Can someone explain how Derby are suddenly debt free???

Discussion in 'Bulletin Board ARCHIVE' started by Dragon Tyke, Mar 31, 2014.

  1. Dragon Tyke

    Dragon Tyke Well-Known Member

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    http://www.bbc.co.uk/sport/0/football/26817533

    the article says they have lost £7.1 million this year. It also says they still owe £15million on the stadium. It says their losses were £800,000 worse than last year.... But they say they are debt free. My mathematical skills are famously not the best, but I am really struggling to see how they are debt free. If that's the case then how the hell did we go into admin for £3.5 million then.
     
    Dragon Tyke, Mar 31, 2014
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  2. shenk1

    shenk1 Well-Known Member

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    Creative accounting ;)
     
    shenk1, Mar 31, 2014
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  3. Cal

    CalgaryTyke New Member

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    The article says the owners converted their debt into equity (just like Leicester did) - that means the owners have changed the loans they had provided into shares in the company - this is generally great for the company and not so good for the loan-providers / owners as they can only get their money back by selling their shares now rather than taking cash out of the company to repay the loans. Clear as mud?
     
    CalgaryTyke, Mar 31, 2014
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  4. Jimmy viz

    Jimmy viz Well-Known Member

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    http://www.investopedia.com/terms/d/debtequityswap.asp

    In effect what they have done is the second one here. It is usually den to refinance companies on the brink of liquidation but in football seems to be used more flexibly by owners who know they will never get their money back.

    Cheating by any other name.
     
    Jimmy viz, Mar 31, 2014
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  5. Dragon Tyke

    Dragon Tyke Well-Known Member

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    so basically its what Jimmy Cricket has said

    Cheating
     
    Dragon Tyke, Mar 31, 2014
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  6. Cal

    CalgaryTyke New Member

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    Well, unless you are an owner, in which case you are in a much worse position than you were before.

    Incidentally, one of the owners of Derby County was one of my clients at Scotiabank here in Calgary - Brett Wilson - and he is considered one of, if not the most successful businessman in Canada. Not sure what he saw in Derby, if I'm honest though - I gave him a ribbing over it a few years ago.
     
    CalgaryTyke, Mar 31, 2014
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  7. Jimmy viz

    Jimmy viz Well-Known Member

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    To be fair debt equity schemes outside football can work in a businesses favour by reinvigorating and repositioning them. In football they seem to be used exclusively to hide debt.
     
    Jimmy viz, Mar 31, 2014
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  8. Cal

    CalgaryTyke New Member

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    Agreed. The strange business of football..............why would anyone invest in a football club, seriously? If you have loaned money to a football club, you may have half a chance of getting your money back. But when it becomes equity, God help you.
     
    CalgaryTyke, Mar 31, 2014
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  9. Gimson&theBarnsleys

    Gimson&theBarnsleys Well-Known Member

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    Favouritism from those in charge.
     
    Gimson&theBarnsleys, Mar 31, 2014
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