RAWA RAWA/Club Official Minutes/Newsletter

Ghandi Floss

Ghandi Floss

Striker
Here is the link to the official minutes from the last Red And White Army/SAFC meeting.

https://docs.wixstatic.com/ugd/6fecdb_7a8295f244fa408fbbefb684b16f4aee.pdf

@Grumpy Old Man took my place in it, as we wanted to query things on the financial side.
Considering I’ve minus 3 quid in my business account, and minus £1435 in my personal, I’m probably out of my depths trying to!



Also, here is the link to the RAWA first newsletter, containing information of what we’ve been doing the last year, and also about the next AGM planned for August.

Hello Members of the Red and White Army

Please sign up to the RAWA if you haven’t already done so.

I’m also planning on running a monthly thread on here for all our fans queries, no matter how small, and we’ll hopefully get everyone raised/answered with the club.
 


Ghandi Floss said:
Here is the link to the official minutes from the last Red And White Army/SAFC meeting.

https://docs.wixstatic.com/ugd/6fecdb_7a8295f244fa408fbbefb684b16f4aee.pdf

@Grumpy Old Man took my place in it, as we wanted to query things on the financial side.
Considering I’ve minus 3 quid in my business account, and minus £1435 in my personal, I’m probably out of my depths trying to!



Also, here is the link to the RAWA first newsletter, containing information of what we’ve been doing the last year, and also about the next AGM planned for August.

Hello Members of the Red and White Army

Please sign up to the RAWA if you haven’t already done so.

I’m also planning on running a monthly thread on here for all our fans queries, no matter how small, and we’ll hopefully get everyone raised/answered with the club.
Click to expand...

OK, here’s my take on what happened. Some of this is, of course speculation, particularly about what may have happened before the change of ownership, but, in my view, it’s consistent with subsequent events and the club’s account of them. I should make it clear that this is very much my own interpretation, and nothing to do with RAWA or anyone else.

The driving force in getting a deal over the line was a change in attitude from SBC. They didn’t want to lend to a League 1 club, and were starting to feel at risk. So they started invoking guarantees and/or threatening foreclosure, effectively forcing Short’s hand.

Short was able to come up with a deal where the debt would be partially cleared immediately by cashing in the club’s bond lodged with them (£23m in the 2018 accounts, but subject to currency fluctuations) and making a cash payment himself. This would leave £25m to be repaid from the parachute payments receivable by SAFC Ltd in July and August.

As the deal approached, Short made the decision to leave the club apparently debt free, by clearing the internal and external loans by means of a share issue. As part of this, the debt would pass to Drumaville, although payment would still come from SAFC. This allowed Short to make his claim. The reality of course is that the club still had the obligation to repay that £25m. It had simply been moved off balance-sheet. The simple solution would have been for Short to swallow his pride and leave the £25m in Sunderland’s books.

Enter Madrox. They are told that the deal is £37m, £12m for the shares in Sunderland Ltd, and £25m to pay off the SBC loan now sitting in Drumaville’s books. The £25m is specifically stated to be payable from the parachute payments. The problem is that that this creates a cost of investment of £37m to Madrox as a separate legal entity. Still, the hope is that the parachute can be reassigned to facilitate this. Nobody has thought to question whether the PL will allow this. They can’t, as it’s against PL regulations; it has to go into an account in the name of the club receiving the parachute payment. There is thus no alternative to the money coming into SAFC, and being passed through Madrox (in paper terms anyway), since Madrox is the legal entity with the debt to Drumaville. This movement is what created the balance between SAFC and Madrox. The £9.6m balance in the last accounts is the value of the July parachute instalment; the remainder of the £25m will have gone across in August. The final payment for the shares was made in April, when Short lifted his charges.

If you look strictly at legal form, this can be interpreted as SAFC meeting part of Madrox’s purchase price. However, the underlying substance is that the parachute was used for the purpose originally intended by Short, namely paying down the SBC loan.

