Southampton owner tells Mauricio Pellegrino he has no extra funds (The Times)

Out of interest, and because of the pay wall, how do the Times know that there are no extra funds? The language "Mauricio Pellegrino, the manager, is aware of the situation, however, and has been told not to expect any additional transfer funds this month" means that the info came from on high. Not the sort of thing Les would say. Did Ralph say it? I suspect the Gao's didn't - they haven't said anything and it would be a strange first statement.

 

So who told the Times that there were no more funds? And does that mean we aren't signing Hoedt?

No-one said there are no more funds, just no additional funds. I nice open ended statement, possibly put out by the club to temper fan expectations.

no additional fund this month, wasn't it???

They say no 'Extra' funds.

 

I presume we have the funds to bring in both Hoedt and the attacking player we want, just that after that there isn't any more - but then I doubt there is any need for any more.

 

Don't forget the new big Prem deal is paid pro-rata, so at this point in the season I assume we may have a slight cash flow problem.

If he had to borrow £180m to buy the club it is highly unlikely he would then sanction extra spending for additional players and any new players as you suggest will be paid for by current revenues.

Gao can only really succeed by getting in extra revenue through exploiting the Chinese market I would have thought he is not a property developer so it is unlikely he will redevelope Southampton

no additional fund this month, wasn't it???

No-one said there are no more funds, just no additional funds. I nice open ended statement, possibly put out by the club to temper fan expectations.

To be honest, that's what I thought. No "additional" funds. For all we know the budget for the transfer window was £50m, so far we have spent about £20m on Lemina and Bednarek, just about to spend £15m on Hoedt. This would leave £15m with no additional funds on top of that.

I'm not going to panic yet.

So this Matt Hughes writes...."Gao’s backers are demanding a return on their investment and will not grant him a transfer budget so the club will continue to operate as it has done throughout the Liebherr family’s ownership."

Who are Gao's backers? And although Batman says its Aldridge () who divulged all this info, how does Hughes know all this? I work a little bit with the Chinese, and would be surprised if the backers would be so forthright so soon after investing. Its not a message you would send out days after buying the club.

I don't know that much about the Chinese football market, but does anyone over there really care about occasional appearances in the early rounds of the Europa League?

I would be very surprised if Lander/Gao couldn't find a way to extract significant benefit in China if, for example, Southampton v Internazionale was screened live. Even Sparta Prague. It's not about us it's about who we would be playing against.

So we’ve learnt that the new owner wants his new business to make a profit (well duh) and wants the club to be sustainable (which is how we’ve been running the club anyway – and quite successfully I’d say). They also won’t be supplying any extra funds though with the progress seemingly being made with Hoedt this doesn’t seem to be hampering us in the market. OK it may mean having to sell a couple of players but as has already been discussed elsewhere we already have a full squad of 25 available so trimming the squad down a bit may be a necessity anyway. Whether this applies to future windows also isn’t clear at this point.

If it is just about making money for them then it is in their interests to keep the club in good shape as well. This isn’t the same situation as the Liebherrs where they were able to buy the club on the cheap and so were practically guaranteed some sort of return on their investment, they will need to help the club grow in some way in order to get any sizeable return. While it looks like that won’t be in the form of investing additional funds in the playing personnel (again no different to how we were running things anyway) I can foresee them trying to increase things like our commercial revenue and market share in the East to try and grow in that sense (which – again – is what we have been trying to do anyway).

Having to deal with the loan is an additional concern but you’d have hoped with both the Gao and Liebherrs business acumen that this would have already been taken into account before the takeover was finalised.

Honestly to me it does very much sound like a case of ‘carry on as you are’ which considering how far it’s got us up to now I’m quite happy with. Circumstances can change obviously and some trepidation is certainly understandable and probably justified but I see no reason to panic just yet. Certainly it won’t bother me until I see any actual proof of the club being mishandled in some way.

The comments above about selling before buying. Is that an actual quote from the article or an extrapolation?

Would've thought with Ralph's comments about the black box buzzing and more incoming that we have enough in the kitty anyway.

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I would be very surprised if Lander/Gao couldn't find a way to extract significant benefit in China if, for example, Southampton v Internazionale was screened live. Even Sparta Prague. It's not about us it's about who we would be playing against.

