Debt to Equity and The 'New' Man City

[Socrates]

Very interesting stuff. The debt into equity might not mean what we would like it to mean though, it may mean that it is acceptable to eliminate debt interest from the equation by capitalising accumulated debt but NOT that you can spend more than you actually earn going forwards. Would allow any club to spend up to their turnover rather than up to their turnover less debt interest repayment by eliminating that debt interest element. Still does not mean you can use equity to spend more than you earn.

whatever they finally decide, this bit sounds promising - the phasing-in time schedule could be effectively extended (from 2015 to 2018).

That buys us more than enough time to be very confident that we can raise our turnover to a competitive level in time so very hopeful.

How would they stop us from having an enormous loan paid back at a ridiculously low rate?

Nothing, but if we use it to spend more than we have EARNED then we won't meet the UEFA criteria so there would be no point doing it!

Is that not in effect what the Glazers are doing but they're choosing to spend the money on buying themselves the club & giving themselves pocket money rather than spending it on on players?

No. Doesn't change the formula they plan to use anyway. (3 years spending + 3 years debt interest) <= 3 years turnover
Don't meet that formula you don't play. Eliminating the debt interest by eliminating the debt in favour of equity capitilisation helps the Scum as they currently have debt. Doesn't help us. The extra time they have negotiated does help us though.

[mcfc1632]

AS I SAID AGES AGO THEY HAD TO DO SOMETHING ALONG THESE LINES OTHERWISE IT WOULD HAVE BEEN ABSOLUTLY REDICULOUS SEEING MAN CITY WIN THE LEAGUE YEAR IN AND YEAR OUT AND NOT BEING IN THE CHAMPIONS LEAGUE.!!!!!

IM NOT EVEN SHOCKED AT THIS DECISION.

Wellll - it is the totally logical decision..... but

If the debt to equity is a formal position then this means that so long as the Sheik 'takes the hit' - he can do what he wants - so champagne all round - since he bought us we have been totally dependent on his goodwill and heaven forbid we ever piss him off

But I would be cautious and need to see the final documents etc - all this came about to a small degree from Platini trying to do the 'right' thing and (IMO) to a larger degree from the Liverpools, Chelseas, scums of the world seeking to stymie the CITY threat - Abramovich for example had direct talks with Platini with Platini being clear that he did not want to have to keep digging into his pockets to compete

I would not be surprised to see that debt to equity is one aspect of this - as is expenditure related to turnover - so we can not spend more than a certain percentage of our turnover - and with our turnover very 'low' (less than a third of the scum's) - this could be very limiting - WE NEED CL FOOTBALL

Gill on behalf of the scum - along with RM and Bayern have been at the heart of whispering in Platini's ear - hope I am wrong, but I suspect there will be more to come

[john@staustell]

The big clubs (including City going forward) will call the shots. No big clubs, no WAFFA. End of.

[Wooders]

I think they shot themselves in the foot by using the flimsy'est of reasons it wouldn't count Manchester UTD, I think everyone started to question the ethics behind it and they've now backtracked to this new ruling
we should be easily up and running in 5 years though

[Alex Sapphire]

if you can be arsed have a read of THIS

they's pointing out that 21 clubs have already been refused licenses, preparing the ground for Platinimania, which is just what the clubs are doing

[Rag_hater]

Seems to me with them having to extend the timeframe that they are paving the way for more climb downs.
Already with the acceptance that they cannot stop clubs being in debt the other grand dreams they have of financial fairness will fall by the wayside.

[LeanneIsABlue..x]

Sorry, I've read that article three times and still have no idea what the hell it's talking about.. :S

[Beefymcfc]

Sorry, I've read that article three times and still have no idea what the hell it's talking about.. :S

I think this is all we need to know really:

That won’t change because they are doing a good job here in England and that is good for football because we need clubs like Manchester U***d, like Chelsea, like Liverpool and like the ‘new’ Manchester City.”

[brite blu sky]

My understanding of this is similar to Socs. in that the clubs needed a mechanism to allow them to incur debt but not have the interest payments taken out of their revenue. If they had been forced to do that then they would never have been able to buy say an 80 mil player and keep within the rules, so team renewal would have been a major problem.
As that lets the rags off the hook, is.. well lamentable for us maybe as haters of them, but in reality it was always really going to be on the cards.

