Have the club paid off the 80 million pound loan ?

[Andrew Watson]

Have the club ever paid off the 80 million loan from a few years back?  Am I right in thinking SR got the club for a cheaper price on the understanding that they paid back the loan.

[daldridge7]

Pretty sure they refinanced it on better terms

[daldridge7]

https://www.dailyecho.co.uk/sport/25016622.southampton-fcs-5-7m-profit-2023-24-financial-accounts/

[goodymatt]

So we paid some off, now it’s back up to £80m on better terms. Explains why the rumoured club sale value is a bit lower than market value? If we get stuck in the championship this loan could become a big problem.

[Saint Fan CaM]

11 minutes ago, goodymatt said:

So we paid some off, now it’s back up to £80m on better terms. Explains why the rumoured club sale value is a bit lower than market value? If we get stuck in the championship this loan could become a big problem.

True. Remember in the Lowe years it was the interest payments on the debt that took us down.

[goodymatt]

9 minutes ago, Saint Fan CaM said:

True. Remember in the Lowe years it was the interest payments on the debt that took us down.

Maybe selling us now makes some sense, right now we are better value and there is a good chance to go straight back up. If we succeed then great but the value will be higher and less interesting to buyers as survival will still be very challenging. If we fail to go up, that loan and reducing parachute payments will strangle us more and more.

[Saint Fan CaM]

1 minute ago, goodymatt said:

Maybe selling us now makes some sense, right now we are better value and there is a good chance to go straight back up. If we succeed then great but the value will be higher and less interesting to buyers as survival will still be very challenging. If we fail to go up, that loan and reducing parachute payments will strangle us more and more.

Indeed and serves to remind us why this summer is not just another window - it will be a critical repair and rebuild process that will have far reaching consequences on the status of the club mid-long term. In my view there’s as much chance of Dragan selling later - i.e. if another relegation happens, as the club will be cheaper to acquire, however that does also mean likely job losses and assets sold.

[Saint86]

29 minutes ago, Saint Fan CaM said:

True. Remember in the Lowe years it was the interest payments on the debt that took us down.

Wasn't it Barclays reducing the overdraft somewhat harshly that put us under?

[Saint Fan CaM]

2 minutes ago, Saint86 said:

Wasn't it Barclays reducing the overdraft somewhat harshly that put us under?

And that.

[Chez]

11 hours ago, daldridge7 said:

Pretty sure they refinanced it on better terms

They paid a decent chunk of the loan off last year to get the total down to about £69m, but then took out another £11m loan, so it's now back up to £80m.

The loan cost us £11m to service (interest accrued on the loan) in 2023, and cost us £9m to service in 2024. So, you'd think this year (and next) we will be spending similar amounts just on interest payments. Not ideal, but pretty much the norm these days. 

[Andrew Watson]

Surely it is Mr Solaks to pay then.

 

[Chez]

2 hours ago, Andrew Watson said:

Surely it is Mr Solaks to pay then.

 

Nope. The company owns the debt. Solak wont be paying the debt down out of his coffers. 

Edited May 1 by Chez

[Andrew Watson]

Chez, maybe I have wrongly assumed that SR got the club on the cheap as long as they paid off the debt. If I am wrong, I hold my hand up.

[Weston Super Saint]

22 hours ago, goodymatt said:

So we paid some off, now it’s back up to £80m on better terms. 

 

20 hours ago, Chez said:

The loan cost us £11m to service (interest accrued on the loan) in 2023, and cost us £9m to service in 2024. 

Which means the 'better terms' are still over 10% p.a.!

These guys are as shit at financing as they are at actually running the club.

[Chez]

8 hours ago, Andrew Watson said:

Chez, maybe I have wrongly assumed that SR got the club on the cheap as long as they paid off the debt. If I am wrong, I hold my hand up.

They got it cheaper because it had a £80m debt which they had to take on. They didn't have any obligation to pay the debt off immediately at the moment of purchase.

It's like buying a car valued at £10k with £4k still left to pay on the finance (that you take on) for £6k. You spend £6k up front then maybe £1k a year for four and a bit years.

the new owner doesn't have to pay it off at all, because it's a company, and the company can gradually pay the debt using the income it makes each year. Except they haven't even done that. The debt is similar in size to when they bought the club (I think).

[Holmes_and_Watson]

3 hours ago, Weston Super Saint said:

 

Which means the 'better terms' are still over 10% p.a.!

These guys are as shit at financing as they are at actually running the club.

Point taken.

But if their finance was really as bad as their football, they'd be harvesting our organs to get a few quid in, after losing it all when their crypto got pinched. Something like that would be a parallel with how badly they run the football side. 🙂

[Saint86]

2 hours ago, Chez said:

They got it cheaper because it had a £80m debt which they had to take on. They didn't have any obligation to pay the debt off immediately at the moment of purchase.

It's like buying a car valued at £10k with £4k still left to pay on the finance (that you take on) for £6k. You spend £6k up front then maybe £1k a year for four and a bit years.

the new owner doesn't have to pay it off at all, because it's a company, and the company can gradually pay the debt using the income it makes each year. Except they haven't even done that. The debt is similar in size to when they bought the club (I think).

It was a Covid loan with a significant/alarming interest rate originally - something like £80-90M with 9% interest or something.

(just checked this actually, my recollection not too far off: https://www.theguardian.com/football/2021/feb/22/sign-of-the-times-how-english-clubs-are-turning-to-high-interest-us-loans#:~:text=Southampton's £78.8m loan,and the club's other properties.)

^^ That article was from 2021.

From the echo summary of the accounts (see also my post earlier in the year), last season the club paid of a whopping £23.8M, which only took the loan down to £70M.

Someone with more time than me can go through every set of club accounts since 2021 and calculate exactly how much interest we've paid on that loan in 3-4years, but suffice to say its probably horrendous and not something that is sustainable.

So when all is said and done:

Bringing the loan under a more favourable interest rates is a good thing.

[Chez]

2 hours ago, Saint86 said:

It was a Covid loan with a significant/alarming interest rate originally - something like £80-90M with 9% interest or something.

(just checked this actually, my recollection not too far off: https://www.theguardian.com/football/2021/feb/22/sign-of-the-times-how-english-clubs-are-turning-to-high-interest-us-loans#:~:text=Southampton's £78.8m loan,and the club's other properties.)

^^ That article was from 2021.

From the echo summary of the accounts (see also my post earlier in the year), last season the club paid of a whopping £23.8M, which only took the loan down to £70M.

Someone with more time than me can go through every set of club accounts since 2021 and calculate exactly how much interest we've paid on that loan in 3-4years, but suffice to say its probably horrendous and not something that is sustainable.

So when all is said and done:

Bringing the loan under a more favourable interest rates is a good thing.

I think the bank loan interest paid so far is about £35m (not including 2025), which doesn't include the extra amount paid to reduce the underlying debt (which was not long after increased again when taking another extra loan out)

2021 - £7.66m
2022 - £7.71m
2023 - £10.96m
2024 £9.02m

Edited May 2 by Chez

[Andrew Watson]

Thanks Chez and company for clarifying.