Claudius wrote:
That’s correct.
It actually goes back to a capital structuring issue we have long had. When the Etonians did the stadium deal, in retrospect, they left us with
- high interest debt
- strenuous loan conditions on how much cash we should keep
- sponsorship deals that were both quickly dwarfed in value and did not pay out cash in their latter years
It was an absolute cluster and you can understand why Dein considered the painful alternative of Wembley. A cheaper source of money would’ve been a capital call from those existing investors who had already benefited so much from the Premier League, or sourcing a new investor. Businesses do the latter all the time to support rapid growth. In retrospect, it was naive. And then they had Usmanov and Kroenke fighting for a decade.
That's just in regards to the bonds that the stadium debt was converted to in 2006 (once we saw the stadium/Home gate revenues), under a 25 year fixed payment scheme. IIRC in addition to the penalty clauses regarding any early payment the final payment was going to be over 50m.
The initial debt structure was considered to be even less desirable, hence the reason for the conversion. However the criteria included not only a requirement to keep 30% of total revenues (each season??) to cover debt payments, but there was also a requirement for 70% of annual revenues to be directly reinvested into the football team so as to maintain capability to challenge for titles and maintain brand value.
The front loading of the commercial sponsorship meant our cash flow in terms of those deals was supposedly going to be under 10m per year, and most of our annual revenues was/is based on Home game match day revenues. It's also the reason we promoted ourselves as being an alternative to other forms of entertainment options (concerts etc), and why we looked to the casual/tourist market, as on average they spent over 100 pounds more per head per game than season ticket holders.
Not sure if it was the initial deal or the bonds but one of them cost the person who put it together their job, although I don't think they were fired as such.
DD tried to source a new investor which saw him involved with both KSE & then Red & White Holdings after PHW had him sacked. PHW as Chairman was the one that eventually provided KSE the opportunity to take over the club as well as blocking Red & White from having any representation on the BoD. He also changed the rules in regards to the 30% shareholding after KSE had gained over 50%.
