Just having a quick look at the copy @BillyBiskix has posted. From looking at the cash flow statement the club appeared to have borrowed £146m in bank loans and repaid £7m in inter company loans. Its cash and cash equivalents position as of 31 May 2020 is £140m up from £35m. To my untrained eyes, it does kind of look like the club has borrowed money which it has then held onto.
The Athletic article suggested much of the debt was since repaid, so i wonder if the club did go ahead and draw down from borrowing facilities to cover it for the next 6 months or so in case there were any issues with the banks or its other sources of funding…and then perhaps gave it back when the new season got underway?
The wages are eye watering. I know it includes the CL win bonuses but it’s a huge number that has doubled in the space of five years.
Next year’s will include the PL bonuses and an even bigger hit to revenues due to the lack of fans. Then the year after will likely see wages dip but also a loss of CL revenue should we not make it this year.
That isn’t a pretty picture when we’ve a number of key players entering contract renewal situations. Possibly further evidence why they aren’t willing to pay Gini what he wants if they think they can get someone to do a similar job on far lower wages.
Clearing all the dead wood this summer becomes all the more important, even if that means accepting lower transfer fees. Can’t see how we accommodate much more on the wage bill without seriously trimming it first.
Been my stance for a while. The pandemic gives us the perfect opportunity to do it without seeming weak and ruining the “tough sellers” reputation we’ve nurtured. Nobody will bat an eyelid at us selling low this summer and it won’t make them think we’ll do so again in the future either. If we can really have a clearing of the decks it’ll help create loads of room on the wage bill and even at devalued fees it’ll bring in significant money. That’ll allow us to do a bit of targeted purchasing in the same devalued market.
Problem is in order to sell we need buyers and buyers for the likes of Wilson, Grujic, Origi, Karius, Shaq et al will also be counting the costs of the pandemic. I saw recently Brighton recorded a loss of nearly £70m. Villa nearly £100m.
These are the kind of clubs that might have been in the market for some of our players deemed surplus to requirements. Whilst there might be things that can be done with fees in terms of spreading payments or loan to buy deals, what’s harder for them to do is pay the level of wages we do.
I suspect we might also end up having to eat some wages for some of these guys too just to get them gone. And there are a lot of them on that list so it could soon add up.
Quite sobering, even for someone who had lower expectations than most for our summer business.
I said I thought this would be the case a few weeks back. In theory an outgoing payment of over £100m per year is fully paid off now with only about £20m a year from last summers expenditure. If we are allowed to keep outgoing cash payments the same as they were and our deals are spread over the usual 3 years this could mean capacity for up to £300m worth of deals can be absorbed into the cash flow.
We need to clear the books anyway, we’ve ended up with far too many players on the books that we can’t rely on due to quality, fit, age, injury records or something else.
I see we are getting 70m yearly from Nike, I thought that was a flexible rate (higher than normal, Something like 30% ?)depending on how many shirts we sell.
Yes, a big thanks to @BillyBiskix for posting the link. And an apology to @Draexnael for casting doubts on his suggestion that the club had simply drawn the money down and left it in its current account.
For some inexplicable reason the club chose to draw down the whole of its new facility with the bank:
The £200.0 million Revolving loan facility, refinanced on 31 January 2020, for a term of five years that is available for general corporate purposes including working capital and letters of credit. This facility was drawn down in full in advance of the year end.
So while this left Liverpool with £149 million in cash and cash equivalents, it was paying interest on £197 million drawn down at an annual rate of 1.21%.
Unless there are some hidden charges on each occasion money is drawn down, this makes little sense.
Other items of interest include the comment contained within the Directors report to the effect that:
Administrative expenses for the year ended 31 May 2020 were £496.9 million (2019: £484.4 million). The increase mainly related to higher player salary and player amortisation costs during the period.
While employment costs did rise by £15.6 million (5.1%), the comment regarding amortisation costs makes little sense as amortisation fell by £5.7 million i.e. reducing administrative expenses rather than increasing them.
Other significant increases in expenditure, for example a £15 million (31.6%) increase in Cost of Sales, and an £8.5 million (18.6%) increase in unspecified administrative expenses also contributed to an operating loss of £70.245 million, but they are included without comment or explanatory notes.
Overall a depressing set of figures but no way as bad as I was lead to believe from James Pearce’s comments.
On a positive note, expenditure on the Kirkby training facility contributed to the £39 million spent on the acquisition of tangible fixed assets, whilst the sale of the Melwood site contributed to the £9.7 million proceeds from sale of tangible fixed assets.
My first thoughts were that they had concerns banks would not lend money when it was needed most.
My second thought was perhaps the club was being opportunistic in having the cash in hand to Buffett style to step in when another club got in trouble. But we saw how cautious the club was last summer on transfers, while also reluctant to accept offers it considered low.
Given the next financial report is expected to show a loss at least 3x as big, i’m equally surprised if we simply returned the borrowed money…
I’d like a penny for the thoughts of Wolves and Bayern when they see we’ve got over £100m in cash at the bank when they agreed to allow us to pay for Jota and Thiago in instalments of 50p over the next 1,000 years.
I doubt it as for that to happen the bank (RBS/NatWest Markets PLC) would have renege on its legally binding agreement with LFC.
Besides which, the money transferred from the revolving loan facility is likely to be held in another of LFC’s accounts with RBS, (and not in used £20 notes stashed under John Henry’s bed), so if the bank chose it could easily claw the money back or withhold payment.
There is no need to this as any payment to another party is unlikely to be in the form of hard cash. It’s far more likely that payment would be by electronic bank to bank transfer/ bankers draft / letter of credit, or some other financial instrument.
I really cannot see any reason for drawing down all of the money, just to stick it in another bank account and incur interest charges, other than perhaps it might be the means of avoiding hefty charges for several individual transfers / withdrawals.
Is it possible that the club believed that they would need a reserve of cash to continue meeting its obligations, should football not resume? I think the timing of these accounts is around the time that this was very uncertain.
That’s the whole point of a revolver account. Over its five year term it gives you immediate access to the funds (up to a maximum availability of £200 million) whenever you might need it i.e. you don’t have negotiate a new deal each time you need the money. Also you only pay interest on moneys drawn down. In many respects it’s a bit like an agreed overdraft - only much, much bigger.
I said this would happen. That us and other clubs would use credit facilities a lot to meet payments on time as the money to pay those facilities would be guaranteed to be coming in at scheduled points but without the near weekly cashflow from match day it may become quite a difficult balancing act to get payments made on time otherwise. This is a bit more extreme than I expected though.
Lets cut to the chase… Do we have the money to sign Haaland and Mbappe or just one of them? Thats all we need to know!
I like the sound of going into our overdraft to sign Mbappe like a student spunking their first bank account with an overdraft in freshers week personally.