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Extension of borrowing powers

May 30 2017 at 8:21 PM
Guest  (Login Roundhegian)

 
Any one else received a letter from the club about an EGM to approve an extension of borrowing powers?
Normally with something like this I would assume the Board knows what it's doing, but some of the stuff in the covering letter is a cause for concern.
First it says they only want the power to borrow more and they don't intend to exercise the power unless it would make the development cheaper. But if it was only something that might come in useful wouldn't they just sneak it through at the AGM and hope no-one would notice. Surely they would not incur the trouble and expense of an EGM unless there is a significant chance they will indeed be borrowing another £18 million.
Secondly, the new borrowing power is to be used only for a specified purpose of the new north-south stand, which seems to open up a legal minefield if the plans change in any significant way (would the borrowing still be lawful?)
Thirdly there is no explanation of how the 40 years lease and sublease arrangements will work, but presumably the club will be paying rent to the council which in turn will pay a rent to the financial institution, the amounts guaranteeing the institution will get back the cost of funding the stand and the profit it requires to enter into the deal in the first place.
Most significantly of all, the business plan seems to depend on Headingley getting the rights to international cricket after 2019 and also Headingley being a venue for the ECB t20 competition. At one time this would have been a near certainty but now I am not so sure. Does the Board have a plan B for the use of the modernised stadium if they do not get these staging rights? No clue from the letter.
I don't think I can support plans that I don't really understand because they haven't been properly explained, so will probably abstain.

 
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Stu
(Login StuartRA)
Assistant Moderator

Re: Extension of borrowing powers

May 30 2017, 8:43 PM 

Agree. I will also abstain. Not enough info re amount of annual rent and whether there are any alternative plans if things go pear-shaped. We may not get a T20 franchise. We may not get the International matches we are expecting. Do we have any guarantees that we will get these matches?

To many ifs, buts & may be's!!


Rent could be 18m divided by 40 years?? Around 500,000 per annum on top of the 700,000 we are already paying out in interest.


    
This message has been edited by StuartRA on May 30, 2017 8:54 PM


 
 
Geoff B
(Login Coastalview)

Re: Extension of borrowing powers

May 30 2017, 11:49 PM 

After several re-reads I have decided I must vote against the proposal.

I cannot support the motion and I believe abstaining would be tantamount to washing my hands of the situation.

The two clubs, their blue chip partners, and Leeds City Council have hatched a scheme to fund the new stand without taking on extra borrowing so they should be held to that in my view.

If the agreement is a good one for all parties then there is no need for the club to have a contingency fund of 18m in order to buy themselves out of it a couple of years down the line.

My suspicion is that the club fear they may not be able to service current debt and the new stand in future years and want to be in a position to incur new debt in order to keep up payments.

That way madness lies.

 
 
Steve C
(Login stevecowton)
Assistant Moderator

Re: Extension of borrowing powers

May 31 2017, 9:51 AM 

What is a "Blue Chip" financial institution?
I'll be voting in favour of the rule amendment because i think we need to back our Board and i agree that this is one of those pivotal moments in our history.
If we don't secure future International fixtures we cant afford to service our existing debt.

 
 
YorkTyke
(Login YorkTyke)

Re: Extension of borrowing powers

May 31 2017, 4:07 PM 


 
 
Guest
(Login BrickyardBoy)

What is a "blue chip" company?

May 31 2017, 4:55 PM 

"A blue chip is a nationally recognized, well-established and financially sound company. ... Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth." (Source: "Investopedia")

 
 
Steve C
(Login stevecowton)
Assistant Moderator

Re: Extension of borrowing powers

May 31 2017, 6:09 PM 

Thankyou.
I wasn't sure if it had some sort of legal status.

 
 

Dave Morton
(Login DaveMorton)

Re: Extension of borrowing powers

May 31 2017, 9:28 PM 

We'll just have to hang on 40 years and see how it works out. I must pop along to my doctor's for a prescription. I assume you can get the Elixir of Life on the National Health?

 
 
Dewsburian
(Login Dewsburian)

Re: Extension of borrowing powers

May 31 2017, 11:41 PM 

"If the agreement is a good one for all parties then there is no need for the club to have a contingency fund of 18m in order to buy themselves out of it a couple of years down the line. My suspicion is that the club fear they may not be able to service current debt and the new stand in future years and want to be in a position to incur new debt in order to keep up payments. That way madness lies."

There's nothing irrational about the club wanting to have a contingency fund to take advantage of more favourable conditions that may pertain in a few years' time. It may even be quite a sensible thing to do. It's also important here to remember that quite soundly based economic entities can go bust because of negative cash flow, so, provided that you're confident in the underlying model, that's certainly a danger you want to avoid.

 
 
Steve C
(Login stevecowton)
Assistant Moderator

Re: Extension of borrowing powers

June 1 2017, 7:59 AM 

It ll be interesting to see how many people turn up for the EGM on such a peculiar day.
I would imagine it will be decided on postal votes but how many people do they need for the meeting to be quorate...?

 
 
Stu
(Login StuartRA)
Assistant Moderator

Re: Extension of borrowing powers

June 1 2017, 8:34 AM 

The EGM is on the first day of the day/night CC match v Surrey. The match starts at 2pm, so 12 noon is a reasonable start time for the EGM.

 
 
Geoff B
(Login Coastalview)

Re: Extension of borrowing powers

June 1 2017, 9:00 AM 

I'm sure the board will get enough votes before the EGM.

Most members I am sure will back them. They will get a nice shiny new stand, they aren't being asked to put their hands in their pockets, and they don't seriously think the club can go bust.

Common-sense tells me to vote no because I don't think we can ever get anywhere near paying back what we owe already, and in a sensible world we can go bust.

Some of my other senses, looking round at how the world works these days, tells me that it doesn't really matter anymore.

If borrowing stopped and everyone had to pay up cash money, the creditors would be lucky to get 5p in the £1.

 
 
Stu
(Login StuartRA)
Assistant Moderator

Re: Extension of borrowing powers

June 1 2017, 9:50 AM 

I guess I feel the same way as you Geoff. I will not be around in 40 years time if/when the club goes bust, but I still can not agree to put the club further in debt. Equally, I do not want to scupper their plans, even if there is no guarantee they will come to fruition. It could well end up in a big financial mess and the club going bankrupt, but I will not be around to see it, so let them get on with it!!

I would be a lot happier if we had a "cast-iron written in stone" agreement with the ECB that we will get all the matches the club are expecting --- but we have not!!

Never abstained before in any election or referendum, but no way can I support the proposal, but as it will not affect me, I will not vote against it.

 
 
Saltburn senior
(Login Saltburnsenior)

Extension of borrowing powers

June 1 2017, 4:53 PM 

The purpose of the EGM is simply to endorse the Board's resolution re borrowing powers.
In my view there is sufficient business accumen amongst the Board Members to believe that the proposal is based on sound commercial considerations. The Board are said to be unanimous in recommending the resolution and I am prepared to trust their judgment and support them.
40 years does seem a very long time and I suspect most of the posters on this forum will have taken their sweaters for the last time long before then- unless DM's doctor produces something revolutionary- but the decisions which need to be made now and in the months ahead hopefully will ensure the Club's future.

 
 
 
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