Wfc Finances

We have sold the family Silver and the rights to any future silver that we might ever come across

 

The real worry is we started borrowing against the silver (Deulofeu and Pereyra) and we’re now borrowing against the silver-coloured metal.

 

I love the other-side-of-the-world SuperCogs like Hanson Ho desperately scrambling around looking for a defence mechanism in the comments. Supports about 5 different ‘soccer teams’ yet strangely gets involved quite often to bash back any criticism of the owners.

Proper weird. Must get sent a free shirt every season.

 

What I don't understand is that if it's all one purse and what's good for Udinese/the Pozzos is good for us, then why do we need to borrow against money they owe themselves?

 

Something something tax efficient something something loan fees something something the stability?

 

Confirmation of our confidence about staying up so we can pay the cash required for terminating Tufans loan - now that was a class piece of business.

Alternatively a lack of confidence about season ticket revenue upon relegation so need to have cash in the bank even if it is by borrowing against monies due for the sale of a dud to our sister club - now that Success sale was another class act paying what £13m to Granada and selling him for ( guess) £5m. Ignoring the wages paid and any loan fee from Malaga.

 

If I had to guess it was just shy of £7m (ie those are instalments two and three) which to be fair, regardless of the fee paid to Granada was probably above market value at the time of his sale last summer.

Either way, this Macquarie arrangement with a 9% interest rate does not encourage those who are interested in the financial well-being of either Watford, Udinese, or both. Obviously Kieran Maguire was the one who highlighted this on Twitter - I wonder if he’ll give his two cents on his next podcast.

Things should be clearer fairly shortly when the new accounts (ie 20/21) are out although it is hard to compare us to a league cohort given that we were relegated (and Norwich and Bournemouth in different ways have different financial models from ours).

Edit: just seen Maguire has replied to a concerned Watford fan saying “quite a common transaction nowadays.” I don’t think this is a pending financial apocalypse by any means but is still interesting/unique in the sense that these transactions are rarely between clubs with the same owners.

 

It’s rarely between clubs of the same owner as it’s pretty rare that an owner has two clubs in the first place. This type of deal has been made made many times in the past by the Pozzo’s.

It’s only the current “anti everything Pozzo” climate that is making this a concern.

I may have missed it, but within the deed filed at companies house, I see no reference to a 9% interest charge.

 

Yeah, I suppose that charitable organisation Macquaire Bank just lent us nearly £5m for free. What exactly would you expect it to be? If anything that’s cheap compared to documented rates we’ve paid previously.

Based on two instalments being paid back a year apart that’s about £600k interest, or about 7 times what we made in our last accounting period from the area you think Gino really excels, loan fees.

 

I didn't say no interest would be paid, only that it doesn't state 9% in the deed. Poor attempt at starting today's fight. You must try harder.

 

Not trying to start a fight, it’s just pretty obvious a near £5m loan would have an interest rate attached to it, and it’s well documented that’s the sort of interest rate we’ve paid in the past, if not higher.

Ultimately it’s more money siphoned out of the club to pay us back £4m for a player we paid a Pozzo group club £12m for, that was then sold, and to make matters worse the player in question is absolutely woeful as well, and his contributed precisely zero to us. But it’s all the same wallet so it’s ok.

 

The documents we file at Companies House are not the easiest to follow as it's a constant paying off and taking out of loans but here's where I think we are (happy to be corrected by those more in the know!).

We paid off a lot of our debt to people like 23Capital and seem to have gone through some sort of consolidation and Macquarie are now our lenders of choice. From the charges that haven't been satisfied, this is my understanding of our position:

March 21 - loan against €8m future payments for Pereyra
March 21 - loan taken out with Macquarie (unsure of value)
May 21 - loan taken out against a further €8m Pereyra payment, plus €11.4m against a Deulofeu payment
September 21 - another loan taken out with Macquarie (again, unsure of value)
November 21 - loan taken out against the stadium, reported in The Athletic to be £50m
March 22 - loan taken out against €4.4m Success payment.

So from what I can work out, we have borrowed about €32m euros in future transfer fees (£27m), two further loans I can't see any figures attached to and a £50m loan against the stadium.

Think the accounts should be out in the next week or so, look forward to some of our more financially literate members giving us the lowdown.

 

I'm not going to say I'm happy with any of this but is it not common place to take out loans against future income? Not just in football but in business generally. I know in my previous company they took out a loan to pay contractors and the guarantee for this loan was based on forecasted income. Maybe somebody with a more financial background like @We hate 48 or @The undeniable truth can shed some light on if this is correct or not

 

It is but the worry is the amount of loans we take out. We have transfer instalments owed to us and that we owe. We always seem to take loans against our incoming fees and kick the can down the road on the fees we owe. We’ve been doing it since the days of Richarlison. That’s before we get to the £50m plus two other loans mentioned above. Hopefully it’s just like for like consolidation (or even reduction) of the old loan to 23Capital. All in all it feels like a struggling business, continually desperate to free up cash flow.

I think what we manage to get for Sarr, Dennis and JP is important in the summer as after that we don’t have too many saleable assets.