No extra funds this window is no big deal.

As for the rest, strikes me as more dipper sh_it aimed at ramping the pressure up to sell VVD.

I shall take great pleasure in watching the dippers cry and light candles come Sept 1st.

I was hypothesising that Goa might have some kind of masterplan that involves buying more land around the stadium (in due course) and turning the whole area into some kind of super-dooper leisure & living quarter. He is a real estate developer by trade, after all. There again, he could simply be a con merchant whose intention is to buy the club, milk a few years of Premier League riches, and then bugger off leaving the club in dire straits. Who knows?

I tend to agree.

If he / Southampton Football Club were to purchase and develop the surrounding land, that would add significant value to the club. I don't really see how the value of the club will increase, enough to make it a decent business proposition, now (unless we get into the top 4, which won't happen without massive investment).

Time will tell I guess and I've seen nothing to suggest that anything will change, apart from we now have an owner who wants to own a football club. That being said, the debt does concern me slightly, however as long as it's not transferred against the club, I don't see a great issue.

As for no more transfer funds this window, I'd much rather we carry on the way we have been, than invest stupid money into 30+ years olds, like Villa are currently doing.

Disagree. We now have the complexity and incestuousness of a Chinese consortium. Further we will need to service debt on a hefty loan from a commercial lender (the choice of lenders being limited to offshore lenders in order to circumvent domestic restrictions). That's in contrast to the status quo ante where we borrowed a smaller amount of money from the owner, ostensibly on more generous terms. And the commercial loans we did obtain under KL, from what I recall, were secured against her personal estate. Agree, though, that Kat is smiling.

And people were so quick to thank her...

Where is the value to be had? With a brand that you can build, or one that is already established? I would be interested to hear from anyone who knows the Chinese market and what potential/appeal we might have. Or is it all a bit of a closed shop with Man U, PSG, Barca type clubs? I'm not envisaging ever rivalling them, but just getting a small piece of the action. You can look at this article - http://www.telegraph.co.uk/news/world/china-watch/sport/growing-nations-sports-economy/ - which states Man U has a following of 100m in China. Maybe (or maybe not) we can get a million or two (or more) and that there is probably were the value is.

I do think that we can look at ourselves, and under estimate what the club is and what appeal it might hold. Again I am not saying we are on the level of the Big 6, but then neither am I saying that we have no appeal at all.

I was hypothesising that Goa might have some kind of masterplan that involves buying more land around the stadium (in due course) and turning the whole area into some kind of super-dooper leisure & living quarter. He is a real estate developer by trade, after all. There again, he could simply be a con merchant whose intention is to buy the club, milk a few years of Premier League riches, and then bugger off leaving the club in dire straits. Who knows?

Maybe they will develop the area but I wouldn't have thought that's why he's bought the club - i don't think he's a con man, just not sure what he brings to the table. I would have happily carried on as we were. Top half team looking to get into Europe every now and then.

But nothing stays the same forever.

If I was selling my house and I got a good offer I am not too sure I would be over diligent in examining where my buyer's funds came from. Can't blame Ms Liebherr I would do the same if the money was right. However selling the deal to the fans the way RK did a few days ago was a tad duplicitous. Personally I would have preferred to stay where we were but that was no longer an option it seems.

this. Proof of funds was all that they would have cared about. They got that and the rest was PR spin.

Then why bother to buy us?

Club bought using a loan. Loan paid off by club earnings. The owner will in ten years time have a £300+m asset he can sell. No brainer really. All he has to do is keep us in top flight...

Disagree. We now have the complexity and incestuousness of a Chinese consortium. Further we will need to service debt on a hefty loan from a commercial lender (the choice of lenders being limited to offshore lenders in order to circumvent domestic restrictions). That's in contrast to the status quo ante where we borrowed a smaller amount of money from the owner, ostensibly on more generous terms. And the commercial loans we did obtain under KL, from what I recall, were secured against her personal estate. Agree, though, that Kat is smiling.

Yep. Never understood why people were unhappy with the previous owner. Lets see if that grass is greener...

To also buy up the land around the stadium and make a fortune out of developing the area? Maybe?