It’s a legitimate question to ask whether that loan payment could have been made by the owners themselves. I’m not so sure they could. Firstly, it’s possible that the need to use the parachute was written into the share purchase agreement. Alternatively, raising £25m in cash by the end of August may not have been possible. After all, agreement had already been reached to pay to the share price in instalments. What we can be reasonably sure of is that those payments were used to pay off the loan, as the charges over the club weren’t removed until the end of August.

I’m fairly sure that there is no legal obligation on Madrox to repay the balance, although, as they put investment in themselves, it should come down anyway. It simply means that the money they put in comes off that balance, rather than creating new soft debt in the club.

What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
 
Grumpy Old Man said:
OK, here’s my take on what happened. Some of this is, of course speculation, particularly about what may have happened before the change of ownership, but, in my view, it’s consistent with subsequent events and the club’s account of them. I should make it clear that this is very much my own interpretation, and nothing to do with RAWA or anyone else.

The driving force in getting a deal over the line was a change in attitude from SBC. They didn’t want to lend to a League 1 club, and were starting to feel at risk. So they started invoking guarantees and/or threatening foreclosure, effectively forcing Short’s hand.

Short was able to come up with a deal where the debt would be partially cleared immediately by cashing in the club’s bond lodged with them (£23m in the 2018 accounts, but subject to currency fluctuations) and making a cash payment himself. This would leave £25m to be repaid from the parachute payments receivable by SAFC Ltd in July and August.

As the deal approached, Short made the decision to leave the club apparently debt free, by clearing the internal and external loans by means of a share issue. As part of this, the debt would pass to Drumaville, although payment would still come from SAFC. This allowed Short to make his claim. The reality of course is that the club still had the obligation to repay that £25m. It had simply been moved off balance-sheet. The simple solution would have been for Short to swallow his pride and leave the £25m in Sunderland’s books.

Enter Madrox. They are told that the deal is £37m, £12m for the shares in Sunderland Ltd, and £25m to pay off the SBC loan now sitting in Drumaville’s books. The £25m is specifically stated to be payable from the parachute payments. The problem is that that this creates a cost of investment of £37m to Madrox as a separate legal entity. Still, the hope is that the parachute can be reassigned to facilitate this. Nobody has thought to question whether the PL will allow this. They can’t, as it’s against PL regulations; it has to go into an account in the name of the club receiving the parachute payment. There is thus no alternative to the money coming into SAFC, and being passed through Madrox (in paper terms anyway), since Madrox is the legal entity with the debt to Drumaville. This movement is what created the balance between SAFC and Madrox. The £9.6m balance in the last accounts is the value of the July parachute instalment; the remainder of the £25m will have gone across in August. The final payment for the shares was made in April, when Short lifted his charges.

If you look strictly at legal form, this can be interpreted as SAFC meeting part of Madrox’s purchase price. However, the underlying substance is that the parachute was used for the purpose originally intended by Short, namely paying down the SBC loan.

It’s a legitimate question to ask whether that loan payment could have been made by the owners themselves. I’m not so sure they could. Firstly, it’s possible that the need to use the parachute was written into the share purchase agreement. Alternatively, raising £25m in cash by the end of August may not have been possible. After all, agreement had already been reached to pay to the share price in instalments. What we can be reasonably sure of is that those payments were used to pay off the loan, as the charges over the club weren’t removed until the end of August.

I’m fairly sure that there is no legal obligation on Madrox to repay the balance, although, as they put investment in themselves, it should come down anyway. It simply means that the money they put in comes off that balance, rather than creating new soft debt in the club.

What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
Click to expand...
Thank you

That is deeply concerning
 
Grumpy Old Man said:
OK, here’s my take on what happened. Some of this is, of course speculation, particularly about what may have happened before the change of ownership, but, in my view, it’s consistent with subsequent events and the club’s account of them. I should make it clear that this is very much my own interpretation, and nothing to do with RAWA or anyone else.

The driving force in getting a deal over the line was a change in attitude from SBC. They didn’t want to lend to a League 1 club, and were starting to feel at risk. So they started invoking guarantees and/or threatening foreclosure, effectively forcing Short’s hand.

