Financial Results - Year End June 30, 2021

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Very interesting, thanks mate.

Quick question, how do you hedge interest rate risk? I see this in my translations and I can't quite grasp the mechanics

I've now re-read thread and understand why you asked question.

short answer is no hedging required - its fixed low interest rates on vast majority of debt/bonds, minimal debt not hedged and completely manageable
 
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.
Thanks for that link!

It's weird sometimes my job (I do a lot of financial translations). I 99% know that my translation into English is true and accurate but if I then had to explain it in layman's terms - what it actually means - to someone else I'd be fucked
 
Guido 🇺🇦 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.
Good stuff mate.

Two questions/points though ;

1) I believe (?????) that to satisfy the debt we have to keep £100m in the bank to satisfy the debt.
I could be totally wrong on this though.

2) What happens when the loans mature ?
It's all well and good paying the interest , it's the capital that could be a problem further down the road.
 
Good stuff mate.

Two questions/points though ;

1) I believe (?????) that to satisfy the debt we have to keep £100m in the bank to satisfy the debt.
I could be totally wrong on this though.

2) What happens when the loans mature ?
It's all well and good paying the interest , it's the capital that could be a problem further down the road.

1. Quite possible - usual requirement is to keep one or two quarterly interest payments in bank. But if its £100m its still manageable

2 When bonds mature (first one in 15 years average maturity 23 years I think, the bonds are either repaid (and we have years to accumulate cash and repay) and/or we refinance bonds (ie issue more bonds) at whatever the prevailing terms are. Refinancing is very common


It would not surprise me if in 7/8/9 years time we didn't see the club buy some bonds back to start repayment early. Just depends on how we are doing at the time
 
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.


Both Lo Celso and Bergwyn though won't show as a loss in the accounts. Players are depreciating assets just like if a company buys a laptop over 4 or 5 years.

If Lo Celso cost £40 million his cost will be capitalised and then that will have been written down/amortised over 5 years in the accounts, meaning his value after each year on the club accounts is:

Year 1 - £32 million
Year 2 - £24 million
Year 3 - £16 million
Year 4 - £8 million
Year 5 - £0

Therefore if we sell him after year 3 for £23 million, the club will have £7 million sale profit but will report an annual profit of £23 million (£16 million eoy year 3 amortised value + £7 million sale profit).

So even though we bought higher and sold lower, the accounts will show a profit.
 
Both Lo Celso and Bergwyn though won't show as a loss in the accounts. Players are depreciating assets just like if a company buys a laptop over 4 or 5 years.

If Lo Celso cost £40 million his cost will be capitalised and then that will have been written down/amortised over 5 years in the accounts, meaning his value after each year on the club accounts is:

Year 1 - £32 million
Year 2 - £24 million
Year 3 - £16 million
Year 4 - £8 million
Year 5 - £0

Therefore if we sell him after year 3 for £23 million, the club will have £7 million sale profit but will report an annual profit of £23 million (£16 million eoy year 3 amortised value + £7 million sale profit).

So even though we bought higher and sold lower, the accounts will show a profit.
Thanks for that.
I'm gonna bookmark your reply as it explains amort very clearly.
 
Good stuff mate.

Two questions/points though ;

1) I believe (?????) that to satisfy the debt we have to keep £100m in the bank to satisfy the debt.
I could be totally wrong on this though.

2) What happens when the loans mature ?
It's all well and good paying the interest , it's the capital that could be a problem further down the road.
It won’t be
Thanks for that.
I'm gonna bookmark your reply as it explains amort very clearly.
Both Lo Celso and Bergwyn though won't show as a loss in the accounts. Players are depreciating assets just like if a company buys a laptop over 4 or 5 years.

If Lo Celso cost £40 million his cost will be capitalised and then that will have been written down/amortised over 5 years in the accounts, meaning his value after each year on the club accounts is:

Year 1 - £32 million
Year 2 - £24 million
Year 3 - £16 million
Year 4 - £8 million
Year 5 - £0

Therefore if we sell him after year 3 for £23 million, the club will have £7 million sale profit but will report an annual profit of £23 million (£16 million eoy year 3 amortised value + £7 million sale profit).

So even though we bought higher and sold lower, the accounts will show a profit.
Is that the case for player sales? Eg 23M is applied immediately, in whole? As opposed to the duration of the sale agreement (so if it’s paid in 3 annual instalments is it applied upfront or over 3 years)?
 
Thanks for posting, that's quite an invaluable breakdown of the terms. Useful for any argument around our debt with fans of other clubs (and some of the posters on here).

To add to that document there is the press release on a further bond issue of £250m and some snippets out of the y/e 30 June 2021 to give you a complete picture of what is in the public domain.

All extra detail, but headlines remain debt is long term (average repayment date 22 years) and at very low interest rates which would be unobtainable today.

