The Championship is a "bubble waiting to burst"

[beam1234]

The AoL and SoL come with a lot of fixed costs it's difficult to do much about. When Donald bought the club we had non-wage overheads of around £20m. Whilst they'll undoubtedly have made inroads to that number, stuff like business rates, policing costs and such stuff are hard to move short term.

wow

 

[Reptilia]

Seems like a huge mess.

That said, I think it can be cracked properly if you have a well thought-out plan relying on home grown players and smart scouting. Easier said than done, of course.

Sheff Utd being the prime example this year.

 

[DJM]

I was thinking about the £2.5m release clause value for MM & I wouldn't pay more. If you were thinking of a higher figure then you owe me a like, like.

Not at £2.5m, I don't

 

[KittenMittens]

The AoL and SoL come with a lot of fixed costs it's difficult to do much about. When Donald bought the club we had non-wage overheads of around £20m. Whilst they'll undoubtedly have made inroads to that number, stuff like business rates, policing costs and such stuff are hard to move short term.

I believe SD said that the business rates are coming down substantially this year.

 

[Grumpy Old Man]

I believe SD said that the business rates are coming down substantially this year.

I do remember that, but they'll still be a substantial overhead. We'll always have a higher fixed cost base than other clubs in the division because of the scale of our infrastructure. That means that if people are looking solely at revenue, they'll get a misleading view of how "rich" the club actually is.

 

[KittenMittens]

I think the worry I and others have is that if we try to run based on our cost-base and in a sustainable manner for this level, we'll be very little better off than other L1 clubs because the cost-base is (as you say) higher, and that revenue will be inhibited by the level we're playing at. Crowds, TV money, even prize money is reduced and that means reducing every cost that the club has to a very threadbare level to break even. A club of this size has vast advantages in theory, but we're quite rapidly eroding anything that could have helped us get out of the division.

Ultimately, we had a window of 2 years where we could do things that other teams couldn't do. An ambitious owner was needed who would understand that a small, manageable debt would likely be run up (or maintained) in order to ensure we could get promoted quickly.

We're going to balance the books at the expense of the club's on-field ambitions, and while that may appeal to some, I think most fans would say that being 'debt free' has not been a net benefit to the club's ultimate position. What difference could £10m from the parachute payments have made to the club over the last year by reducing, rather than clearing the SBC debt? That was money that we could have had to spend where it really counts, it was there, in fact it's largely still owed to us by our owner, and yet here we are, we haven't spent a penny on transfer fees this season and we're mid-table, whereas every club who spent money is above us, Ipswich, Peterboro, Coventry, Rotherham and Pompey. They haven't even spent much. Not asking for a £5m spree which may be impossible, but the plan to be sustainable in league one would always, always be at the expense of getting out of the division as a priority.

I'm all for sustainability, but I don't believe all debt is bad, and we should have ownership who understand that if they want to make a profit (which they should) it comes with a degree of personal financial speculation on their part.

 

[The Fitter]

I do remember that, but they'll still be a substantial overhead. We'll always have a higher fixed cost base than other clubs in the division because of the scale of our infrastructure. That means that if people are looking solely at revenue, they'll get a misleading view of how "rich" the club actually is.

The rates look likely to drop this year with Boris now in charge.

 

[Grumpy Old Man]

The rates look likely to drop this year with Boris now in charge.

Rule 1 in life - never trust a Tory.

I think the worry I and others have is that if we try to run based on our cost-base and in a sustainable manner for this level, we'll be very little better off than other L1 clubs because the cost-base is (as you say) higher, and that revenue will be inhibited by the level we're playing at. Crowds, TV money, even prize money is reduced and that means reducing every cost that the club has to a very threadbare level to break even. A club of this size has vast advantages in theory, but we're quite rapidly eroding anything that could have helped us get out of the division.

Ultimately, we had a window of 2 years where we could do things that other teams couldn't do. An ambitious owner was needed who would understand that a small, manageable debt would likely be run up (or maintained) in order to ensure we could get promoted quickly.