Short was able to come up with a deal where the debt would be partially cleared immediately by cashing in the club’s bond lodged with them (£23m in the 2018 accounts, but subject to currency fluctuations) and making a cash payment himself. This would leave £25m to be repaid from the parachute payments receivable by SAFC Ltd in July and August.

As the deal approached, Short made the decision to leave the club apparently debt free, by clearing the internal and external loans by means of a share issue. As part of this, the debt would pass to Drumaville, although payment would still come from SAFC. This allowed Short to make his claim. The reality of course is that the club still had the obligation to repay that £25m. It had simply been moved off balance-sheet. The simple solution would have been for Short to swallow his pride and leave the £25m in Sunderland’s books.

Enter Madrox. They are told that the deal is £37m, £12m for the shares in Sunderland Ltd, and £25m to pay off the SBC loan now sitting in Drumaville’s books. The £25m is specifically stated to be payable from the parachute payments. The problem is that that this creates a cost of investment of £37m to Madrox as a separate legal entity. Still, the hope is that the parachute can be reassigned to facilitate this. Nobody has thought to question whether the PL will allow this. They can’t, as it’s against PL regulations; it has to go into an account in the name of the club receiving the parachute payment. There is thus no alternative to the money coming into SAFC, and being passed through Madrox (in paper terms anyway), since Madrox is the legal entity with the debt to Drumaville. This movement is what created the balance between SAFC and Madrox. The £9.6m balance in the last accounts is the value of the July parachute instalment; the remainder of the £25m will have gone across in August. The final payment for the shares was made in April, when Short lifted his charges.

If you look strictly at legal form, this can be interpreted as SAFC meeting part of Madrox’s purchase price. However, the underlying substance is that the parachute was used for the purpose originally intended by Short, namely paying down the SBC loan.

It’s a legitimate question to ask whether that loan payment could have been made by the owners themselves. I’m not so sure they could. Firstly, it’s possible that the need to use the parachute was written into the share purchase agreement. Alternatively, raising £25m in cash by the end of August may not have been possible. After all, agreement had already been reached to pay to the share price in instalments. What we can be reasonably sure of is that those payments were used to pay off the loan, as the charges over the club weren’t removed until the end of August.

I’m fairly sure that there is no legal obligation on Madrox to repay the balance, although, as they put investment in themselves, it should come down anyway. It simply means that the money they put in comes off that balance, rather than creating new soft debt in the club.

What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
Click to expand...
Cheers
 
Grumpy Old Man said:
What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
Click to expand...


OK.

Thanks for that. Although things appear to be less clear cut than the original statements, how is this going to affect the club now and for the next season?

Will the charges affect our ability to sign players without the cash injection of another investor?

And is there any more 'hidden' charges that will affect the clubs cash flow?

PS. Pour yourself a coffee mate, it's going to be a busy morning for you:lol:
 
Zak's Dad said:
OK.

Thanks for that. Although things appear to be less clear cut than the original statements, how is this going to affect the club now and for the next season?

Will the charges affect our ability to sign players without the cash injection of another investor?

And is there any more 'hidden' charges that will affect the clubs cash flow?

PS. Pour yourself a coffee mate, it's going to be a busy morning for you:lol:
Click to expand...

That's the last bit of sloppy language. There are no charges over the club; the short term loan is merely guaranteed by the relevant parachute instalments. It's very similar to when a company uses a debt discounter - you get the cash upfront, and they collect the money later. The bigger constraint on spending is that the cost base is too high. Signings, I feel, will need at least some money from the owners.
 
Grumpy Old Man said:
OK, here’s my take on what happened. Some of this is, of course speculation, particularly about what may have happened before the change of ownership, but, in my view, it’s consistent with subsequent events and the club’s account of them. I should make it clear that this is very much my own interpretation, and nothing to do with RAWA or anyone else.

The driving force in getting a deal over the line was a change in attitude from SBC. They didn’t want to lend to a League 1 club, and were starting to feel at risk. So they started invoking guarantees and/or threatening foreclosure, effectively forcing Short’s hand.

