Loans for equity?

[maxflicity]

The other and more important point:
Loans are debt and therefore repayable and may even be secured, such as MUFC debts
Shares (or equity or, as US call them, stocks) are locked into the company. The investor can not get this money back unless he sells his shares to someone else or has to go through numerous legal routes to arrange for the company to bay them back, which the Companies Act makes quite difficult.

When the accounts are analysed the fact that this money is shares greatly increases the financial position of the company.

Lets just hope that the remaining spending in the close season last is also equity and not debt, because we could be still in debt if the spending is loan financed!

These accounts are old and dont cover the period of our massive spend on players, merely the acquisition of the club and the early spending spree.

I like what I see but we dont know and wont know about the financing of teh major player acquisitions until the next set of accounts.

 

[TopFloorGuy]

The other and more important point:
Loans are debt and therefore repayable and may even be secured, such as MUFC debts
Shares (or equity or, as US call them, stocks) are locked into the company. The investor can not get this money back unless he sells his shares to someone else or has to go through numerous legal routes to arrange for the company to bay them back, which the Companies Act makes quite difficult.

When the accounts are analysed the fact that this money is shares greatly increases the financial position of the company.

Lets just hope that the remaining spending in the close season last is also equity and not debt, because we could be still in debt if the spending is loan financed!

These accounts are old and dont cover the period of our massive spend on players, merely the acquisition of the club and the early spending spree.

I like what I see but we dont know and wont know about the financing of teh major player acquisitions until the next set of accounts.

my reading of all the info is that sheikh mansour has converted all his loan financing into equity so that should include monies advanced to cover the summer transfer activity.

 

[Rammyblues]

For those that are not financial experts all he has done is increase the number of shares in his own company and remove the debt. I assume this means we comply with all the eligibility clauses for CL football. I suppose therefore over the next year or two whatever loss we make, they do the same each time, once we make money the value of the shares rises and in theory if they then sell they will make money. Is this about it?

 

[Footyblue]

For those of you concerned with whether things are classified as loan or equity. If the owner here is the one making the loan it is by and large completely meaningless. The owner can convert the loan into equity at any time. Where debt gets you in trouble is when you have a lot of it and it comes from a third party. Like them rags.

Here the owners have so many billions that any loss is absorbed easily by their total holdings around the world. Don't they have hundreds of billions of pounds. Say they have 200 billion pounds. Any rate of return on that amount will way more than cover anything the club would ever lose in a year. This is a nothing side thing for them. Nothing in a good way. They can throw so much money at this, never even notice and still outspend any other team on earth easily. Pinch yourself. Its real.

 

[newcrossblue]

very different to Irobbedmeselfrich who put the debt on to Chelsea and left it there, as far as I am aware.

No - he's just done the same. So us and Chelsea are in the same boat - make a loss but no debt.

Took him long enough - he must be getting ready to sell

 

[mick hunt]

Did anyone watch News North West in the sports section of the program Tony Livesy, took great pride in announcing our debt but failed to mention the same debt has been written off and doesn’t exist. Gordon Burns, the rag took a deep breath through pursed lips and Livsey, took great delight by saying the debt doesn’t include the sacking of MH or City’s summer signings he also failed to mention that the debt has been written of by our owners...........F cking rag media.

 

[EalingBlue2]

At the moment on top of existing losses and purchases to may 09 if I understand correctly they issued another 89m of equity. This means that we have covered 89m of player payments and losses this season.

It also suggested we also have a 40m bank facility (I assume unused) which I assume means we can quickly access 40m at any time on top of existing funding etc.

This also puts us in a strong position to get external debt or investment if we want it.

Interestingly if he has in effect issued 400m of shares it means for him to walk away he would have to get 400m for City (ie for a business losing 92m a year which would be impossible) or take a huge loss. In reality I think this really ties him to City in a big way.

The equity loan thing in some ways is semantic though (and the same with chelsea) - though very important for the champs league and if you want investment. That is if a club has one owner and all the debt is owed to that owner and he decides to call on that debt he can only do so by giving it to himself or screwing himself (ie he could gain nothing) so in many ways the debts of a club if they are 100% owned by someone and the debts are to that person are irellevant

 

[bananamilksheikh]

i think the accountants on here have explained most of this. the word DEBT seems to send shivers down the spine but....it is the interest rate and the lending terms that matter. especially in relation to the ability to pay the interest.

the SHEIHK and ADUG are legally obliged to produce accounts and the money invested in MCFC must be described on the balance sheet. Debt with/or without interest or equity with/or without dividends...it doesnt really matter. Equity satisfes UEFA and avoids that dreaded word DEBT. He could just as easily call them bonds or debentures or similar.

Stop worrying!

 

[EalingBlue2]

I would add the most important thing is who the debt is to regardless of interest rate and term if the debt was external it could be a problem! Whereas if we owed the owner short term huge loans at high interest it would really be irellevant as no one would screw themselves

 

[Prestwich_Blue]

For those of you concerned with whether things are classified as loan or equity. If the owner here is the one making the loan it is by and large completely meaningless.

That's not strictly true. A loan is a liability that has to be repaid and incurs interest. So Wardle's loan incurred interest but we didn't actually pay it (largely because we couldn't). However the interest was still chargeable. When the club was sold, Wardle had to agree to reassign that loan to Thaksin but he took less than it was worth in order to do that. The full debt was then Thaksins and he took that when he sold to ADUG.

However, if the loan is converted to equity then the holder of the equity is only entitled to what his shares are valued at. So if the Sheikh sold City for £200m, that's all he would get.

It doesn't have any bearing on UEFA's proposed rules as they plan to exclude clubs who make substantial losses (i.e. ones who use their owners funds to keep them going) which is us and Chelsea. Despite clubs like the rags, Liverpool & Real Madrid having crippling debts, they would appear to be excluded from this as they can (just about) pay their way.