Significant investment by FPP has been made

[wash]

of course this is corerect..but if the loan is to madrox..and madrox invest it into safc..then the security ofr the loan is something madrox provide..not something safc do..

I take it you speak to your phone/ computer to reply rather than type

 

[Grumpy Old Man]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.

When are they due to be published ?

April next year at the latest.

 

[kingkeane]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

Does this mean there shoudln't be an issue spending some in January if required without FFP being an issue?

 

[GBSAFC]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

so for all of us who arent spreadsheet/ ffp n*nces... does that mean we can spend anything upto 9m in Jan and not face ££ penalties

 

[Grumpy Old Man]

Does this mean there shoudln't be an issue spending some in January if required without FFP being an issue?

Spending the transfer fees was never the issue. The issue was not going over the wage ceiling of 60% of income. Even now, it's a double edged sword though. If we bump up the wage bill now and don't go up, it would create a bigger problem in the summer unless the investment was repeated. It's not as straightforward as it seems.

Does this mean there shoudln't be an issue spending some in January if required without FFP being an issue?

See above

 

[martyftm]

Spending the transfer fees was never the issue. The issue was not going over the wage ceiling of 60% of income. Even now, it's a double edged sword though. If we bump up the wage bill now and don't go up, it would create a bigger problem in the summer unless the investment was repeated. It's not as straightforward as it seems.

See above

Thanks Grumpy for keeping us all informed with your expert knowledge.

 

[RTGAdmin]

Spending the transfer fees was never the issue. The issue was not going over the wage ceiling of 60% of income. Even now, it's a double edged sword though. If we bump up the wage bill now and don't go up, it would create a bigger problem in the summer unless the investment was repeated. It's not as straightforward as it seems.

See above

Interesting that the whole investment has gone to SAFC in one lump if that is the case, as that would mean no issue with spending this year, but as you say, creates a potential issue next year - presumably even if the capital is still sitting there if we remain in league one as it would be income now, not next season!

 

[Grumpy Old Man]

Interesting that the whole investment has gone to SAFC in one lump if that is the case, as that would mean no issue with spending this year, but as you say, creates a potential issue next year - presumably even if the capital is still sitting there if we remain in league one as it would be income now, not next season!

Unless, of course, there are plans for similar investments in future seasons, or the Americans make moves to take more control.

 

[davebaxt]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

What is meant by no 1 & 2. Sorry for sounding like a thicky.

 

[Abu Dhabi Red and White]

Righty-ho, we now have a raft

Flotation? Sorry to stick my oar in.

 

[kingkeane]

Unless, of course, there are plans for similar investments in future seasons, or the Americans make moves to take more control.

I am sure this will have been discussed don't you think?

 

[Grumpy Old Man]

I am sure this will have been discussed don't you think?

Undoubtedly, although nothing will be said publically about it.

 

[Secret Visage]

Unless, of course, there are plans for similar investments in future seasons, or the Americans make moves to take more control.

This is my thinking.
They've had discussions about what we need / they can do, this season in League One and the financial injection covers this.
Anything additional will depend on where we find ourselves next season.

 

[Grumpy Old Man]

What is meant by no 1 & 2. Sorry for sounding like a thicky.

You don't sound like a thicky at all. It's quite technical, but could be important going forward. I'll try and explain it as simply as I can, but it's not straightforward.

When a company issues shares, they have what's called a nominal value - the face value of the share. In the case of Sunderland Ltd, this is 1p; for SAFC Ltd, it's £1. However, shares are normally sold for more than that when they're issued. That brings in more money than the nominal value of the shares - the difference is put into something called a share premium account, which forms part of the company's reserves. The other main part of a company's reserves are retained earnings, the accumulated profits over they years (or, in Sunderland's case losses). In the case of Sunderland, these reserves had grown piecemeal over the years, to the point where the club had a huge share premium, and equally huge losses.

The reason this is important is that a company can only pay dividends from what are known as distributable reserves, usually meaning retained earnings. Other reserves, including the share premium account, are called non-distributable and can't be used to repay shareholders. In Sunderland's case, the retained losses were so large that there was no prospect of the club having distributable reserves for the foreseeable future. It also makes that side of the balance sheet look really untidy, and gives a misleading view of its solvency if users only look at the retained earnings number

If a company is clearly solvent (and the directors have to submit a signed declaration to that effect), it can, with the agreement of 75% or more of the shareholders, either reduce its issued share capital, cancel its share premium account, or both. This has the impact of increasing the distributable reserves and making the balance sheet look much neater. It also opens up the possibility of dividends being paid in future.

