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  • #31
    Originally posted by Martinel View Post
    A debt/equity swap is a refinancing deal in which a debtholder gets an equity position (shares) in exchange for cancellation of a debt. The clubs losses were being underwritten by loans from shareholders and these loans were recognised as a loss for accounting purposes. I think to improve the balance sheet and with a probable nod to FFP (which is possibly causing the ongoing debate with the FL) the debt/equity swop removed the debt from the balance sheet and reduced reported losses for the Club. The shareholders now own huge numbers of shares issued in exchange for the debt and they have little chance of recovering their losses if the Club is ever sold because the total value or per share offer is likely to be less than the effective share costs. At that point I guess an actual loss arises and shareholders can look to claim any tax reliefs on the losses.
    Ok......I understand now!

    Thanks.

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    • #32
      Originally posted by Martinel View Post
      A debt/equity swap is a refinancing deal in which a debtholder gets an equity position (shares) in exchange for cancellation of a debt. The clubs losses were being underwritten by loans from shareholders and these loans were recognised as a loss for accounting purposes. I think to improve the balance sheet and with a probable nod to FFP (which is possibly causing the ongoing debate with the FL) the debt/equity swop removed the debt from the balance sheet and reduced reported losses for the Club. The shareholders now own huge numbers of shares issued in exchange for the debt and they have little chance of recovering their losses if the Club is ever sold because the total value or per share offer is likely to be less than the effective share costs. At that point I guess an actual loss arises and shareholders can look to claim any tax reliefs on the losses.
      Exactly right. The original £60m write off was done specifically to reduce our losses. Rather than face a fine of about £50m, it meant that our lower losses would result in a fine of around £8m, if I recall correctly. Perfectly acceptable accounting practice. Although it was this that caused the issue with the FL and FFP. The FL's argument is that it wasn't a football related transaction, so should not have been allowed to reduce our football related losses and the fine that they wanted to give us.

      The annoying thing is that as far as I'm aware, FFP was introduced to stop clubs racking up debts they couldn't afford, knocking their suppliers and preventing the likelihood of clubs going under. Our owners choose to do the right thing and the thieving FL come along wanting to cash in under the guise of a fine. Just as well they are going to lose.

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      • #33
        this excellent piece is a very accurate summary of the financial situation up to JFH early doors.

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        • #34
          Originally posted by hal9thou View Post
          this excellent piece is a very accurate summary of the financial situation up to JFH early doors.
          Link doesn't work mate, but I think that is the same report I posted a couple of responses up.

          The thing I don't get about this whole 180m debt converted to shares thing is the effect it must have had to the existing shares. Let's say for arguments sake the club was valued at 100m, that would mean that based on the most accurate info we have, TF and his cronies owned around 67m of shares and the remaining 33m was owned by the Mittals. If you go ahead and issue another 180m worth of shares that would basically dilute the existing shares meaning that the Mittals stake would overnight devalue by nearly 2/3rds.

          Obviously the above cannot be what happened as the Mittals would have sh*t a brick at the prospect of 20m quids worth of equity disappearing like that. I'd love to see how the club's accountants have made all of this work!
          Last edited by Tarbie; 15-01-2017, 10:26 AM.

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          • #35
            The debt conversion must have diluted the overall share value based on current asset value which i reckon is mainly the stadium. But if say we leave Loftus Road I assume the site can be re developed. Have no idea what the value could be for housing or commercial use but would be huge I guess which would in turn improve the current company value and share price. That may be part of their thinking. Assume that they were also doing anything to avoid big FFP fine which would have just increased debts and loans. FFP is just stupid as it fines a club for too much debt and just increases the level of debt. Whole thing is flawed.

            Be interesting to look at this years accounts to see how all this was done. Bet it's a complex arrangement. Nothing wrong with a debt swap loads of firms do it to make results look better.

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            • #36
              Originally posted by Martinel View Post
              The debt conversion must have diluted the overall share value based on current asset value which i reckon is mainly the stadium. But if say we leave Loftus Road I assume the site can be re developed. Have no idea what the value could be for housing or commercial use but would be huge I guess which would in turn improve the current company value and share price. That may be part of their thinking. Assume that they were also doing anything to avoid big FFP fine which would have just increased debts and loans. FFP is just stupid as it fines a club for too much debt and just increases the level of debt. Whole thing is flawed.

              Be interesting to look at this years accounts to see how all this was done. Bet it's a complex arrangement. Nothing wrong with a debt swap loads of firms do it to make results look better.
              Totally, and thanks for helping me get my head around that. The whole debt conversion thing had me perplexed for a good while!

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              • #37
                Some accurate points but I think there's a bit of confusion. 3rd party debt is debt owed by the club. Shareholder debt isn't debt its essentially equity. Therefore there is no need or requirement for this to be repaid. Money pit in is likely to be structured as a "loa shareholder loan as can be tax beneficial but (and I think relevant here) also if money was funded in different proportions to the ownership of the club.

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                • #38
                  Thanks Tarbie. As James confirms the whole situation is financially complicated. The owners being rich men will probably have a team of expensive tax lawyers and advisers to fall back on. Used to work for one of the big accountants - they do love the complex stuff when it comes to fees and have plenty of clients who willingly pay !

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                  • #39
                    Everytime the club start winning (which by the way is not that often) someone start a thread on the financial situation of the club. Granted that the situation is not at all rosy, however, I do believe that its been taken in control. By having Hoos as Chairman, I trust him to steady the ship and keep improving year after year. Can't wait to read the financial statements for season 15/16, as it was during last season that our finances were being looked at very carefully. We got rid of most of the high earners and in the transfer market, the club made sure that we do not spend then what we actually can afford.

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                    • #40
                      Originally posted by Tarbie View Post
                      Link doesn't work mate
                      swiss rambler May 16
                      Last edited by hal9thou; 15-01-2017, 03:30 PM.

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