As for our situation of having a benefactor with open chequebook, it seems to me that there would be no end of little tricks to up our revenue in the short term by simply having the Shiek 'buy' stuff and services from the club. As illustration a stupid example such as: a private televideo system for match days ( cameras he can access all over Comms ) set up for the Shiek and his family in AD, that he pays 25 mil for the priveledge every year. Stupid example i know, but you get the point, Shiek can 'buy' whatever he wants from the club at whatever price he wants to pay. Hey presto extra revenue for the club.

As we all know capitalism can always stay one step ahead of regulations, so whatever they try and do there will always be a way around it.

[Beefymcfc]

From what I've read, I'm guessing that clubs must work within their budgets, ie. revenue based, for wages/purchases etc. However, if a wealthy benefactor wants to come and pump a load of money in, then it will not be counted on the balance sheet as a debt as they can now turn it into equity, ie. part of the clubs whole value.

[brite blu sky]

From what I've read, I'm guessing that clubs must work within their budgets, ie. revenue based, for wages/purchases etc. However, if a wealthy benefactor wants to come and pump a load of money in, then it will not be counted on the balance sheet as a debt as they can now turn it into equity, ie. part of the clubs whole value.

ah ok, so that means that nothing changes at all in reality. I would suspect that the recent swapping of debt to equity by the Shiek and Abramovic, as someone suggested, was a move they got wind of, that would allow them to head off at the pass the impending rule changes. But i would have thought that this would undermine what Platini was trying to achieve in reference to clubs with benefactors. Clubs without benefactors would be more restricted i guess as they would be governed by the market on debt to equity ratios. ( there is a limit to what the market will accept ).

It would seem on the face of it that Platini has been defeated in terms of trying to prevent clubs with benefactors pumping money in and distorting the transfer market.

[Dronny]

Hmmm, so therefore it was a bit of kneejerk reaction to sack Hughes as 4th place is not the be all and end all after all....lol

Hughes in ;-) - Just imagine the confusion on here, all the "outer's" becoming "inners" and vice versa, folks wouldn't know whether they were coming or going!

Ahem, on a serious note that looks a whole load better. In hindsight with Gill on that committee it was unlikely he was going to allow something as draconian as Platini proposed to succeed

[Beefymcfc]

From what I've read, I'm guessing that clubs must work within their budgets, ie. revenue based, for wages/purchases etc. However, if a wealthy benefactor wants to come and pump a load of money in, then it will not be counted on the balance sheet as a debt as they can now turn it into equity, ie. part of the clubs whole value.

ah ok, so that means that nothing changes at all in reality. I would suspect that the recent swapping of debt to equity by the Shiek and Abramovic, as someone suggested, was a move they got wind of, that would allow them to head off at the pass the impending rule changes. But i would have thought that this would undermine what Platini was trying to achieve in reference to clubs with benefactors. Clubs without benefactors would be more restricted i guess as they would be governed by the market on debt to equity ratios. ( there is a limit to what the market will accept ).

It would seem on the face of it that Platini has been defeated in terms of trying to prevent clubs with benefactors pumping money in and distorting the transfer market.

If this is the case, then sanity prevails. What Platini's plan didn't take into account was market forces. On one hand you have clubs who want to buy players, and clubs who want to sell yet he didn't take into account that it's clubs like ours who float the market. Notice how in the January window, we stayed clear of spending money until the very end, not allowing other clubs to push for their own transfers. This may have been a ploy from the club to make a point to the likes of Platini and Co that money really does make the world go round and by restricting the inflow of new money, then the markets begin to drop.

[Beefymcfc]

Hmmm, so therefore it was a bit of kneejerk reaction to sack Hughes as 4th place is not the be all and end all after all....lol

Hughes in ;-) - Just imagine the confusion on here, all the "outer's" becoming "inners" and vice versa, folks wouldn't know whether they were coming or going!

Ahem, on a serious note that looks a whole load better. In hindsight with Gill on that committee it was unlikely he was going to allow something as draconian as Platini proposed to succeed

Maybe it was the likes of Gill who actually instigated this in the first place, to protect his/their own interest. However, once Platini got hold of it and tinkered with the idea of taking it to the extreme, Gill and Co saw their arse and got it reversed.