Short was able to come up with a deal where the debt would be partially cleared immediately by cashing in the club’s bond lodged with them (£23m in the 2018 accounts, but subject to currency fluctuations) and making a cash payment himself. This would leave £25m to be repaid from the parachute payments receivable by SAFC Ltd in July and August.

As the deal approached, Short made the decision to leave the club apparently debt free, by clearing the internal and external loans by means of a share issue. As part of this, the debt would pass to Drumaville, although payment would still come from SAFC. This allowed Short to make his claim. The reality of course is that the club still had the obligation to repay that £25m. It had simply been moved off balance-sheet. The simple solution would have been for Short to swallow his pride and leave the £25m in Sunderland’s books.

Enter Madrox. They are told that the deal is £37m, £12m for the shares in Sunderland Ltd, and £25m to pay off the SBC loan now sitting in Drumaville’s books. The £25m is specifically stated to be payable from the parachute payments. The problem is that that this creates a cost of investment of £37m to Madrox as a separate legal entity. Still, the hope is that the parachute can be reassigned to facilitate this. Nobody has thought to question whether the PL will allow this. They can’t, as it’s against PL regulations; it has to go into an account in the name of the club receiving the parachute payment. There is thus no alternative to the money coming into SAFC, and being passed through Madrox (in paper terms anyway), since Madrox is the legal entity with the debt to Drumaville. This movement is what created the balance between SAFC and Madrox. The £9.6m balance in the last accounts is the value of the July parachute instalment; the remainder of the £25m will have gone across in August. The final payment for the shares was made in April, when Short lifted his charges.

If you look strictly at legal form, this can be interpreted as SAFC meeting part of Madrox’s purchase price. However, the underlying substance is that the parachute was used for the purpose originally intended by Short, namely paying down the SBC loan.

It’s a legitimate question to ask whether that loan payment could have been made by the owners themselves. I’m not so sure they could. Firstly, it’s possible that the need to use the parachute was written into the share purchase agreement. Alternatively, raising £25m in cash by the end of August may not have been possible. After all, agreement had already been reached to pay to the share price in instalments. What we can be reasonably sure of is that those payments were used to pay off the loan, as the charges over the club weren’t removed until the end of August.

I’m fairly sure that there is no legal obligation on Madrox to repay the balance, although, as they put investment in themselves, it should come down anyway. It simply means that the money they put in comes off that balance, rather than creating new soft debt in the club.

What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
Click to expand...
Cheers @Grumpy Old Man In your opinion what does the short/medium/long term future hold for Our club?
 
Very good information, and nice to see things being done in a professional manner. Can only say well done and thanks to all involved.
I realise the club has no real accountability to the supporters’ groups but at least under this structure the questions are minuted and will carry over into subsequent meetings.
 
Grumpy Old Man said:
That's the last bit of sloppy language. There are no charges over the club; the short term loan is merely guaranteed by the relevant parachute instalments. It's very similar to when a company uses a debt discounter - you get the cash upfront, and they collect the money later. The bigger constraint on spending is that the cost base is too high. Signings, I feel, will need at least some money from the owners.
Click to expand...

Well that would be nice. You can not expect to come into a club and spend hardly any money from your personal bank account.
 
IB Concerns amongst supporters – When is money coming back into the Club. Is there an agreed timescale?

CM noted that the parachute payment money was always intended to pay off SBC bank debt, and that was
precisely the “money coming back into the club” – indeed, it is precisely what parachute payments are intended to
do.

The fact that a paper debt has been run up is practically irrelevant, as that money was never going to be spent
on players; it was always going to pay down debt, whether Ellis Short, Madrox or anyone else owned the club in
June 2018. So, no, the club does not get lucky enough both to pay off its debt and then receive the same money
again to spend on new players! Nor will it make any difference if a majority stake in the club were to be sold, as if
the owed amount of cash were to be placed in the club it would simply increase the purchase price by that sum.
Click to expand...

