Kirchner- A risk or a potential reward

[Ramleicester]

CK's 'wealth' was based around a business that was massively funded by external investors on the basis of the promise of potential growth. Alongside this was his personal crypto investments that had seen massive growth over 2020/21.

I am sure when he started out on the quest to buy a club this 'wealth' was in good shape. During the process his investments tanked very very badly and the smoke and numerous mirrors he put in place with his business investors were shattered.

Kind of what happens when 'wealth' comes fast and easy. I am sure he thought he could get it back as quick as it had disappeared and carry on but his investors pulled the rug and his personal investment instruments of choice are still in the doldrums.

Fair to say a bullet dodged. Clowes is a businessman based on a long track record and experience with a family of similar standing alongside him. CK in comparison is a PR genius who made a few lucky bets and won which made him think he was some sort of genius entrepreneur. 

He isn't.

His putting is crap too.

 

[kevinhectoring]

2 hours ago, angieram said:

You've said this before, Kevin - why do you think he'll be looking to sell quickly?

Not quickly necessarily. But before we return to the Championship.
 

Owning a club in L1 - especially Derby under an EFL business plan - is relatively low risk and I’d think there’s a part of him which will enjoy it despite his desire for a low profile. But his Saturday afternoons at PP are important to him and he’ll know many fans will turn on him if we don’t get promoted before long.

Owning Derby in the championship is a different proposition.  Parachute payments, he knows how stupendously wealthy several other owners are and he’s seen what rams ownership did to MM (a much wealthier man). Plus he knows that tens of thousands of people in derby expect a good owner to take us to the PL (especially given what our noisy neighbours are now enjoying). 

It was no secret that he was a reluctant buyer of the club (albeit he may have been an enthusiastic buyer of the stadium for £23m !). In fact the big (largely unnoticed) reveal in his video interview was that the decision to buy the club after CK crashed and burned was in part driven by a desire to protect the value of the stadium (already purchased). 
 

Best scenario for DC overall might be for us to narrowly miss promotion this year, then for us to run away with the title in 23/24. Then he has time for a leisurely sale of a championship club that (I think) would be free of EFL constraints. 

We’ll see ...  

[kevinhectoring]

2 hours ago, RoyMac5 said:

Practically, how would he currently even get his money back for us?

Agree, he’d struggle just now but once a return to the championship is assured I think he’ll do ok   I’m not at all saying a sale is imminent 

[Carl Sagan]

6 hours ago, RoyMac5 said:

Practically, how would he currently even get his money back for us?

I don't believe DC would expect to. He saved us, thinking it was the right thing to do when he's a fan, sees what it means to other fans and was able to stump up the cash. I suspect he'll sell at a loss in the next 1-3 years if what he sees as a safe buyer comes forward, as it was a big outlay for him and running a football club is a loss-making exercise.

4 hours ago, Ramleicester said:

CK's 'wealth' was based around a business that was massively funded by external investors on the basis of the promise of potential growth. Alongside this was his personal crypto investments that had seen massive growth over 2020/21.

I am sure when he started out on the quest to buy a club this 'wealth' was in good shape. During the process his investments tanked very very badly and the smoke and numerous mirrors he put in place with his business investors were shattered.

Kind of what happens when 'wealth' comes fast and easy. I am sure he thought he could get it back as quick as it had disappeared and carry on but his investors pulled the rug and his personal investment instruments of choice are still in the doldrums.

Fair to say a bullet dodged. Clowes is a businessman based on a long track record and experience with a family of similar standing alongside him. CK in comparison is a PR genius who made a few lucky bets and won which made him think he was some sort of genius entrepreneur. 

He isn't.

His putting is crap too.

One of my friends who moves in these circles was chatting with an American venture capitalist who described Kirchner's wealth as "horse money". Apparently the phrase means "easily earned", perhaps through marriage or a lottery win rather than through talent and/or hard work.

[Ramleicester]

7 hours ago, RoyMac5 said:

Practically, how would he currently even get his money back for us?

Part of any due diligence on purchasing a football club is a wonderful 'return model' which looks at the year on year likely return or loss on investment.

They tend to be done over ten years with each 12 months modelled on a range of possible scenarios such as likely cost base, probability of promotion/relegation, fan base, media and social media exposure, merchandise, sponsorship and a whole load of other factors. It creates a 5 level optimistic to covid levels of pessimistic wrist slashing estimates of possible return (loss). They are works of art but ultimately works of crystal ball gazing.

I have seen a few and fair to say never seen one that would make me part with my own cash! The factor that counts for these owners is ego, passion, romance and to cure boredom of their existing lives. 

