not very good with money and money in football clubs but can somebody tell me why Sheffield Wednesday are allowed such huge debts and face no sanctions whatsoever? Its not as if they have just fallen on hard times is it? they have been in debt for some time, so why no administration, why no receivers coming in?
The Co-op bank hold most of their debt I think, so it's in the banks interest for them to carry on trading, as if they went tits up the Co-op would get a fraction of their money back, if any at all. </p> I seem to recall that Dave Allen had negotiated special terms for their debts interest/repayments etc with the bank - how that stands now Allen's not there I don't know. </p>
dave allen who is currently the backing for them and has lots of money has guaranteed all the fowls debts to the bank, so if they call those debts in allen will pay up (god knows why!!!!) perhaps a little like PC has done for our club, or did when he first took over. no doubt there are more on here that are better qualified to comment...
Its a question of whether or not the creditors ask for their money back immediately When we went into admin a few years ago, the actual debt was only about £150,000 if memory serves me well. However, the bank involved decided that because the club's net outgoings exceeded the net earnings, ie negative cash flow, they would call in the loan. Hence immediate bankrupcy. In the Wendy's case, their creditors must have some strange idea that the club is a long-term safe debtor, ie they must be getting enough money in to pay the interest etc.
Yeah the creditors are basically relying on wendsday to get in the premiership inside the next 10 years in order to pay them off as i understand it.
I think the essence of the situation is that it does not matter how big the debt is, what matters more is your capacity to service it and repay it. Hence, when we went into admin, the debt was very small by comparison with Wednesday's, but it was getting worse year on year as we were continuing to make annual losses and the banks called in their loans to force the issue as they saw no prospect of getting any of their money back otherwise. In Wednesday's case, the debt is massive, but if Allen has been guaranteeing to service it to this point, then there is no immediate issue for the creditors. And, if their on going situation is not making things worse (i.e. they are not continuing to trade at a loss thus making the debt bigger) then the outlook is that the debt will be repaid one day. I think that Wednesday made a bit of a profit according to their last annual accounts, of about £1m. The problem for Wednesday is that, as one of their fans put it on their board, they are firefighting and have been for some years - this profit came partly from the selling of players, so in real terms their situation is getting no better in respect of operating income coming through the tills and they can't rely on players being worth good money being available to sell, with players costing nowt being able to come in and replace them whilst managing to stay in the division. In addition, if crowds keep falling (down 9% this year apparently according to the link to their board from yesterday) then the situation gets worse. When it comes to a point where the banks twitch and a fire sale of their decent saleable players is needed to keep them happy, then relegation follows shortly afterwards and it all goes tits up from there, so to speak. If they are having to get their players to sub the train bill to Palace then it appears they are teetering on the brink and there could be some cracking bargains to be had come January. If the team then perform ***** in the second half of the season and relegation looks to be on the cards then, given that this would force them into Admin through the further loss of income, I can see that the call would come before Easter to give them a chance to take the 10 point hit this year. Some of the more informed comments on the Admin thread on their board yesterday talked of how some of the loans are up for re-negotiation at the end of this year, and the terms they may be offered to continue the facility, given the economic situation, could be a whole lot worse than last time round. For my money, there is a good chance that Wednesday will be in Admin before next summer. Watch this space.
i think banks these days are happy if you just repay the interest monthly on any money outstanding (bit like interest only mortgages) if they are doing this then they will continue trading/playing.
Whether that is true or not (and I'm not sure it is, but aren't in a position to say one way or the other) the key issue for them seems to be that their loan agreements are due for renewal / renegotiation (a bit like a fixed rate mortgage that is taken out for a fixed term). Given the current climate, the terms of the renewals are likely to be much tougher, with higher interest rates, then they were when they were last agreed in the times of free and easy credit for all. These increased interest payments may tip the balance. i.e. on 25 million pounds, every extra 1% on the interest rate costs them an extra 250 thousand a year. Their saving grace may be the likely reductions in the base rate due before the end of the year. The onset of the recession, and the B of E's attempts to counter it may be Wednesday's blessing in disguise.
There is an old addage - if you owe the bank £1000 it is your problem. If you owe them £1000000 it's their problem!
Administration etc One day soon administration and points deduction could see a club go out of business. Then the borrowers will start to take a different view on how much money they allow clubs to owe them. Could be a club like Luton could be a bigger club like washday but its bound to happen eventually.
