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we are £6.5m in debt


davenportram

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6 hours ago, G STAR RAM said:

I think Martin Lewis' advice is aimed at individuals rather than companies.

Are you suggesting that MM should have cleared the mortgage rather than buying Bradley?

 

Not exactly. Just that £6.5 is probably chicken feed to generous Mel so I wonder why he retains a debt that is costing the club interest. 

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8 hours ago, admira said:

Not exactly. Just that £6.5 is probably chicken feed to generous Mel so I wonder why he retains a debt that is costing the club interest. 

Read my post on the last page. Also remembered that the coop were investigated over the loan, probably why they wrote off so much and another likely reason for a very favourable interest rate.

8 hours ago, WorksopRam said:

Can you even pay it all at once? Or have you got to do it to the terms agreed, so they get the interest from us and stuff?  

You can pay any loan off in one go. It depends on the the terms of the the loan as to how much of the interest needs to be paid.

i can only think that the interest on the loan is less than than the interest the repayable balance is accumulating in the bank, or that repaying it now would affect FFP.  Mazing Mel is too clever to pay interest for no reason!

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Regarding the interest on the loan - what I was trying to say is there is probably no point in paying it off, as the loan is/was at a very low interest rate. Also, it probably represents a low loan to value percentage.

Say you've got £6.5m cash, you might invest it and want a return of 5% = £325k.

If you're paying interest on a £6.5m loan at say 2% ( suspect it was actually less than that ) = £130k - that means you're £195k better off ..... result !

 

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32 minutes ago, Herdwick Ram said:

Regarding the interest on the loan - what I was trying to say is there is probably no point in paying it off, as the loan is/was at a very low interest rate. Also, it probably represents a low loan to value percentage.

Say you've got £6.5m cash, you might invest it and want a return of 5% = £325k.

If you're paying interest on a £6.5m loan at say 2% ( suspect it was actually less than that ) = £130k - that means you're £195k better off ..... result !

 

Haven't I already said this? ?

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56 minutes ago, Herdwick Ram said:

Regarding the interest on the loan - what I was trying to say is there is probably no point in paying it off, as the loan is/was at a very low interest rate. Also, it probably represents a low loan to value percentage.

Say you've got £6.5m cash, you might invest it and want a return of 5% = £325k.

If you're paying interest on a £6.5m loan at say 2% ( suspect it was actually less than that ) = £130k - that means you're £195k better off ..... result !

 

Having worked in financial services for over 30 years I've never known a circumstance whereby you can borrow money at a lower rate of interest than you can invest it (unless you're prepared to accept a high risk). That's not how the financial markets work. Having said that, the interest probably is quite low but I doubt if it's less than 2%. 

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6 minutes ago, Tamworthram said:

Having worked in financial services for over 30 years I've never known a circumstance whereby you can borrow money at a lower rate of interest than you can invest it (unless you're prepared to accept a high risk). That's not how the financial markets work. Having said that, the interest probably is quite low but I doubt if it's less than 2%. 

In our case investment include new players, training facilities, new contracts etc. Not necessarily just having money sat accumulating interest  

Paying off the Stadium would probably cost us 6.5m towards FFP. It's a waste of 6.5m that could be used towards getting us up. 

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42 minutes ago, Chris Mills said:

In our case investment include new players, training facilities, new contracts etc. Not necessarily just having money sat accumulating interest  

Paying off the Stadium would probably cost us 6.5m towards FFP. It's a waste of 6.5m that could be used towards getting us up. 

Paying back the mortgage early would actually benefit the FFP position. The repayment of the loan doesn't affect the club's profit, only the interest on it. Early repayments= less interest. 

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13 hours ago, Tamworthram said:

Having worked in financial services for over 30 years I've never known a circumstance whereby you can borrow money at a lower rate of interest than you can invest it (unless you're prepared to accept a high risk). That's not how the financial markets work. Having said that, the interest probably is quite low but I doubt if it's less than 2%. 

It is possible - my father worked for the Midland Bank and bought his house in the late 1950s - he got such a low interest rate (as a member of staff) that it was never in his interests to pay off the mortgage - he kept it going almost until the day he retired....

The one thing we can be sure of is that Mel won't be leaving the mortgage running on the stadium without good cause - and don't forget that he has a pretty healthy sum of money to invest (significantly more that the £6.5M on the stadium) so he may well be in a position to get better rates of return on his wad than the amount the club are paying out....

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Tamworthram ;

This goes back several years - possibly to the LoG - when the stadium was in the books for c£15m.

There was a comment back then that the only debt was on the stadium which had been re-mortgaged and that the interest rate was very favourable.

I don't have the accounts to hand, but if you care to check I think you might find that it was ridiculously low ?

 

BTW, I'm paying 0% interest on my credit card balance and getting 3% on my deposits - earns me a few £ in the short term ..... so it is possible :)

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20 hours ago, Tamworthram said:

Having worked in financial services for over 30 years I've never known a circumstance whereby you can borrow money at a lower rate of interest than you can invest it (unless you're prepared to accept a high risk). That's not how the financial markets work. Having said that, the interest probably is quite low but I doubt if it's less than 2%. 

Further to the standard 0% cc interest rates, I worked in debt management and complaints for various banking institutions, and can confirm that there are rates available to be exploited. Following a complaint ( potentially after the dodgy initial dealings) a favourable rate could be offered, or indeed a zero % if independent adjudicators deemed we had paid enough interest already. 

Also, the club was close to administration, the bank could have decided to cut its losses and just accept the outstanding loan amount without any further interest, interest that could have put the club over the edge and meant nothing would be re-paid . These scenarios are just speculation, but happen in banking business all the time. 

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