That said Derby County FC is as good a bet to recover investment as any (a million maybe billion miles better than say Chelsea). It will rise again and has a fan base and potential for future income as good as any football club that has been sold over the past few years. Factor in the satisfaction factor, the romance and passion around saving a founder member then being the current owner of DCFC must feel good. I doubt any football club outside of the top 5 in the world has ever been purchased with an expectation of getting money back (save for the odd tax write off lol). 

 

[RAM1966]

On 18/08/2022 at 09:35, Strider said:

A simple solution to prevent this type of situation is for any administrators or sellers to insist on seeing the money in a UK based account. Would stop the Kirchner's, Derventio's and Alonso's of this world. Just seeing the money in a random account isn't enough.

They should go futher, the money should be deposited with the EFL with a agreement to purchase with large penalty clauses should the purchaser pull out without a goog reason.

On 23/08/2022 at 10:55, duncanjwitham said:

I still think it was unlikely it was anything like this.  He couldn't borrow (much) money against us because without owning the stadium, there was nothing to secure it against.  Money laundering or similar seems unlikely too, because you don't do it with an international border in between (because of the enhanced checks that take place on transfers), or a company that's being monitored more extensively than normal (you've got FFP reporting, plus enforced business plans and any other fallout/follow-up from exiting admin).  Any weird payments in or out are going to get flagged up relatively quickly.  And if his intention was something like trying to and drain excess funds out of the club to fund his lifestyle, then I'm not sure there's going to be enough excess funds to make that worthwhile, especially if he was intending to carry on making payments to creditors over the next 2 or 3 years.

The only explanation that makes any kind of sense to me is that he genuinely wanted to buy us, probably because he thought owning a football club would be a cool thing to add to his flash lifestyle.  And then he either changed his mind when he realised the true costs, or he genuinely couldn't transfer the money (whether that be because of money laundering checks, or the money was no longer "available" to him, or whatever).

This is why purchasing the club without the stadium did not make sense.  I said this at the tome and got slated.  Itcwas clear as day he did not have the money yo do both and therefore a poor choice by the Administrators.

No wonder Rooney has peed off to the States while this all blows over....

[duncanjwitham]

50 minutes ago, RAM1966 said:

They should go futher, the money should be deposited with the EFL with a agreement to purchase with large penalty clauses should the purchaser pull out without a goog reason.

The problem is, every one of these extra requirements just make it harder for legitimate buyers to actually complete a purchase.  If Quantuma had insisted on this, and the £5m non-refundable deposit, and every other suggestion in this thread, there's a decent chance that we'd have to got to May with no interested parties at all and Quantuma would have started liquidation proceedings.  Don't forget that at the point Kirchner was named preferred bidder, negotiations with credits weren't even complete (since HMRC etc wouldn't commit to anything until they had an actual bidder to talk to).  So you're asking buyers to hand over millions without even knowing for sure what they're buying.  And I'm sure "The purchaser has pulled out because conditions imposed by Quantuma made a deal unviable" headlines would have been treated wonderfully by Derby fans.

50 minutes ago, RAM1966 said:

This is why purchasing the club without the stadium did not make sense.  I said this at the tome and got slated.  Itcwas clear as day he did not have the money yo do both and therefore a poor choice by the Administrators.

No wonder Rooney has peed off to the States while this all blows over....

The problem is that none of the other bidders were offering anything like enough either.  Ashley was apparently offering low £20ms for the entire thing, stadium included, which was nowhere near enough.  At least Kirchner had what appeared to be a viable plan to get a deal over the line.  You can say it was a poor choice by the admins, but you're basically criticising them for not liquidating us months ago.

[FindernRam]

On 23/08/2022 at 11:34, RadioactiveWaste said:

austerity football being run prudently

Prudent is not the same as austere necessarily. Our income limits will be way ahead of most L1 teams and the rules allow us a bit of freedom. But I'm all for prudent.

Our recent years transfers in were a bit excessive but we did seem to be forever playing people out of their normal positions Had we not done this they may have done a lot better for us.

[CBX1985]

On 23/08/2022 at 10:55, duncanjwitham said:

I still think it was unlikely it was anything like this.  He couldn't borrow (much) money against us because without owning the stadium, there was nothing to secure it against.  Money laundering or similar seems unlikely too, because you don't do it with an international border in between (because of the enhanced checks that take place on transfers), or a company that's being monitored more extensively than normal (you've got FFP reporting, plus enforced business plans and any other fallout/follow-up from exiting admin).  Any weird payments in or out are going to get flagged up relatively quickly.  And if his intention was something like trying to and drain excess funds out of the club to fund his lifestyle, then I'm not sure there's going to be enough excess funds to make that worthwhile, especially if he was intending to carry on making payments to creditors over the next 2 or 3 years.

The only explanation that makes any kind of sense to me is that he genuinely wanted to buy us, probably because he thought owning a football club would be a cool thing to add to his flash lifestyle.  And then he either changed his mind when he realised the true costs, or he genuinely couldn't transfer the money (whether that be because of money laundering checks, or the money was no longer "available" to him, or whatever).

