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Will always be both good and bad….. would argue our recent buys have helped offset the massive losses on Ndom and GLC. Kulu must be worth 75M now, ditto Romero and Benta c.40M
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yup, we should receive a significant chunk of it back once they and a few others are gone this summer.
Also our wages to revenue ratio gives us plenty of headroom for expensive transfers and big wages.
As credit analyst I have been saying that from the very start.
Makes sense if you are the owners. Buy it on debt and just service the interest through the club itself. In the end, sell up and let the new owner pay it off. You never have to pay for the club in any way out your own pocket, it just pays for itself, and you make big profit in the end for no real risk, owning this big brand in the meantime. Not best for the club, obviously.
Yeah, it’s all good. Obviously the better you do scouting and youth development, and sell at the right time, the better but it’s never 100% efficient. Your wins cover your losses. Had we sold Dele at his peak for instance that would have turned out to be a great move but it is what it is. It doesn’t matter. Still made a profit of course. Winks when sold will be mostly all profit. Lo Celso a loss. Bergwijn fairly neutral etc.
Guido 🇺🇦
- thanks a lot for posting it here. For me personally it was interesting and easy reading. As I work as full time credit analyst in corporate banking.
So as a Spurs fan and analyst I'd like to sum it up for those who did not want to go through all of it.
1) SPURS DOES NOT HAVE A DEBT PROBLEM; NOT EVEN CLOSE - there is debt and there is debt. There can be very different types of liabilities. You can owe credit card company that charges you ~15-20% per year for the drinks you ordered while nightclubbing or you can owe bank a 3-5% interest rate mortgage for home in growing population center where prices have doubled since you took the mortgage. Football clubs can also have similar issues - we could finance liquidity with overdraft and pay off salaries of players and staff, or clubs can build assets that generate income for future. Spurs have only done the latter. And obviously the increased revenue from new stadium far exceeds the loan repayments per year.
As it was pointed out - our short term debt amount was as little as 57 million. This is ~13% of our total revenue, which is not too much. Though usually these amounts are compared to pre-amortization profits, but I would not go as deep.
2) SPURS HAVE THE MONIES - while having significant debt, we also had cash buffer of 148 million pounds (!!). And first thing about having money to buy assets is - YOU PAY WITH MONEY (actual cash), NOT PROFITS (just concept). So even before the 150 mil injection we had same amount of cash in the balance sheet. Also our cash balance is enough to cover the debt servicing of more than 2 years (not sure the interest payment and too lazy to google it; for principle payments it would almost cover 3 years).
3) CURRENT ECONOMY MAKES SPURS INVESTMENT EVEN SMARTER - now this part goes further from content posted; just an observation from economy. Currently we are seeing fast tempo inflation - quick googling shows that UK saw yearly inflation of 9%. So now lets assume that our average loan interest is 3%. That would mean that real/net interest rate is -6%! Or to put it other way - we have taken the loan in in valuable money and we are paying loan back with lot cheaper money. Principle amounts will not change but value of the money is in quick decrease. So that is very favourable for the clubs point of view. Most likely this 706 or 857 million pounds will be peanuts in few years time. Of course this inflation rate will not last forever. And central banks will increase the price of money which will mean our interest payments will increase, but I have no doubt that financial person Levy is, our interest rates are fixed / hedged in large part.
So we are in VERY-VERY good position financially. We got an equity injection by owners but on top of this we have significant cash buffer and our yearly cashflows will support future investments/expenditure as well.
Now lets hope the club can use these resources wisely and spend on players in better fashion than we have in recent past.
Very interesting, thanks mate.
For me personally it was interesting and easy reading. As I work as full time credit analyst in corporate banking.
So as a Spurs fan and analyst I'd like to sum it up for those who did not want to go through all of it.
1) SPURS DOES NOT HAVE A DEBT PROBLEM; NOT EVEN CLOSE - there is debt and there is debt. There can be very different types of liabilities. You can owe credit card company that charges you ~15-20% per year for the drinks you ordered while nightclubbing or you can owe bank a 3-5% interest rate mortgage for home in growing population center where prices have doubled since you took the mortgage. Football clubs can also have similar issues - we could finance liquidity with overdraft and pay off salaries of players and staff, or clubs can build assets that generate income for future. Spurs have only done the latter. And obviously the increased revenue from new stadium far exceeds the loan repayments per year.