Why is this important? Well, one potential initial investment method for FPP would be to take up what are known as preference shares. These usually have no voting rights, but are compensated for lack of control by a guaranteed dividend (usually x% of nominal value), which has to be paid before any dividends to ordinary shareholders (that's why they're called preference shares). This is the way MSD invested in the Florida Marlins. Obviously, to pay a preference dividend requires distributable reserves. Now. I'm certainly not saying that this is the intention. However, it does make it a possibility. Quite often, preference shares also come with a right to conversion into ordinary shares - this could provide FPP with a means of taking control gradually if they went down that route.

 

[OzzyMac]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

Could the 9 million be money that SD had previously taken out of the club last season?

 

[Grumpy Old Man]

Could the 9 million be money that SD had previously taken out of the club last season?

Not really. That's a debtor in the books of SAFC Ltd. Any cash coming in to do that would simply be a reduction in that debtor; very straightforward.

 

[OzzyMac]

Not really. That's a debtor in the books of SAFC Ltd. Any cash coming in to do that would simply be a reduction in that debtor; very straightforward.

Cheers

 

[Linus]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

Apology accepted.

 

[CornedBeef]

Righty-ho, we now have a raft of filings at Companies House for Sunderland Limited. As a result of this, I think I've got a handle on what's happened.

Firstly, a mea culpa. I thought the share allotment was part of the tidying up. It's not. It's the actual investment coming in.

What has happened is:

1. The existing share capital of £1.608m was reduced to £1m.
2. The share premium of £251.6m has been cancelled
3. The amount thus released of £252.2m has been credited to reserves.

All this happened between 17 and 31 October

4. On 1 November £9m in new shares were allotted, presumably to Madrox.

The numbers are slightly different, but there are mirror entries to these in SAFC Ltd.

So, it looks as though the investment amount is £9m, and it's come in as share capital, meaning it will count as income for FFP purposes.


April next year at the latest.

Good work as always. Thanks

 

[nandos sonic sauce]

You don't sound like a thicky at all. It's quite technical, but could be important going forward. I'll try and explain it as simply as I can, but it's not straightforward.

When a company issues shares, they have what's called a nominal value - the face value of the share. In the case of Sunderland Ltd, this is 1p; for SAFC Ltd, it's £1. However, shares are normally sold for more than that when they're issued. That brings in more money than the nominal value of the shares - the difference is put into something called a share premium account, which forms part of the company's reserves. The other main part of a company's reserves are retained earnings, the accumulated profits over they years (or, in Sunderland's case losses). In the case of Sunderland, these reserves had grown piecemeal over the years, to the point where the club had a huge share premium, and equally huge losses.

The reason this is important is that a company can only pay dividends from what are known as distributable reserves, usually meaning retained earnings. Other reserves, including the share premium account, are called non-distributable and can't be used to repay shareholders. In Sunderland's case, the retained losses were so large that there was no prospect of the club having distributable reserves for the foreseeable future. It also makes that side of the balance sheet look really untidy, and gives a misleading view of its solvency if users only look at the retained earnings number

If a company is clearly solvent (and the directors have to submit a signed declaration to that effect), it can, with the agreement of 75% or more of the shareholders, either reduce its issued share capital, cancel its share premium account, or both. This has the impact of increasing the distributable reserves and making the balance sheet look much neater. It also opens up the possibility of dividends being paid in future.

Why is this important? Well, one potential initial investment method for FPP would be to take up what are known as preference shares. These usually have no voting rights, but are compensated for lack of control by a guaranteed dividend (usually x% of nominal value), which has to be paid before any dividends to ordinary shareholders (that's why they're called preference shares). This is the way MSD invested in the Florida Marlins. Obviously, to pay a preference dividend requires distributable reserves. Now. I'm certainly not saying that this is the intention. However, it does make it a possibility. Quite often, preference shares also come with a right to conversion into ordinary shares - this could provide FPP with a means of taking control gradually if they went down that route.

Cheers GOM