Why not just buy the land around the stadium?

It looks like it's wait and see time. First visible change, more chinese advertising round the perimeter boards, next season's pre-season tour to include HK/China?

I've got enough savings to buy a brand new car (not that I ever would) but if I were to do so I almost certainly wouldn't raid my very productive savings but would get it on cheap finance. Similarly if the club is burdened with the cost of debt servicing let's hope it'll be at a good rate because the borrower is good for the money.

The clubs hardly going to come out saying we've loadsa money to spend on new players now, we know what happens to players values then.

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I think people need to realise that any of these big foreign "investors", with a few very notable exceptions, are not buying the club because they love it, they are doing it to make money. Any"investor as the term implies are looking for some sort of dividend down the line. These " investors" only have to look at the Liebherrs to see the returns it is possible to make.

Hope they're more successful than Kat in finding a buyer, 80% for 210m I think they could make a profit selling in a years time easy.

Why not just buy the land around the stadium?

Good question. Dunno. I'm just thinking out loud on a football forum which means there's a significant danger I may be talking nonsense...

So we’ve learnt that the new owner wants his new business to make a profit (well duh) and wants the club to be sustainable (which is how we’ve been running the club anyway – and quite successfully I’d say). They also won’t be supplying any extra funds though with the progress seemingly being made with Hoedt this doesn’t seem to be hampering us in the market. OK it may mean having to sell a couple of players but as has already been discussed elsewhere we already have a full squad of 25 available so trimming the squad down a bit may be a necessity anyway. Whether this applies to future windows also isn’t clear at this point.

 

If it is just about making money for them then it is in their interests to keep the club in good shape as well. This isn’t the same situation as the Liebherrs where they were able to buy the club on the cheap and so were practically guaranteed some sort of return on their investment, they will need to help the club grow in some way in order to get any sizeable return. While it looks like that won’t be in the form of investing additional funds in the playing personnel (again no different to how we were running things anyway) I can foresee them trying to increase things like our commercial revenue and market share in the East to try and grow in that sense (which – again – is what we have been trying to do anyway).

 

Having to deal with the loan is an additional concern but you’d have hoped with both the Gao and Liebherrs business acumen that this would have already been taken into account before the takeover was finalised.

 

Honestly to me it does very much sound like a case of ‘carry on as you are’ which considering how far it’s got us up to now I’m quite happy with. Circumstances can change obviously and some trepidation is certainly understandable and probably justified but I see no reason to panic just yet. Certainly it won’t bother me until I see any actual proof of the club being mishandled in some way.

I think the important words in these snippets of the article is "extra funds" and "this month." Whose to say that come January, once we have established a clearer idea of what we need, he wont finance any required deals?

I'm glad to see that I have come back on here after my rant and most posters have got it, with or without my Satire.

The clubs hardly going to come out saying we've loadsa money to spend on new players now, we know what happens to players values then.

 

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You mean like Everton and £45m for Gylfi !!! he is a £20-25m player max

Among other things, a massive boost to his sports-related brands in China. That's where he will make the money out of this deal. He hasn't done for our benefit.

 

But in order to keep milking that benefit he needs to keep us going along nicely as we are. Euro appearances will be a significant add-on to the brand value.

My understanding is that Lander has only just entered the sports market -and his assets are nothing to write home about (a women's football team sponsoring basketball tournaments etc). In their crazy rush to buy foreign assets e.g. chicken suppliers and iron ore miners buying video games developers, Chinese businesses have been inventing synergies that often barely stand up to scrutiny. Not saying this has happened here; but the government -rightly- has become concerned about the justification for buying trophy assets.

Frankly there is no brand value in Southampton in China: nobody follows or is likely to follow Southampton as a result of this transaction. Most consumers follow the big clubs -and even then tend to lump the big English clubs with the other big clubs from Spain, Italy and Germany, happily switching and mixing loyalties as they see fit. Likewise to the extent loyalty exists, it is to star players, not clubs. The idea that the odd Europa appearance is going to make a difference is wishful thinking. There maybe benefits associated with the Academy and the grassroots game in China but they are notoriously difficult to monetise and unlikely to move the dial.

