Jumping on the debt discussion bandwagon.

[tian447]

I hate to keep reminding everyone and banging on about the whole debt issue, but I was just discussing this with flatmates and it's a strange one.

 

Who do we owe(or before it being bankrolled by UBIG, did we owe) all that amount of money. ?30 Million + is an absolutely staggering amount to owe for a club with very little chance of ever paying it off, short of winning the Euromillions.

 

How have we amassed this? Who exactly is this money owed to, and why do they seem content to allow us to continue as a club? If someone owed my company ?30M, I would be pushing through the courts to get it back as soon as possible.

 

I know that a profit turning football club is a rare thing, but where exactly are our expenditures going...?

[JAYEL]

I hate to keep reminding everyone and banging on about the whole debt issue, but I was just discussing this with flatmates and it's a strange one.

 

Who do we owe(or before it being bankrolled by UBIG, did we owe) all that amount of money. ?30 Million + is an absolutely staggering amount to owe for a club with very little chance of ever paying it off, short of winning the Euromillions.

 

How have we amassed this? Who exactly is this money owed to, and why do they seem content to allow us to continue as a club? If someone owed my company ?30M, I would be pushing through the courts to get it back as soon as possible.

 

I know that a profit turning football club is a rare thing, but where exactly are our expenditures going...?

 

We owe it to ourselves

 

The UBIG Corporation.

 

 

.

[tian447]

We owe it to ourselves

 

The UBIG Corporation.

 

 

.

 

 

Who do we owe(or before it being bankrolled by UBIG, did we owe) was the operative part of this.

 

Allow me to rephrase.

 

BEFORE owing it to UBIG, before they bought it out, who was it owed to. How did it accumulate?

[Thunderstruck]

We owe it to ourselves

 

The UBIG Corporation.

 

 

.

 

Not unlike UK plc where we own most of the national debt through pension funds, insurance companies and the Bank of England. Although, to listen to some, you would think we owed it all to some American-Italian called Vito who has a taste for sharp suits and Sinatra music.

 

http://news.bbc.co.uk/1/hi/business/8530150.stm

[JAYEL]

Who do we owe(or before it being bankrolled by UBIG, did we owe) was the operative part of this.

 

Allow me to rephrase.

 

BEFORE owing it to UBIG, before they bought it out, who was it owed to. How did it accumulate?

 

 

Usual spending money we didnt have.

 

 

I think most was Bank of Scotland and SMG , both would have closed us down.

 

 

Thank you Mr Romanov

 

 

 

.

[Geoff Kilpatrick]

Who do we owe(or before it being bankrolled by UBIG, did we owe) was the operative part of this.

 

Allow me to rephrase.

 

BEFORE owing it to UBIG, before they bought it out, who was it owed to. How did it accumulate?

 

Ok, take a pause.

 

We owed roughly 20M when Vlad took over - that was owed mainly to Bank of Scotland who owned the collateral on Tynecastle. We were also due 4.5M to SMG from non-conversion of loan stock after their investment in 1999. That was the primary trigger for the sale of Tynecastle as BoS wouldn't extend our borrowing facilities with them to repay the SMG money which was falling due.

 

How did that build up? Through player wages mainly and revenues not hitting what they expected to (e.g. TV money, gate receipts).

 

When Vlad took over, the debt was transferred to Ukio Bankas and UBIG from Bank of Scotland (this means Bank of Scotland were recouped). SMG took 1.8M instead of the 4.5M due after Vlad cut a deal with them when he bought out the shares.

 

Now, the debt post then has been driven by paying wages that are well beyond our turnover. Where did we borrow the money from? UBIG. When that money has fallen due, UBIG has created debt for equity swaps, meaning that debt has been converted into shares in HMFC (a debt write-off).

 

So the 30M thing is driven by the players you are watching, in essence and the empty seats around you.

[JAYEL]

Who do we owe(or before it being bankrolled by UBIG, did we owe) was the operative part of this.

 

Allow me to rephrase.

 

BEFORE owing it to UBIG, before they bought it out, who was it owed to. How did it accumulate?

 

 

Why the interest in before UBIG ?

 

 

.

[david mcgee]

I think Geoff has summed it up pretty well.

 

When you think about ?20 million has been written off in debt for equity swaps and we have taken in about ?15 million or more in transfers out. ( Berra, Wallace,Rudi,Bednar,Hartley and Gordon)

 

It begins to show you how much has been wasted on Pinilla, Kingston, Beslija type acquisitions.

 

Not to mention the number of managers Vlads had to pay off.

 

or the failed youth system now defunct where he brought in "highly rated " foriegn kids, ( Branny, Copil spring to mind) none of whom made it to the first team or were sold for profit.

[Radioactive Mince]

I think Geoff has summed it up pretty well.

 

When you think about ?20 million has been written off in debt for equity swaps and we have taken in about ?15 million or more in transfers out. ( Berra, Wallace,Rudi,Bednar,Hartley and Gordon)

 

It begins to show you how much has been wasted on Pinilla, Kingston, Beslija type acquisitions.

 

Not to mention the number of managers Vlads had to pay off.

 

or the failed youth system now defunct where he brought in "highly rated " foriegn kids, ( Branny, Copil spring to mind) none of whom made it to the first team or were sold for profit.

I make that about a ?50 million overspend (I've got transfer income at about ?18 million).

