In this article we look at some important issues raised by Trust members in respect of the bid by Milan Mandaric for the takeover of Leicester City FC.
Ownership of the Walkers Stadium – For the club to move forwards re-structuring the debt on the Walkers Stadium is paramount. While the club continues to be in the Championship repayments to Teachers simply serve to pay interest on what is in effect a mortgage. Only a sustained period of Premiership income would reduce the debt & eventually bring ownership of the stadium back to the club.
Initial media reports on Mandaric’s bid indicated the bid included the purchase of the Walkers Stadium as part of the purchase price for the club. This led some supporters to believe ownership of the stadium would come back to the club & the debt on it would be cleared.
However it now appears the value of the bid does not include for the purchase of the stadium. That does not mean necessarily Mandaric would not provide finances buy the stadium – but this will have to be repaid in the form of loan or other such agreement. The debt will still exist & until such time as it is repaid ownership of the stadium will not belong to LCFC.
In that respect nothing changes, however if the terms of any loan to purchase the stadium are more favourable than the current deal with Teachers, then clearly this beneficial to the club & would presumably be welcomed by shareholders & fans alike….
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Funding of the Playing Squad – As with the ownership of the Walkers Stadium supporters were led to believe monies would be available to strengthen the playing squad as part of the purchase of the club. However as the bid appears to only guarantee shareholders their initial investment then monies for strengthening the playing squad will have to come from elsewhere. Again Mandaric could finance this but, as with a loan to buy the stadium, ultimately it would have to be repaid. The difference here is that this would increase the debt on the clubs’ balance sheet.
Alternatively Mandaric may decide to finance both the purchase of the stadium &/or funding of the playing squad secured against income the club would receive from being promoted to the Premiership. This raises two points – would this adversely impact on funds available to strengthen the squad to compete in the Premiership? Or should promotion still prove to be elusive who has liability for paying the loan – the club or Mandaric?
A third option for Mandaric would be to buy the club, provide finances for both or either of the above & then seek to recoup his investment with profit when selling the club on at some point in the future. In that scenario the risks clearly lie with Mandaric & would not burden the club with other debts/liabilities if the desired success is not forthcoming.
Protecting Current Assets – There are instances in football where entrepreneurs have taken ownership of a football club & sold off assets such the ground or training/Academy facilities for example & made huge profits from the resulting property deal. Those profits are not re-invested back into the club but often invested in another business. In short this is known as “asset stripping”
Foxes Trust wishes to make clear we are no way suggesting these are Mandaric’s intentions & to the best of our knowledge there is no evidence of asset stripping at any of his former clubs. However the Trust Board believe it is right that supporters are aware of such possibilities – regardless of how remote it might be.
Management Infrastructure – If the club transfers to single person ownership the current off field management structure of the club will change. The current Board of Directors would be replaced by a Management Board made up of probably no more than four people appointed by Mandaric. The Management Board would responsible for the day to day running of the club, although Mandaric could veto any decision made by the Management Board if he so desired.
Of importance here is would Mandaric bring in people from outside the club who may have no connection with the club or seek to make appointments from the current Board of Directors?
Ideally the Trust would like to see a combination of both, to bring in some new ideas whilst retaining some continuity from the current Board of Directors.
Irrespective though of how the Management Board would be made up the Trust would be seeking to ensure any persons involved in the running of the club would not compromise the “Fit & Proper Persons” criteria as set out by the Football League either now or in the future.
Above we have looked at some concerns raised by Trust members & tried to give a balanced view on what options Mandaric’s could take should his bid be successful. The Trust urges Mr Mandaric to outline his business plan for the club to allow both shareholders & fans to make their own conclusions on his bid for our football club.
In an article later this week the Trust will explore what alternatives to the Mandaric bid the Board of Directors might look to put before shareholders at the EGM this weekend.
News Update – Direct dialogue between the Foxes Trust and a representative of Mr Mandaric has commenced.