My guess is that their investment is a play on the Premier League's continued expansion as much as SFC. Like a property developer who'll buy a flat, install marble surfaces in the kitchen or a bit of wood flooring in the hallways before flipping it in a rising market, the owner may make a few cosmetic changes here and there but I don't see any long-term strategy other than keeping up in the PL. That the fella belongs to a consortium -with all the gridlock and disagreement it potentially brings- only makes pursuing a strategy with conviction more difficult. Of course, that might not be a bad thing if they turn out to be complete ingenues.

You mean like Everton and £45m for Gylfi !!! he is a £20-25m player max

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Club bought using a loan. Loan paid off by club earnings. The owner will in ten years time have a £300+m asset he can sell. No brainer really. All he has to do is keep us in top flight...

This is how I see it, not really great news for the club

if I was running the club's transfers and the other clubs i was speaking to about buying players from knew my club had just been purchased, I guess a leek like this would be quite useful in limiting the selling clubs expectations of what we could afford?

Club bought using a loan. Loan paid off by club earnings. The owner will in ten years time have a £300+m asset he can sell. No brainer really. All he has to do is keep us in top flight...

Exactly this. There will be no investment - it'll be business as usual for Saints, but with a little more money dripping out to pay interest/loans.

Exactly this. There will be no investment - it'll be business as usual for Saints, but with a little more money dripping out to pay interest/loans.

In which case for the club to claim that the takeover was necessary to enable the club to compete in the PL top 10 was untrue and will cause damage in the relationship with supporters. Not sure about the debt free aspect.

More money coming out of the club is not what the fans were led to expect - although we all had raised fears about Lander not coming up with the money beforehand - and the Gao using his own money smokescreen has soon been blown apart by the Bloomberg and the Times articles.

Would suggest the new owners outline their vision pronto.

Where does it say that any loans used in the purchase are secured against the club?

Where does it say that any loans used in the purchase are secured against the club?

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Where does it say that any loans used in the purchase are secured against the club?

It doesn't but people's (legitimate) concern is that they could either be applied across or that money to enable us to compete will be used to service unnecessary debt. That then increases sharply the risk of relegation and the debts can't be serviced and the club rots, although not as fast if the liabilities can't be directly tied to the club.

Not exactly the extra investment to help us compete is it? Hey, the previous money has made their money though.

I said before we don't need to be spunking hundreds of millions of pounds on players rather just keep the good ones we have long enough to achieve something!

It doesn't in fact says opposite in Bloomberg post but that doesn't stop the old soothsayers on here we are doomed beware the Ides off March. Don't panic Capt Mainwaring

 

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Who, here, has said that they have done so?

Assuming the loan is against Gao's assets, I'd speculate that he has few assets outside China (they're bloody difficult to shift) and that's why he brought in other offshore investors. I'd also speculate that the capital and collateral they've put up is very little relative to the size of the loan which will be reflected in higher borrowing costs.

Who, here, has said that they have done so?

 

Assuming the loan is against Gao's assets, I'd speculate that he has a few assets outside China (they're bloody difficult to shift) and that's why he brought in other offshore investors. I'd also speculate that the collateral they've put up is very little relative to the size of the loan which will be reflected in higher borrowing costs.

I thought it was his assets in Macu?

Who, here, has said that they have done so?

 

Assuming the loan is against Gao's assets, I'd speculate that he has a few assets outside China (they're bloody difficult to shift) and that's why he brought in other offshore investors. I'd also speculate that the collateral they've put up is very little relative to the size of the loan which will be reflected in higher borrowing costs.

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Not really as he will have to service it somehow and has potentially secured it against the club's assets or income streams.Faraway Saint on the Gao thread that's one it took less than a minute to find.

 

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I'm not sure you understand what "security" means in this context.

It is quite possible he intends to use revenues generated by the football club to repay the loan. The issue of security is separate and distinct to the question of where the money to repay the loan is coming from.

"Security" means assets which are available to the creditors if the loan is defaulted on.

The fact that SFC is not security for the loan (if that is a fact, which I expect it probably is) does not mean SFC will not be paying for the loan in one way or another.

The caveat to all this is that the loan itself is not necessarily bad news, although the details of quite where this money has come from and the cost of the money - and indeed whether SFC is expected to fund that cost - are somewhat lacking.