[Ted Hughes]

Very interesting stuff. The debt into equity might not mean what we would like it to mean though, it may mean that it is acceptable to eliminate debt interest from the equation by capitalising accumulated debt but NOT that you can spend more than you actually earn going forwards. Would allow any club to spend up to their turnover rather than up to their turnover less debt interest repayment by eliminating that debt interest element. Still does not mean you can use equity to spend more than you earn.

whatever they finally decide, this bit sounds promising - the phasing-in time schedule could be effectively extended (from 2015 to 2018).

That buys us more than enough time to be very confident that we can raise our turnover to a competitive level in time so very hopeful.

How would they stop us from having an enormous loan paid back at a ridiculously low rate?

Nothing, but if we use it to spend more than we have EARNED then we won't meet the UEFA criteria so there would be no point doing it!

Is that not in effect what the Glazers are doing but they're choosing to spend the money on buying themselves the club & giving themselves pocket money rather than spending it on on players?

No. Doesn't change the formula they plan to use anyway. (3 years spending + 3 years debt interest) <= 3 years turnover
Don't meet that formula you don't play. Eliminating the debt interest by eliminating the debt in favour of equity capitilisation helps the Scum as they currently have debt. Doesn't help us. The extra time they have negotiated does help us though.

As the rags would have made a loss last year without selling Ronaldo I should imagine it will severely limit their ability to buy players then in theory. Strange if they accept that. On the other hand I firmly believe the Sheikh will find ways of getting investment into the club that they can't legally challenge without having to curtail the income of many other clubs, so we can spend big if we need to. I'm not sure we'll need to if Jim Cassell succeeds with the overseas academies but we may need continuing help to finance the wage bill.

There'll be some interesting moves afoot if we feel we do need to spend big. I can't see how they can possibly keep on top of it without bringing in a new rule every week. Makes Platini popular with the big boys even if it fails though, which is why he's doing it.

[btajim]

Sorry, I've read that article three times and still have no idea what the hell it's talking about.. :S

From my understanding, they're trying to prevent the Mega Rich Clubs from dominating Football for decades by imposing limits on spending. Especially spending money given to them for free by wealthy Owners. That sort of money will need to be earned by the Club within the next 5 years. If we win Trophies and sell lots of merchandise then we're on the right tracks.

A Club like Real Madrid can finance the signing of Tranaldo or Kaka because they'll sell huge amounts of Shirts with those Players' names on the back. Real Madrid also have the history / name to attract talent that a Club like City presently can't.

[Socrates]

Ted Hughes - if the rags can eliminate debt interest payments then they will be able to afford to buy Ronaldo back twice after 3 years!

Beefy et al, sorry but disagree, it doesn't say anything about reversing the policy on clubs not spending more than INCOME. Simply introducing new equity will not it in itself circumvent those rules. Don't forget, it was never about debt it was about inflated spending...

[Beefymcfc]

Ted Hughes - if the rags can eliminate debt interest payments then they will be able to afford to buy Ronaldo back twice after 3 years!

Beefy et al, sorry but disagree, it doesn't say anything about reversing the policy on clubs not spending more than INCOME. Simply introducing new equity will not it in itself circumvent those rules. Don't forget, it was never about debt it was about inflated spending...

Cheers pal, just piss on my chips why don't ya!

[Socrates]

Ted Hughes - if the rags can eliminate debt interest payments then they will be able to afford to buy Ronaldo back twice after 3 years!

Beefy et al, sorry but disagree, it doesn't say anything about reversing the policy on clubs not spending more than INCOME. Simply introducing new equity will not it in itself circumvent those rules. Don't forget, it was never about debt it was about inflated spending...

Cheers pal, just piss on my chips why don't ya!

Soz :( The real bright side is the longer time frame for introduction, means we have a couple more years at least before spending on players needs reducing!

[ian494]

Ted Hughes - if the rags can eliminate debt interest payments then they will be able to afford to buy Ronaldo back twice after 3 years!

Beefy et al, sorry but disagree, it doesn't say anything about reversing the policy on clubs not spending more than INCOME. Simply introducing new equity will not it in itself circumvent those rules. Don't forget, it was never about debt it was about inflated spending...

JF, just because they can discount the debt interest from the balance sheet for entry into the CL it does not mean that it comes off the bottom line, they will not have 160 quid to spend after servicing the £716M debt, never mind £160M, as the debt will stil be there and no Ronaldo sale or advance on new shirt deals to soften the blow.