I think you are being somewhat kind to Mr Kirtchner.  

This had absolutely nothing to do with wanting to own a football club (though he probably did), nor did he care about the helping the club, nor was this a "commercial idea">

If you haven't already, watch the The Man Who Stole Cricket, regarding 'Sir' Alan Stanford or listen to "the Trillion Pound Scam", about Notts County. https://www.bbc.co.uk/programmes/p0bq3935

CK is an alleged fraudster of some kind.  Those types need to have credibility.  He got that by sponsoring sport he had no intention of paying.  And he probably assumed - likely correctly - DCFC were so desperate that they would not question him strongly enough; we would want to believe.

If he were trying to rip someone off for multi multi millions, let's muse, then how better than to show that you are friends with Rooney and all the golfers.  Fake it until you make it.  Or fake it until you fake it even bigger.  Alan Stanford used cricket the same way.  Munto finance did the same thing to Notts County.  

This was about a facade and the club was the mirror to show he is the real deal.   If you are the real deal, people will buy anything.  

[RAM1966]

I'm not sure we will ever know what Kirchner's plans to fund us actually were, at first glance it looks like a 3 amigos style purchase.  Maybe the investigations and enquiries to come in the US, may actually shed some light on where this money was going to come from.

100% a dodged bullet and I think we would have ended up liquidated.

 

 

[kevinhectoring]

On 24/08/2022 at 12:02, RAM1966 said:

This is why purchasing the club without the stadium did not make sense

Makes good sense if you get a lease on decent terms. Could massively increase your return on capital 

[RAM1966]

On 26/08/2022 at 00:01, kevinhectoring said:

Makes good sense if you get a lease on decent terms. Could massively increase your return on capital 

Not when you are paying circa £30m for 5 players.  The ground was worth far more the £23m...

The only viable option included the ground, every option/bid included the Stadium apart from Kirchner's Monopoly ?.....

Sorry but when you are buying an insolvent business, you need to buy the biggest tangible asset too, which was on offer far  under its true value....

[CBX1985]

5 hours ago, RAM1966 said:

Not when you are paying circa £30m for 5 players.  The ground was worth far more the £23m...

The only viable option included the ground, every option/bid included the Stadium apart from Kirchner's Monopoly ?.....

Sorry but when you are buying an insolvent business, you need to buy the biggest tangible asset too, which was on offer far  under its true value....

I'm not sure I agree.  The Ground would receive rental payments of c£1m pa.  You are effectively paying an upfront fee to avoid that.  It is a non saleable asset, as was proven - it has one use for one buyer; you can't do anything else with it.

At a big enough discount, an offer would make sense (a long lease is in many ways as good as purchase to free up capital - hence the secondary market in commercial property).  He just bid non-commercially, unlike Ashley (who was commercial); and did not have Clowes' love fort the club which could allow that.

It made no sense and was too good to be true. There is a reason that is red-flag #1.

[RAM1966]

2 hours ago, CBX1985 said:

I'm not sure I agree.  The Ground would receive rental payments of c£1m pa.  You are effectively paying an upfront fee to avoid that.  It is a non saleable asset, as was proven - it has one use for one buyer; you can't do anything else with it.

At a big enough discount, an offer would make sense (a long lease is in many ways as good as purchase to free up capital - hence the secondary market in commercial property).  He just bid non-commercially, unlike Ashley (who was commercial); and did not have Clowes' love fort the club which could allow that.

It made no sense and was too good to be true. There is a reason that is red-flag #1.

You could lease for 20 years at a £1m a year, but what have you got at the end of it?  Do not forget the book value of the ground was £81.1M when it was valued a few years ago.  Its probably not worth that much now we are a Lg1 club, but, its certainly worth a lot more than £23M.  

So how come all of the other bids included the ground?  I spoke to one of the potential buyers who said there was no deal that was viable, which did not include the ground (at the cut price it was sold for), why do you think Mel sold the ground well below book value?  It was to offset the fact that the club on its own was insolvent and not viable with all the masses of debt. 

We now know that Kirchner didn't have a pot to p!ss in and was struggling to raise the funds which is why he decided to go for the club only.  

When DC comes to sell the club, I imagine as soon as we are back in the Championship, the club will be worth far more with its own stadium, than it would without.

Edited August 28, 2022 by RAM1966

[CBX1985]

4 hours ago, RAM1966 said:

You could lease for 20 years at a £1m a year, but what have you got at the end of it?  Do not forget the book value of the ground was £81.1M when it was valued a few years ago.  Its probably not worth that much now we are a Lg1 club, but, its certainly worth a lot more than £23M.  

