If I understand this article properly I could have taken over Barnsley on this basis without spending a penny of my own. Man Utd. appear to have funded their own takeover by the American brothers to the tune of £1bn. https://www.theguardian.com/footbal...-left-club-90m-worse-off-and-loaded-with-debt
Its like me going to buy a house but rather then me borrow the money I make the current home owner borrow the money for me, utterly bizarre.
No really - It only works with clubs that had real value at the time - Man U and Burnely both debt free with cash reserves makes raiding the cash and mortgaging the business viable. Barnsley have no assets to mortgage against. For Burnley basically the existing shareholders have the cash that the business is worth - the new shareholders are running a club which is basically owned by the bank. Though if it all goes t!ts up they walk away and leave the bank with the losses - so its unlikely the interest rate they are paying is going to be low. If Burnley get relegated now they are likely to do a Wigan or Bolton. If they had gone down last season they would be coming straight back up with no financial problems. Bad news for their fans
It may seem like the new owner has used the club’s money to purchase it but that is illegal. The purchaser has to fund the transaction with cash, either their own or borrowed, but these initial borrowings cannot be secured against the target. An example of this was Craig White with Rangers, he claimed to have the funds to undertake the purchase but was actually generating the funds by securing a loan against future season ticket sales. That is illegal. What is perfectly legal and in many ways isn’t that dissimilar is purchasing a business but then putting debt in to the business to recover your purchase price. This is how many private equity firms work, leveraged buy-outs, with the business servicing the debt and repaying the loan. This is exactly the approach adopted by the Glaziers with Man Utd.
They purchased the club using loans and hedge fund money then when the deal went through they moved that debt onto the club against the clubs assets and income they pay themselves /receive 50 % dividend of the net income of the club every year when they sell for billions they turned down a offer of over 4 billion + other year they will get that money and any of there unpaid debt will be left with the club.
