Protest must happen

That's very true (but it doesn't necessarily involve administration) and in a year the club pays HMRC several hundreds of thousands in income tax and VAT. And that's the point. Whatever we might think of R&R they have paid cash and have loans outstanding in excess of €6million from the purchase of the club which if the club were to enter administration, they would lose overnight. Because of the way the loans are not a charge on the club (they are all held at the German HoldCo level), they would lose everything. This is so unlike the 2001 or 2003 situations or even 2009 when ML loaned the club his £1mill. Does anybody really think that they would be willing to lose all of their original €6million because of a few hundreds of thousands owed to their biggest creditor? Rahic might be incompetent as a football chairman but Rupp is a smart businessman and I doubt he would ever put himself in that position.

 

Agreed. That's the whole point of this bloody saga. They paid over €6million for something whose assets were worth considerably less than the purchase price, probably no more than half what they paid being generous. And in doing so, imo completely misread the culture and finances of the English game. There simply is no quick way to making money in the lower leagues of the EFL and arguably even in the Championship without very deep pockets. I really believe Rupp has been sold a pup and I don't expect him to put any more of his money into the club to 'buy' success as most clubs who have been promoted from our league in recent years have had to do. I don't imagine he will throw any more good money after the bad. His best bet imo is to find a new purchaser who would be willing to pay something realistic for our club and I suspect that will be a lot less than R&R original paid .. for several reasons!

 

Unless what I've read is wrong that’s not really what he did. He loaned the club money, money they had to repay as soon as they had the money which saw them have to hand him over all the FA Cup money leaving nothing to strengthen the squad. That’s not investing and then profiting when that investment had allowed the club to grow which is what was being suggested was needed. That’s actually the kind of investment that more often than not bankrupts the club, Graham Westley did the same thing at Farnborough Town (although he went further and made himself manager which he used to get the manager role at a better club whichnhe pissing off to with the cup run money and half the playing and back room staff)

 

Overpaying is normal though. The Glazers paid £800mill for United when the asset value was about £300mill. As long as the overpaying isnt so far out of whack you don’t mind as you basically write the overpayment down each with the accounting practice of goodwill which provides a decent tax shield

 

Overpaying is not normal. In our market, we'd be out of business very quickly if clients believed they were being advised in overpaying for their acquisitions! Man U is a very different beast to City. They were expected to have huge growth in earnings because of overseas TV rights; an impending new Sky deal; enormous marketing opportunities particularly in Asia and a balance sheet which was massively underfunded and undergeared. It was the perfect storm for somebody like the Glazers to buy an undervalued company with real growth potential, banks queuing up to refinance the balance sheet at lower rates, a BS full of undistributed profits and the likelihood of a public share quotation. With some clever but well understood financial engineering, it was a non-decision for a new owner.

And therefore a completely different proposition to our own club!

And for completeness, there is no tax shield for amortisation of goodwill for a club such as ours which doesn't pay any corporation tax and won't do for years to come! There is nothing to shield against.

 

Even if that’s the case it’s not like the loan was the situation that Onside was describing. He lent £1million and in return the club was paying him a yearly return of 9% above base rate. This is when the BoE interest rate was 0.5% so he was getting around £95k a year in interest. So that’s not investing now with no return for a return down the line when the club has grown and is profitable, it ended up being write off debts but no more, take £95k a year and when they had a cup run take all the profits from that. Rhodes wanting to get rid of that 95k a year probably made sense rather than let Law wait it out

 

You have the wrong end of the stick. You mentioned about having an owner who invests without any desire to make any money back until well down the line when the club was profitable. I replied to you saying that doesn’t really happen as in football because football clubs are generally not profitable endeavours and to get to the point where they can be required massive investment which makes actually making a return very hard.

To which someone claimed that Lawn did come in with no intention to make a return until the level of investment paid off

 

I'm not saying putting the money in was a bad thing and if paying 9% above base rate was the best deal city could get then fine. But it wasn’t some altruistic investment to help grow the club to a point they were financially secure that Fools Gold implies. It was a life raft for which he was paid handsomely each year for providing before getting his money back at the expense of investing in the likes of the squad when they got cup run money

 

If you like, it's the writing off of goodwill (ie what the owners paid for the club over and above its intrinsic value) over several years in the same way as a company might depreciate what it paid for its plant and machinery.

The reason why City don't pay any corporation unlike many other businesses is a simple one in one sense. Since the club was bought by the Rhodes' way back in 2003 after Admin 2, the club has clocked up years and years of accumulated taxable losses despite those few years when we've made profits from the sale of Delph, Wells etc and the league cup run. It's the same reason why the owners cannot take dividends out of the club (despite what some on here and elsewhere suggest) because of these same accumulated losses.

 

Again you are missing the point. I'm not arguing the merits of Lawns money. Just that he isn’t the altruistic investor that Onside said was neede and which Fools Gold is claiming Lawn was