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Very interesting, thanks mate.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.
Quick question, how do you hedge interest rate risk? I see this in my translations and I can't quite grasp the mechanics
Is the long term Spurs stadium mortgage fixed fee, or variable? I guess variable could be an issue for Spurs
Ah, thats brilliant if true.
Thanks for sharing!
Bond terms in all its detail !
Easy to offset 34M through a small hike in ticket prices anyway
not needed to finance though !
Good stuff 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.
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.
Yep, we fixed it while it was low, couldn’t really lose in any meaningful way and got certainty and potentially got what turns out to be a good deal.
Thanks for that.
I'm gonna bookmark your reply as it explains amort very clearly.
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.
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.
Your clients should have done it in 2019 then !
Next financial accounts should be out soon. Will be interesting to see how the club is faring
That’s wrong and Gold is a tool. Population of S Korea is < than GB
Maybe that 178M is Asia in total?
If they come out the same time as lat year, there's 2 more months to wait.
Ahh ok.
Not us but relevant as this has been bumped. Quite surprised at this, maybe ours won't be as good as I have assumed. If we follow suit of course.
Up from last year doesn’t tell the full picture. How does it look vs pre covid (rev)?