead & if we can’t raise the funds now to strengthen when it’s at it’s most critical point where is the funding going to come from for the summer window, because of the debt thus the precarious position we are doomed with this ownership model in a PL scenario & even possibly the championship.

[BurnleyFC]

Is it only me who thinks we only have any kind of value because of our Prem status?

I'm not sure you'd be able give Burnley FC away if that goes.

Exactly this.

[ClaretPete001]

Hi Pete001, so, "no cigar?" Good job I'm a non-smoker!

What does qualify someone to run a Premier League football club? All the other owners you quoted were billionaires. Is that all it takes, lots and lots and lots of money?

The ALK team include people with extensive experience in running sports clubs including a US "soccer" team.

I think we are in danger of bandying figures around on a public forum, which is not a great idea.

I am happy to accept that one way or another ALK will have a debt of £60 million and will possibly have to find another £68 million from somewhere. On top of that there is a £200 million valuation, and the difference between that and the £128 million is open to conjecture. I think that is in the public domain.

And yes I think you need to be a billionaire to expose a Premiership club to the kinds of risks we are seeing. The term billionaire is really a euphemism for the capacity of a business to invest and grow its market share.

Yes, the current team has experience of working with sports team but in a very different environment.

And to be honest I find the semantic arguments about where the debt lies and the consequences of it a little uncomfortable.

We have already agreed to disagree on the basis that you think they are clever enough to succeed and I think cleverness is not enough.

That seem to me to be a fair summation of where we are Paul ....! It's been a good debate.

[Swizzlestick]

The automatic extension was withdrawn in April last year, it now has to be appllied for. Burnley FC Holdings Ltd filing deadline is still shown as 30 April 2022.

It needs to be applied for, but it's granted immediately if you select Covid-19 as the reason for late submission.

[Paul Waine]

I think we are in danger of bandying figures around on a public forum, which is not a great idea.

I am happy to accept that one way or another ALK will have a debt of £60 million and will possibly have to find another £68 million from somewhere. On top of that there is a £200 million valuation, and the difference between that and the £128 million is open to conjecture. I think that is in the public domain.

And yes I think you need to be a billionaire to expose a Premiership club to the kinds of risks we are seeing. The term billionaire is really a euphemism for the capacity of a business to invest and grow its market share.

Yes, the current team has experience of working with sports team but in a very different environment.

And to be honest I find the semantic arguments about where the debt lies and the consequences of it a little uncomfortable.

We have already agreed to disagree on the basis that you think they are clever enough to succeed and I think cleverness is not enough.

That seem to me to be a fair summation of where we are Paul ....! It's been a good debate.

Thanks, Pete. If I may, will you allow me to amend your conclusion. I believe that Alan Pace and his ALK colleagues believe they are "clever enough to succeed." For myself, I feel that it is possible that they've got it all worked out and they will be successful. There are, of course, lots of things that I don't have knowledge of. The biggest one of these is that before Sept/Oct 2020 I'd never heard of Alan Pace or any of his colleagues. Equally, I'd no knowledge of MSD, except that I might have seen mention of MSD in financing for Southampton, Derby or Sunderland a little earlier that year.

I can be confident that MSD have got to know Alan Pace very well. Maybe MSD knew Alan Pace before his name appeared with respect to Burnley? Maybe MSD and ALK had had discussions re the earlier ALK attempt to buy Sheff Utd? For MSD to lend money to Alan Pace's business requires MSD to be convinced that the ALK business proposals are sound and within that context I have confidence Alan Pace knows what he is aiming to do. But, there are risks and there are no guarantees.

This may be counterintuitive for some, however, for me, Alan Pace being able to borrow money from MSD is one of the strongest reasons that makes ALK's ownership of Burnley credible.