Club announcement - Finance update - CCFF repaid, short-term debt replaced with long-term | Tottenham Hotspur

The Club has completed on an institutional fund raising of £250m, with an average tenure of over 20 years and an average interest rate of circa 2.8%. The debt stack includes a new 30-year tranche, with a bullet repayment in 2051 and is a unique financing for any sports entity with the long-term institutional debt markets.

The funds have been used to repay the £175m CCFF funding from the Bank of England, which was used to address some of the shortfall in income caused by the pandemic and will also partially repay a bank loan held by the Bank of America which had a shorter term, moving it to fixed rate 15-year money, locking in low interest rates and extending the tenure of the debt.



Per Accounts – Earliest tranche to repay is 2029. Average maturity of all debt is 22.3 years. £50m of Merril Lynch £112m Term loan repaid.
 
It won’t be


Is that the case for player sales? Eg 23M is applied immediately, in whole? As opposed to the duration of the sale agreement (so if it’s paid in 3 annual instalments is it applied upfront or over 3 years)?

Yes the P & L will have the whole £23m brought in (with unpaid receivables shown as Accounts Receivable), and player cost is amortised over the contract length..

Worth pointing out that the total cost of the player is brought into the balance sheet on day 1 of the transfer with any phased payments being shown as Accounts payable.

So there isn't an inconsistency in treatment of receipts and payments as your post seems to be heading to suggest !
 
Spurs bonds have fixed (not variable) interest rates ..... so we are laughing
Is that right? From my few months working in our Corporate Finance team most of the bonds I saw were adjustable (floating) with the coupon (interest rate) resetting every quarter. Very few long term fixed rate ones.
Hope yr right on that though as it’s fucking ace. Our debt effectively reducing by 8% per year.
 
Is that right? From my few months working in our Corporate Finance team most of the bonds I saw were adjustable (floating) with the coupon (interest rate) resetting every quarter. Very few long term fixed rate ones.
Hope yr right on that though as it’s fucking ace. Our debt effectively reducing by 8% per year.


The secret to getting good financing terms is timing. Spurs got the bonds away pre-covid when interest rates were very low and few other asset classes were that attractive to investors.

So Spurs got a stonking deal. And such a deal would not be available now - and given the threat of rising interest rates having bonds with interest rates going up quarterly is the market reaction to the threat.

Details from an industry source, so its factual no flannel, and you will see the interest rates quoted.


ACT Deals of the Year Awards 2019: Bonds below £750m winner | The Association of Corporate Treasurers


www.treasurers.org
www.treasurers.org
 
Yes the P & L will have the whole £23m brought in (with unpaid receivables shown as Accounts Receivable), and player cost is amortised over the contract length..

Worth pointing out that the total cost of the player is brought into the balance sheet on day 1 of the transfer with any phased payments being shown as Accounts payable.

So there isn't an inconsistency in treatment of receipts and payments as your post seems to be heading to suggest !


Also to add, the payers salary will be included in the amortisation.

If a player gets an improved contract then this obviously will impact the p/l value of a player when he is sold.

You start to understand why some players are kept and some sold at certain times. From a football perspective you might scratch your head, but from an accounts perspective it will all make perfect sense.

Selling a player signed with a year or two left on his contract good, signing a player on a 6 year contract and selling him after 1 year bad. So NDombele might as a case in point will make no sense selling him after 2 years. Sending him out on loan reducing the salary part of the amortisation in the accounts for a year or 2 then selling when he only has 2 years on his contract is the best outcome.

Net spend / profit is totally useless in football, it may make some of our fans froth a the mouth but means nothing really on a balance sheet.
 
Also to add, the payers salary will be included in the amortisation.

If a player gets an improved contract then this obviously will impact the p/l value of a player when he is sold.

You start to understand why some players are kept and some sold at certain times. From a football perspective you might scratch your head, but from an accounts perspective it will all make perfect sense.

Selling a player signed with a year or two left on his contract good, signing a player on a 6 year contract and selling him after 1 year bad. So NDombele might as a case in point will make no sense selling him after 2 years. Sending him out on loan reducing the salary part of the amortisation in the accounts for a year or 2 then selling when he only has 2 years on his contract is the best outcome.

Net spend / profit is totally useless in football, it may make some of our fans froth a the mouth but means nothing really on a balance sheet.

Generally agree - but players wages will be shown in P &L but not called amortisation !

Balance sheet and cash flow understanding essential in many businesses - including football - to get a wider understanding of what's going on
 
Generally agree - but players wages will be shown in P &L but not called amortisation !

Balance sheet and cash flow understanding essential in many businesses - including football - to get a wider understanding of what's going on


Yes you're right, I'm thinking more how FFP sees it, that's an even bigger hole though, but a lot of what we've discussed really shows how clubs like Chelsea have been able to circumvent those rules.
 
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