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Mel Morris to put the club up for sale SHOULD Derby fail to win promotion....

Ambitious

By Ambitious
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RamsFan10

RamsFan10

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Posted

I know some on here know the business/financial football stuff well. Can someone explain the part in the times article talking about Mel's loans to Sevco, the holding company? To the untrained financial reader it sounds like Derby/Mel somehow owes himself millions ?

 

EDIT: Is it just that Mel wants his debts cleared in exchange for giving the club (for £1) to a person willing to pay those debts?

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AdamRam

AdamRam

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35 minutes ago, RamsFan10 said:

I know some on here know the business/financial football stuff well. Can someone explain the part in the times article talking about Mel's loans to Sevco, the holding company? To the untrained financial reader it sounds like Derby/Mel somehow owes himself millions ?

 

EDIT: Is it just that Mel wants his debts cleared in exchange for giving the club (for £1) to a person willing to pay those debts?

From the article it appears that MM wants a quid for the club, however wants to recoup some of the money he has put in, which is where the holding companies come in.

The structure of the company would I believe enable him to do this, however how much truth in the story remains to be seen. I think he also has separate companies for the ground for example, however as above my understanding of the structure is probably wrong, so hopefully someone that understands this can give you an answer to that.

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Van der MoodHoover

Van der MoodHoover

Posted
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6 minutes ago, AdamRam said:

From the article it appears that MM wants a quid for the club, however wants to recoup some of the money he has put in, which is where the holding companies come in.

The structure of the company would I believe enable him to do this, however how much truth in the story remains to be seen. I think he also has separate companies for the ground for example, however as above my understanding of the structure is probably wrong, so hopefully someone that understands this can give you an answer to that.

Depends on what's on the balance sheet of the entity that he is selling. 

Owners usually inject cash in by way of loans - just so they have a mechanism to get their money back.

So if mel's holding company owns dcfc say, but has lent dcfc say £40m to keep itself going (ie fund the operating losses), then he could......

......sell for £40m and repay the holdco what it had lent the club

.....sell for less (£1?) and write off the debt of £40m

.....sell for less but leave the debt intact as an amount owed by the new owner.

I'm just making numbers up to illustrate. Mel has swapped debt for equity in some parts of the group so he is less likely to get that back.

 

You need to have sight of all the accounts plus some I side knowledge to be able to work out exactly what's going on.......

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Carnero

Carnero

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As of the last accounts the football club was debt-free.

The owner of the football club, Sevco 5112 owed Mel c£90m in loans provided to it.

Mel would be selling the shares in Sevco 5112 for £1, on the basis that the new owners of Sevco 5112 agreed to pay of all, or part of, the monies he is owed by Sevco 5112.

On this basis,  the football club remains debt-free.

"Derby County available for £1" as a headline is disingenuous, the true cost to the purchaser of Sevco 5112 would be £1 + whatever loan amount they'd now owe to Mel Morris.

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Rev

Rev

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1 hour ago, RamsFan10 said:

I know some on here know the business/financial football stuff well. Can someone explain the part in the times article talking about Mel's loans to Sevco, the holding company? To the untrained financial reader it sounds like Derby/Mel somehow owes himself millions ?

 

EDIT: Is it just that Mel wants his debts cleared in exchange for giving the club (for £1) to a person willing to pay those debts?

Mel owns the service company or Sevco for short, which he lends money to, interest free as far as anyone can tell.

Sevco, which is a separate legal entity from Mel, then purchases shares in the football club, which again is a separate legal entity, rather than lending it money.

The advantages of such a structure are two fold.

1. The club remains debt free, all money received from the parent company is investment rather than loans.

 

2. Under FFP, you can lose around £13m per year on a 3yr cycle and remain compliant, but only if that loss is covered by cold hard cash, rather than loans.

If you do use loans, then the maximum permitted loss is £5m per year, £24m less over a three year period.

Certain expenditure is excluded from FFP calculation though, including the academy and the infrastructure.

Hard to be certain, but running a Cat 1 academy seems to come in somewhere around £5m per year according to figures I've seen elsewhere, plus improvements to the training ground and improvements at PP like concourse heating, the SisGrass pitch etc etc and you'll probably be looking at £20m a year over and above income, which Mel is currently covering without loading debt onto the club itself.

He's been brilliant financially for us, and the way he's funded us with little strings on his investment is laudable, but it's just not sustainable.

He's probably burned through a quarter of his total worth in 5 yrs, a value he's worked hard all his life to achieve, yet we're no further forward than when he took over!

I still don't think he'd sell to any Tom, Dick or Harry, and will put the club before his own interests, but it's seems like the best he'll do from a deal now is someone funding the club going forward in exchange for equity share, much how he took over from the Americans.

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Comrade 86

Comrade 86

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2 hours ago, Carnero said:

As of the last accounts the football club was debt-free.

The owner of the football club, Sevco 5112 owed Mel c£90m in loans provided to it.

Mel would be selling the shares in Sevco 5112 for £1, on the basis that the new owners of Sevco 5112 agreed to pay of all, or part of, the monies he is owed by Sevco 5112.

On this basis,  the football club remains debt-free.

"Derby County available for £1" as a headline is disingenuous, the true cost to the purchaser of Sevco 5112 would be £1 + whatever loan amount they'd now owe to Mel Morris.

Might as well stick this on your clipboard bud - then just copy paste as required ?

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BathRam72

BathRam72

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12 hours ago, HantsRam said:

Sadly,  we seem not to be able to cope with certainty. At least before we spanked Lionels millions we actually got to quite a decent position in the premier league. 

Very sad it hasn't worked out for Mel.

It hasn't worked for him based on several managers all with their own ideas spending on players they believed were the answer.

If that manager were allowed time then maybe they might have been.

We will never know.

I love Mel for his commitment and what he has done for the club but I do feel he is partly to blame with the constant desire for instant success (which you can't blame him for wanting as we all do) but chopping and changing management did not help. (Not all of them of course, i realise some left, but again you have to ask yourself why if Derby was such a great prospect?)

I will await incoming as I know this has been covered elsewhere but it is purely my opinion. 

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Stive Pesley

Stive Pesley

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11 hours ago, reveldevil said:

He's probably burned through a quarter of his total worth in 5 yrs, a value he's worked hard all his life to achieve, yet we're no further forward than when he took over!

This is the key point I think - there must be a tipping point at which getting promoted to the Prem (with all the millions that rain down upon you at that point) no longer makes the continued upfront investment worthwhile. Mel is a businessman, so I suspect that talk of selling now is a sign that he's reaching that point. It's what the gamblers amongst us would call cashing out

In simple terms it's like spending £100 a day on lottery tickets in the hope that you'd win the jackpot of £100,000. Once you've spent £99,999 on lottery tickets - do you carry on knowing that even if you do eventually win you'll actually still be down?

And yeah - I know it's not exactly the same so don't bother picking that metaphor apart ?

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