We're going to balance the books at the expense of the club's on-field ambitions, and while that may appeal to some, I think most fans would say that being 'debt free' has not been a net benefit to the club's ultimate position. What difference could £10m from the parachute payments have made to the club over the last year by reducing, rather than clearing the SBC debt? That was money that we could have had to spend where it really counts, it was there, in fact it's largely still owed to us by our owner, and yet here we are, we haven't spent a penny on transfer fees this season and we're mid-table, whereas every club who spent money is above us, Ipswich, Peterboro, Coventry, Rotherham and Pompey. They haven't even spent much. Not asking for a £5m spree which may be impossible, but the plan to be sustainable in league one would always, always be at the expense of getting out of the division as a priority.

I'm all for sustainability, but I don't believe all debt is bad, and we should have ownership who understand that if they want to make a profit (which they should) it comes with a degree of personal financial speculation on their part.

I don't think they had a choice on paying off that part of the loan once Short had moved it into Drumaville. Short had had to give security over, among other things, the Hilton to do that. So Short wouldn't have been best pleased if £10m of that was left hanging around. The logical thing would have been to have left that £25m in Sunderland for Donald and Methven to deal with, but, of course, that would have meant he couldn't leave the club "debt-free", which it clearly wasn't other than cosmetically.

 

[KittenMittens]

Rule 1 in life - never trust a Tory.


I don't think they had a choice on paying off that part of the loan once Short had moved it into Drumaville. Short had had to give security over, among other things, the Hilton to do that. So Short wouldn't have been best pleased if £10m of that was left hanging around. The logical thing would have been to have left that £25m in Sunderland for Donald and Methven to deal with, but, of course, that would have meant he couldn't leave the club "debt-free", which it clearly wasn't other than cosmetically.

I think that 'debt free' mantra was the big mistake. It went down so well when he took over and was the big selling point for his leadership. That first year, any questions were met with 'look, we're debt-free'. That is only a positive if it doesn't inhibit the club moving forward on the pitch, which it clearly has done.

Just to clarify though, of the '£40m' (neé £37m), I'm under the impression that the SBC loan of £25m was paid off in August 2018 (based on them removing the charge), is that right?

 

[Grumpy Old Man]

I think that 'debt free' mantra was the big mistake. It went down so well when he took over and was the big selling point for his leadership. That first year, any questions were met with 'look, we're debt-free'. That is only a positive if it doesn't inhibit the club moving forward on the pitch, which it clearly has done.

Just to clarify though, of the '£40m' (neé £37m), I'm under the impression that the SBC loan of £25m was paid off in August 2018 (based on them removing the charge), is that right?

That fits in with the use of the parachute, although the charges Short had over the club weren't lifted till April this year (presumably reflecting the payment of the last instalment of the shares. However, the charges SBC had over Drumaville and the hotel company weren't lifted until May, suggesting that Short only made the final payment to SBC then. Given that SBC were probably in the loop regarding knowledge of all the cash floes, I think we have to assume that SBC, at least, regarded the movement of the parachute into Drumaville as Sunderland discharging its responsibilities over that last £25m.

 

[KittenMittens]

That fits in with the use of the parachute, although the charges Short had over the club weren't lifted till April this year (presumably reflecting the payment of the last instalment of the shares. However, the charges SBC had over Drumaville and the hotel company weren't lifted until May, suggesting that Short only made the final payment to SBC then. Given that SBC were probably in the loop regarding knowledge of all the cash floes, I think we have to assume that SBC, at least, regarded the movement of the parachute into Drumaville as Sunderland discharging its responsibilities over that last £25m.

Yes I concur with all of this. And the money paid to Short in April also came from an advance of the remaining parachute payments from last year (April-July) of which the bulk went to Short, presumably because Donald needed it done to be able to sell the club, as he was in negotiations to do so at the time. Rough estimate of £6m or so more (I actually think £6.6m but let's be kind and say £6m).

That would mean a total amount of around £30m+ that has been spent in 2018/19 on getting rid of debt and acquiring shares on behalf of Donald. In my view that's not the best use of those funds, particularly given the very small window of opportunity we had to exist with Premier League money coming into a League One club. There were two better options imo, one was as you say to leave the debt in the club and allow it to be serviced as necessary (ie: reduced to a sustainable level) or the best option, that Donald put that money in himself.

Certainly don't think he should have been using club money in April to pay off shares, it's not hard to reconcile that vs our total lack of summer spending and think that the two are linked.