 

The thing that gets me... ?20 million written off. Why not do that the minute Pieman had got to ****, run the company close to debt-free within a sensible wage structure and cash in on players as and when, even still giving the dead certs like Gordon a large contract to maximise value? After all, Vlad may be many things but he ain't no skirt-lifting pussy like CPR... How much interest have we paid in the six/seven-ish years of VR?

[Geoff Kilpatrick]

I make that about a ?50 million overspend (I've got transfer income at about ?18 million).

 

The thing that gets me... ?20 million written off. Why not do that the minute Pieman had got to ****, run the company close to debt-free within a sensible wage structure and cash in on players as and when, even still giving the dead certs like Gordon a large contract to maximise value? After all, Vlad may be many things but he ain't no skirt-lifting pussy like CPR... How much interest have we paid in the six/seven-ish years of VR?

Who cares about interest when the source of the principal ends up writing off the loan itself?

 

Edit: As for hindsight, where is the fun in that?

[Charlie-Brown]

UBIG have written off or forgiven some of the debt (& interest) that they've created presumably as they have some beneficial means of doing this? What they haven't done is write off any of the debt level they inherited and had to pay HBOS & SMG to acquire.

[Radioactive Mince]

Who cares about interest when the source of the principal ends up writing off the loan itself?

 

Edit: As for hindsight, where is the fun in that?

True to an extent. I was just wondering if anyone knew what our rough annual interest payments were, that's all. More accurately, wondering if the ?20 mil is equivalent to the cumulative sum of said, or close to.

 

Know what you mean about fun. We wouldn't have had 05-06 and all the excitement that brought without VR/UBIG's largesse, that's for sure. I just suspect that, with a 60% wages:turnover, small/zero operating debt and a (shall we say) more 'normal' player recruitment system, we might have been more successful each season than we have been since then. We might even, with Euro qualification nearly every year (and maybe a cup win still - who knows?), have increased turnover significantly over the same period. We sold out our stadium for most of 05-06/06-07 yet turnover hit a glass ceiling, due to Tynie being too small. Just think, if we'd firmly established ourselves as the third force instead of going baws-oot for the OF jugular, we may have been in a position to now take on a ?30 million mortgage on a new stadium and actually have aspirations to fill more of it.

 

As you say... Hindsight, and a lot of 'ifs & buts'. Probably not worth talking about, but hey

[Peebo]

Given our ownership, the debt is merely theoretical and will remain so until Vlad sells the club.

 

I would doubt any potential buyer would accept a deal that leaves them at the mercy of a bank controlled by Vlad. Any deal will have to involve Vlad taking a huge hit on the money his right pocket owes to his left.

[Radioactive Mince]

Given our ownership, the debt is merely theoretical and will remain so until Vlad sells the club.

 

I would doubt any potential buyer would accept a deal that leaves them at the mercy of a bank controlled by Vlad. Any deal will have to involve Vlad taking a huge hit on the money his right pocket owes to his left.

Theoretically, it looks increasingly likely that we will bear the brunt, in terms of playing staff cutbacks, while Vlad pays back money to himself.

 

I'd also argue that, while this money that he owes himself is still self-outstanding, it remains a barrier to any hypothetical takeover/outside investment, stops being theoretical and becomes kinda actual.

[tian447]

Why the interest in before UBIG ?

 

 

.

 

Just as a point of interest. It just seems a bit unreal that the cost of players and wages could spiral so amazingly out of control so quickly. I could understand it if we had been winning the league and winning cups year in year out, and competing in Europe past the knockout stages, but to spend so much money on the number of Beslija's and Nade's we have had in the Vlad years, and to have hee haw all to show for it barring a Scottish Cup...

 

Fancy forming a Euromillions syndicate anyone?

[Geoff Kilpatrick]

Just as a point of interest. It just seems a bit unreal that the cost of players and wages could spiral so amazingly out of control so quickly. I could understand it if we had been winning the league and winning cups year in year out, and competing in Europe past the knockout stages, but to spend so much money on the number of Beslija's and Nade's we have had in the Vlad years, and to have hee haw all to show for it barring a Scottish Cup...

 

Fancy forming a Euromillions syndicate anyone?

Wage inflation in football was driven by players wanting a bigger cut of the TV deals, particularly in England. The Sky deal in England at the turn of the century was the driver and Scottish clubs felt the pinch to compete for talent. That doesn't excuse rubbish decisions such as ?600,000 per annum for Petric's wages but it does explain how he was able to ask for it in the first place.

[southside1874]

When you think of Vlad buying planes and submarines etc. The money he has spent at Hearts is just a hobby for the guy. I have always had the opinion that he wanted to play at football manager and him writing off ?30m debt will be the cost of his hobby. I think he will sell a controlling interest in the club but keep around 30% of shares.

[Coco]

In the recent epistle from Hearts suggesting that the club's ground is not fit for purpose and was suffocating the club they forgot to add one thing.

 

Their financial mismanagement is the reason that they are wanting to sell the ground. The overspending on players has been incredible.

 

As of the last accounts the gap between the turnover of the club and the (wages plus operating costs) operating costs of the club were equivalent to them selling another SIXTEEN THOUSAND SEASON TICKETS AT TYNECASTLE. The mismanagement is laughable and incredibly sad.

 

In the five seasons since 2005 the operating losses of the club have amounted to ?46m. The overspending on dud players in retrospect could actually have funded the white elephant property development sitting in the ticket office. Instead it went into the pockets of Nade, Pinilla, Kingston and the rest of the dud players bought.