 

Exactly. It's perfectly normal to take out a business loan against guaranteed income. It helps with cash flow and even though you pay interest, it's at a better rate as it's a secured loan. Macquarie bank is highly reputable and are selective over who they do business with. Many Premier League clubs use them. Any club that has this type of arrangement have to register the charge (security against a loan) with Companies House and this is when we, as fans, get wind of it.

 

If we were the only club doing this, it would raise alarm bells, but virtually every club does this. It's a convenient way to keep the cash coming in to pay wages, club running costs etc. Of course there is an interest fee to pay, but that's business. Until the day we have a mass murderer running our club with billions in the bank, cash flow will always be a problem, as it is for virtually every football club in the world, apart from the very few at the top to the football pyramid.

 

Didn't the original £12m for Success also go into the same wallet, as Pozzo still owned Granada? Or was that after he sold up?

If so then I suppose it evened itself up as we got Ighalo and Anya from them I think for free(?) and then sold for profit.

 

The key point for me with this particular deal (not the nature of borrowing against future income) is that the only beneficiary I can see is Gino when he sold Grenada, due to the inflated sum we paid them for success. Watford has had no direct benefit from the player other than him costing us a lot of money, both in transfer fees and him contributing precisely zero to us as a player. Gino doesn’t spend a penny of his own money on the club, it’s all debt secured on future income, so the only benefit of the whole situation is Gino from the sale of Grenada. Watford won’t benefit in any way from the £12m we paid out.

 

Think we transferred Success over just before the completion of the sale so presume it would've been deducted from the sale price? No one is going to let their prize asset go for nothing!

 

But he was Gino’s prize asset, as Gino owned them, then he sold the club and presumably pocketed some sort of profit. As far as Watford are concerned it’s £12m out, £4.8m back, but we’ve also got to pay interest on the loan to get that money. I don’t see who has gained from this other than Gino.

 

£4.8m is the future instalments for Success. I think it’s likely that there was a third (or first, temporally) instalment paid at the time of transfer (given that’s generally how transfers work) which would be £7m.

Obviously the fact that Success was purchased from a Pozzo-owned club should invite scrutiny of the fees but Success had an incredibly hot season for Granada at a very young age and seemed an exciting prospect which makes that fee seem fairly reasonable. Whether the fee we received for him in the sale was £4.8m or £7m I’m not sure we could have done better by selling him to another club; who would have spent that on Success last summer?

 

Yeah it's relatively common - usually for clubs who sell a player for big money with big future instalments further on. Liverpool did this with the Coutinho money (https://www.rousingthekop.com/2021/...lever-workaround-to-avoid-35m-barcelona-debt/) they were owed £35m in guaranteed instalments so would've sold the rights to that £35m (probably for £34m or something) - meaning they get £34m that they can spend on the squad instantly whilst the finance company will pocket £1m profit when Barca pay up. That being said, our situation on paper sounds a bit more worrying when it's for a £4m debt that's due in a few months anyway!

 

So yes we lost out £7m on the Success deal. But made £18m on the Ighalo/Anya deals. Saw on transfermarkt that we apparently paid £7m for Ighalo, so going by that measure.

I think the partnership with Granada and Udinese has overall worked out well for us, both on and off the pitch.

The next couple of years will be interesting to see the impact of the structure of some of these deals, mind.

 

Other clubs have bridging loans that is true. Not so many take out debt on every transfer fee owed, most future revenues and every asset, which was the place in which the Pozzos had placed us by the end of the FA Cup final season. Perhaps things have improved since then, after several large player sales, but with a relegation plus Covid and another 3 managerial dismissals its possible it hasn’t.

 

I tend to agree the Success deal was a fair price at the time. He was bought for the first team squad and had previously been successful. Just one of those ones that didn’t work out as opposed to other strange looking deals over the years.

 

If Gino benefits, we benefit, don't you see? It's all one purse.

 

I know Leicester City and Wolves have several loans on future transfer fees and Sky revenue with Macquarie bank, in the same way as we have. They are seen as very well run clubs.

 

Ground and playing assets all mortgaged as well? (Hence my comment other clubs have bridging loans).

 

Yeah, Success and Penaranda looked like huge prospects when they were pulled out of Granada ahead of the club sale. I don’t have any real issues with them. They just haven’t worked out for whatever reasons.

 

All clubs do this.

 

All clubs do this.

 

Think it's clear though that Leicester and Wolves owners are both a lot richer than ours and have also pumped their own money into their clubs. The debt Pozzo accrues on our behalf isn't coming out of his pocket if it all goes pear shaped.

 

We should've left Success and Peñaranda on loan at Granada in hindsight, both had just had breakout seasons as part of an exciting front three flanking El-Arabi (quality player whose contract was allowed to run out). Instead we brought Success over, he made two starts then we loaned him back to Spain the following season, and we sent Peñaranda off on a tour of crap loans of Europe after constant confusion about work permits.

Obviously, the players need to take some of the blame too (and maybe they weren't that good) but really don't think we helped them develop and given that they cost a combined total of £25m odd, that's pretty terrible.

 

I thought Success was given few opportunities by Mazzari but he had plenty later and took none of them. I had run out of patience with him long before he finally left and his finest moment was probably his goal with the last kick of his Watford career.