So how come all of the other bids included the ground?  I spoke to one of the potential buyers who said there was no deal that was viable, which did not include the ground (at the cut price it was sold for), why do you think Mel sold the ground well below book value?  It was to offset the fact that the club on its own was insolvent and not viable with all the masses of debt. 

We now know that Kirchner didn't have a pot to p!ss in and was struggling to raise the funds which is why he decided to go for the club only.  

When DC comes to sell the club, I imagine as soon as we are back in the Championship, the club will be worth far more with its own stadium, than it would without.

You get clear liquidity, which allows investment in other  assets (i.e. Players).  Most businesses rent their operating base for this reason (from M and S stores to big accountancy HQs).  Why tie that much capital up when someone else can and you can rent at stable rates?  This is the entire operating model of the commercial property sector. 

I agree buying makes sense for a new DCFC owner, but only just if at fair value (and only if I had the clear working capital to do it).  If I were buying the club, I would not see the Ground as THE asset.  The Club and the value of supporter spending is, to enable potential promotions to higher leagues to capitalise on TV money.

I've seen people on this thread say that we need to own the ground to capitalise on things like corporate events and the like.  No.  You can do this under a good lease hold - the owner gets a per annum fee for you having unfettered access.

[duncanjwitham]

8 hours ago, CBX1985 said:

Clowes' love fort

I thought you were suggesting a new name for Pride Park for a sec…

[RAM1966]

3 hours ago, CBX1985 said:

You get clear liquidity, which allows investment in other  assets (i.e. Players).  Most businesses rent their operating base for this reason (from M and S stores to big accountancy HQs).  Why tie that much capital up when someone else can and you can rent at stable rates?  This is the entire operating model of the commercial property sector. 

I agree buying makes sense for a new DCFC owner, but only just if at fair value (and only if I had the clear working capital to do it).  If I were buying the club, I would not see the Ground as THE asset.  The Club and the value of supporter spending is, to enable potential promotions to higher leagues to capitalise on TV money.

I've seen people on this thread say that we need to own the ground to capitalise on things like corporate events and the like.  No.  You can do this under a good lease hold - the owner gets a per annum fee for you having unfettered access.

I do not see how this can realistically be compared with running a normal business.  Football does not operate at a profit for starters.  Football teams do not tend to move from one ground to another like other businesses, so do not need that type of level of fluidity.  Therfore a mortgage at the same rate as the lease would make far more business sense.

I've ran my own business and leased a building for the reasons you have said, which is true in a 'normal' business. I would look to move it when market rates decreased and stay put when it suited by having break clauses in the lease agreements.

Football is very different and success can often be decided by a flip of a coin, look at how we played QPR off the park, we were the far better team only to lose in the dying mins.

Large investments in football players, do not have the same chance of success that a tech company would have, by investing £ms in new software development over purchasing a premises to sell to a 3rd party.  That 100% makes sense.

We've seen how over investments turn out, throwing money widly with a scattergun approach does not garantee succes, you can only spend what FFP regs will allow too!

Edited August 28, 2022 by RAM1966

[Reggie Greenwood]

Is it about time this thread was locked ? The same old arguments going round and round. It’s over done and dusted and Kirchner will no doubt get his just rewards. 

[CBX1985]

On 28/08/2022 at 10:08, RAM1966 said:

I do not see how this can realistically be compared with running a normal business.  Football does not operate at a profit for starters.  Football teams do not tend to move from one ground to another like other businesses, so do not need that type of level of fluidity.  Therfore a mortgage at the same rate as the lease would make far more business sense.

I've ran my own business and leased a building for the reasons you have said, which is true in a 'normal' business. I would look to move it when market rates decreased and stay put when it suited by having break clauses in the lease agreements.

Football is very different and success can often be decided by a flip of a coin, look at how we played QPR off the park, we were the far better team only to lose in the dying mins.

Large investments in football players, do not have the same chance of success that a tech company would have, by investing £ms in new software development over purchasing a premises to sell to a 3rd party.  That 100% makes sense.

We've seen how over investments turn out, throwing money widly with a scattergun approach does not garantee succes, you can only spend what FFP regs will allow too!

I don't understand your point on fluidity.  Should you buy (or build) the ground and need to borrow the money for it, you are leasing the money; you allow someone else to do, you thus lease the ground.  Either way you lease from or to someone else.  

The point you raise is your view that owning the ground is the only viable way.  Whilst I think it likely preferable to renting, owning is no panacea and is perhaps only a marginal gains improvement on renting.  Moreover, terms are everything.  Owning on negative terms (i.e. high rates of repayment) are less strong than leasing on strong terms (long term landlord, best interests - which Clowes would clearly have offered Kirtchner).  

There is a raft of things to critique CK's bid for.  The bit about leasing ain't one of them.

Edited August 29, 2022 by CBX1985

[Brammie Steve]