As it was pointed out - our short term debt amount was as little as 57 million. This is ~13% of our total revenue, which is not too much. Though usually these amounts are compared to pre-amortization profits, but I would not go as deep.
2) SPURS HAVE THE MONIES - while having significant debt, we also had cash buffer of 148 million pounds (!!). And first thing about having money to buy assets is - YOU PAY WITH MONEY (actual cash), NOT PROFITS (just concept). So even before the 150 mil injection we had same amount of cash in the balance sheet. Also our cash balance is enough to cover the debt servicing of more than 2 years (not sure the interest payment and too lazy to google it; for principle payments it would almost cover 3 years).
3) CURRENT ECONOMY MAKES SPURS INVESTMENT EVEN SMARTER - now this part goes further from content posted; just an observation from economy. Currently we are seeing fast tempo inflation - quick googling shows that UK saw yearly inflation of 9%. So now lets assume that our average loan interest is 3%. That would mean that real/net interest rate is -6%! Or to put it other way - we have taken the loan in in valuable money and we are paying loan back with lot cheaper money. Principle amounts will not change but value of the money is in quick decrease. So that is very favourable for the clubs point of view. Most likely this 706 or 857 million pounds will be peanuts in few years time. Of course this inflation rate will not last forever. And central banks will increase the price of money which will mean our interest payments will increase, but I have no doubt that financial person Levy is, our interest rates are fixed / hedged in large part.
So we are in VERY-VERY good position financially. We got an equity injection by owners but on top of this we have significant cash buffer and our yearly cashflows will support future investments/expenditure as well.
Now lets hope the club can use these resources wisely and spend on players in better fashion than we have in recent past.
Quick question, how do you hedge interest rate risk? I see this in my translations and I can't quite grasp the mechanics
A bank or other financial institution takes on the risk (for a fee) - only works of course if they think the odds are in their favour that they will not need to pay up.
so atm, my guess would be no financial institution would take on a 'guarantee' that your interest rates would not rise beyond (say) 8% as the risk is that interest rates will continue to rise. Or if they will take on that risk the fee is so high its not worth whole hedging
Is the long term Spurs stadium mortgage fixed fee, or variable? I guess variable could be an issue for Spurs
Agree but it’s not the done thing in football….. quite funny Utd fans have to take this straight up the ass. 750M buys you better players than Mcguire and Wan Bissaka
Oh shit, that is good question...
To be honest I cannot give you a simple and easy answer. In bank there are different departments and while I am in credit origination and monitoring part, then hedge agreements are done in markets department.
On very surface level - you can agree to contract and pay premium to have interest payment in X amount for Y years locked down. Fees obviously differ based on period, amount, currency, etc.
I am not sure how easy it is to understand people who don't operate in the industry but here is one explanation - Interest Rate Swap
Well, our financing got locked down while ago.
Today buying an IRS might come with much higher premium than 1,5 years ago. So I would not be surprised if at least part of the interest payments are hedged from the start.
And I am more than sure that today you can also go into IRS transaction, but you might be right that in current climate the premiums might be really high.
You can have floating mortgage agreement and have separate interest rate swap (IRS) agreement with third party.
I doubt it would get too big of a problem, ofc if we assume that our interest bearing debt amount is 854 m£ then 2% rise in the rate would mean roughly 17 million £ of additional interest payment; 4% 34 million. Considering that our debt to revenue (once more - to lazy to look for EBITDA numbers) is 13% then with 4% hike assuming all is unhedged, this would increase to 20%.
So it would eat into our cash-flows but not catastrophically.
Plus - I still think that Levy has hedged at least part of the interest rate risks.
So it would not ruin us.
Spurs bonds have fixed (not variable) interest rates ..... so we are laughing
Ah, thats brilliant if true.
Thanks for sharing!
Bond terms in all its detail !