Red flag one: this is the money that Methven and Donald have been talking about drip-feeding back into the club. Doesn't sound like that's the intent.
 
Grumpy Old Man said:
OK, here’s my take on what happened. Some of this is, of course speculation, particularly about what may have happened before the change of ownership, but, in my view, it’s consistent with subsequent events and the club’s account of them. I should make it clear that this is very much my own interpretation, and nothing to do with RAWA or anyone else.

The driving force in getting a deal over the line was a change in attitude from SBC. They didn’t want to lend to a League 1 club, and were starting to feel at risk. So they started invoking guarantees and/or threatening foreclosure, effectively forcing Short’s hand.

Short was able to come up with a deal where the debt would be partially cleared immediately by cashing in the club’s bond lodged with them (£23m in the 2018 accounts, but subject to currency fluctuations) and making a cash payment himself. This would leave £25m to be repaid from the parachute payments receivable by SAFC Ltd in July and August.

As the deal approached, Short made the decision to leave the club apparently debt free, by clearing the internal and external loans by means of a share issue. As part of this, the debt would pass to Drumaville, although payment would still come from SAFC. This allowed Short to make his claim. The reality of course is that the club still had the obligation to repay that £25m. It had simply been moved off balance-sheet. The simple solution would have been for Short to swallow his pride and leave the £25m in Sunderland’s books.

Enter Madrox. They are told that the deal is £37m, £12m for the shares in Sunderland Ltd, and £25m to pay off the SBC loan now sitting in Drumaville’s books. The £25m is specifically stated to be payable from the parachute payments. The problem is that that this creates a cost of investment of £37m to Madrox as a separate legal entity. Still, the hope is that the parachute can be reassigned to facilitate this. Nobody has thought to question whether the PL will allow this. They can’t, as it’s against PL regulations; it has to go into an account in the name of the club receiving the parachute payment. There is thus no alternative to the money coming into SAFC, and being passed through Madrox (in paper terms anyway), since Madrox is the legal entity with the debt to Drumaville. This movement is what created the balance between SAFC and Madrox. The £9.6m balance in the last accounts is the value of the July parachute instalment; the remainder of the £25m will have gone across in August. The final payment for the shares was made in April, when Short lifted his charges.

If you look strictly at legal form, this can be interpreted as SAFC meeting part of Madrox’s purchase price. However, the underlying substance is that the parachute was used for the purpose originally intended by Short, namely paying down the SBC loan.

It’s a legitimate question to ask whether that loan payment could have been made by the owners themselves. I’m not so sure they could. Firstly, it’s possible that the need to use the parachute was written into the share purchase agreement. Alternatively, raising £25m in cash by the end of August may not have been possible. After all, agreement had already been reached to pay to the share price in instalments. What we can be reasonably sure of is that those payments were used to pay off the loan, as the charges over the club weren’t removed until the end of August.

I’m fairly sure that there is no legal obligation on Madrox to repay the balance, although, as they put investment in themselves, it should come down anyway. It simply means that the money they put in comes off that balance, rather than creating new soft debt in the club.

What we’re seeing here is the aftermath of a very badly constructed deal overlaid on a ham-fisted debt reorganisation to allow the previous owner to claim the club was handed over was debt free. That was very much not the case.
Click to expand...

A lot of this went over my head, as I find it hard to care about financial/money crack.
But does the last paragraph mean Ellis Short didn’t really clear the debt before leaving? But still tried to paint himself in a better light?
 
Grumpy Old Man said:
That's the last bit of sloppy language. There are no charges over the club; the short term loan is merely guaranteed by the relevant parachute instalments. It's very similar to when a company uses a debt discounter - you get the cash upfront, and they collect the money later. The bigger constraint on spending is that the cost base is too high. Signings, I feel, will need at least some money from the owners.
Click to expand...

Thanks.

So I'm guessing the drive to shed high earners and the possible canvassing of other investors shows that the owners are trying to do this using other people's / the clubs money first.
(That's just me speculating out loud with no knowledge or forethought).
 

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