I thought it was his assets in Macu?

He may have assets in Macau (the gambling, money laundering and currency flight capital of China which makes Mos Eisley Cantina in Star Wars look like a Vicar's Tea Party); but The Times states that he has brought in at least three investors from Macau, so it may also be their assets. The difficulties and complications of moving money overseas cannot be stressed enough.

https://www.ft.com/content/2809e6e0-33c2-11e7-99bd-13beb0903fa3

Not really as he will have to service it somehow and has potentially secured it against the club's assets or income streams.Faraway Saint on the Gao thread that's one it took less than a minute to find.

 

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Oh look, I'm an example

They say no 'Extra' funds.

 

I presume we have the funds to bring in both Hoedt and the attacking player we want, just that after that there isn't any more - but then I doubt there is any need for any more.

 

Don't forget the new big Prem deal is paid pro-rata, so at this point in the season I assume we may have a slight cash flow problem.

This is what I thought. We have the funds for our targets but won't be making additional funds available.

I'm not sure you understand what "security" means in this context.

 

It is quite possible he intends to use revenues generated by the football club to repay the loan. The issue of security is separate and distinct to the question of where the money to repay the loan is coming from.

 

"Security" means assets which are available to the creditors if the loan is defaulted on.

 

The fact that SFC is not security for the loan (if that is a fact, which I expect it probably is) does not mean SFC will not be paying for the loan in one way or another.

 

The caveat to all this is that the loan itself is not necessarily bad news, although the details of quite where this money has come from and the cost of the money - and indeed whether SFC is expected to fund that cost - are somewhat lacking.

It's a waiting game so no point in fretting yet.

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As I tried to say we don't know so why worry until it impacts.

I'm not sure you understand what "security" means in this context.

 

It is quite possible he intends to use revenues generated by the football club to repay the loan. The issue of security is separate and distinct to the question of where the money to repay the loan is coming from.

 

"Security" means assets which are available to the creditors if the loan is defaulted on.

 

The fact that SFC is not security for the loan (if that is a fact, which I expect it probably is) does not mean SFC will not be paying for the loan in one way or another.

 

The caveat to all this is that the loan itself is not necessarily bad news, although the details of quite where this money has come from and the cost of the money - and indeed whether SFC is expected to fund that cost - are somewhat lacking.

A secure income stream is a legitimate form of security in this context. Sky tv payments, for example. Or parachute payments. I have no idea if that is the case here, but it is not impossible.

Who, here, has said that they have done so?

 

Assuming the loan is against Gao's assets, I'd speculate that he has a few assets outside China (they're bloody difficult to shift) and that's why he brought in other offshore investors. I'd also speculate that the collateral they've put up is very little relative to the size of the loan which will be reflected in higher borrowing costs.

Highlighted the only meaningful word in your stream of complete drivel.

Unless you're a chartered accountant with inside knowledge of the deal plus an intimate knowledge of our new owner's finances and intents I'd humbly suggest that speculate is a euphemism for talking out of your big, fat @rse and that you in fact know nothing, just like the rest of us.

How about we give him (and indeed Kat) the benefit of the (very considerable) doubt and consider the possibility that they may have the best interest of the club at heart given as, unlike most of the financial experts on here, they have put their money where their mouth is.

I'd be very surprised if Mr Gao has taken out a personal loan to fund the purchase of a business asset. No sane businessman would do that. It would make him personally liable if the loan is defaulted on, meaning he could lose his house (or one of his houses more likely!).

He's probably set-up some sort of limited liability shell company to borrow this money (so if there's a default, he could liquidate that company and lose nothing personally).

My hunch is that this debt will be transferred to the club eventually.

Rupert Lowe tried, and failed, to liquidate a shell company (Southampton Leisure Holdings), but keep the football company as a going concern. He didn't get away with that trick and I doubt Gao could either.

As I said on the other thread, debt isn't necessarily a bad thing so long as it's affordable, sustainable and allows the club to gain more in increased revenue than it has to spend on the debt repayments.

Overall, I think it's too early to tell if this is a good or bad takeover. We'll have to judge the Gao family on their actions over the next couple of years.