Hearts Debt.... Please Explain

[tazhearts]

For someone who does not have a financial background please can someone comment on my understanding of hearts debt situation....

 

Vlad owns about 95% of Hearts (let's say he owns them outright for arguments sake).

 

If we had no debt, then Hearts would be worth about ?25 million (i.e. that would be the value of our assets...Tynecastle plus the playing squad)

 

Hearts debt (for arguments sake) is now at ?30 million. Yes we owe all of that money to Ubig / Ukios Bankas which are both owner by Romanov.

 

What would happen if Romanov had enough of his scottish football project and pulled out?

 

No one would buy us as our debt would be more than our assets.

 

Vlad would have to wind us up and would as a result loose ?5 million from this venture (the difference between our debt and our assets).

 

Now if you think Vlad is about to plow another ?50 million into the new stand project then that could take Hearts debt up to ?80 million yet would not increase our assets by anything like that (the main stand is pretty much worthless unless a football/sports team wants to use it).

 

Am I correct?

 

Where does this leave us?

[Cobblers]

Fecked

[Towzer]

For someone who does not have a financial background please can someone comment on my understanding of hearts debt situation....

 

Vlad owns about 95% of Hearts (let's say he owns them outright for arguments sake).

 

If we had no debt, then Hearts would be worth about ?25 million (i.e. that would be the value of our assets...Tynecastle plus the playing squad)

 

Hearts debt (for arguments sake) is now at ?30 million. Yes we owe all of that money to Ubig / Ukios Bankas which are both owner by Romanov.

 

What would happen if Romanov had enough of his scottish football project and pulled out?

 

No one would buy us as our debt would be more than our assets.

 

Vlad would have to wind us up and would as a result loose ?5 million from this venture (the difference between our debt and our assets).

 

Now if you think Vlad is about to plow another ?50 million into the new stand project then that could take Hearts debt up to ?80 million yet would not increase our assets by anything like that (the main stand is pretty much worthless unless a football/sports team wants to use it).

 

Am I correct?

 

Where does this leave us?

 

That depends

[tazhearts]

That depends

 

I suppose it either means.....

 

We are fecked - there is no chance of anyone taking over from Vlad and if it goes t*ts up and Vlad pulls out or runs out of money then we will fold.

 

OR

 

It's great news and we are effectively debt free because all of our debt is owned to a bank owned by our owner!

 

Still can't get my head round the ?50 million main stand....

 

Cannot conceive any way in which the new stand will increase revenue to a point where we can pay the interest on an additional ?50 million loan, never mind pay off the Capital over the long term.

[Guest casper]

I suppose it either means.....

 

We are fecked - there is no chance of anyone taking over from Vlad and if it goes t*ts up and Vlad pulls out or runs out of money then we will fold.

 

OR

 

It's great news and we are effectively debt free because all of our debt is owned to a bank owned by our owner!

 

Still can't get my head round the ?50 million main stand....

 

Cannot conceive any way in which the new stand will increase revenue to a point where we can pay the interest on an additional ?50 million loan, never mind pay off the Capital over the long term.

 

Don't worry. Vlads a top buisnessman. He knows what he's doing. Nothing to worry about.

[Hans007]

We can build a ?50m stand but we can't get 600k quick enough for our top scorer

[tazhearts]

Don't worry. Vlads a top buisnessman. He knows what he's doing. Nothing to worry about.

????

[Dirk Diggler]

Don't worry. Vlads a top buisnessman. He knows what he's doing. Nothing to worry about.

 

 

 

It would appear so.

[Spellczech]

We can build a ?50m stand but we can't get 600k quick enough for our top scorer

 

Bricks and mortar lasts more than 4-6 more years...One notable thing about Wednesday?s team was that all the players except Ksanavicius and Banks were a lot younger than Velicka...Our average age has dropped again.

[Rick Grimes]

Bricks and mortar lasts more than 4-6 more years...One notable thing about Wednesday?s team was that all the players except Ksanavicius and Banks were a lot younger than Velicka...Our average age has dropped again.

 

they do. and we won't be stumping up the full ?51m ourselves.

[Hans007]

Bricks and mortar lasts more than 4-6 more years...One notable thing about Wednesday?s team was that all the players except Ksanavicius and Banks were a lot younger than Velicka...Our average age has dropped again.

 

But who's going to sit in his fancy new stand to watch Ksanavicius and Zaliukas as half our midfield with Miko and Cesny playing 45 minutes each?

[Ryan Gosling]

But who's going to sit in his fancy new stand to watch Ksanavicius and Zaliukas as half our midfield with Miko and Cesny playing 45 minutes each?

 

I will.

[Towzer]

But who's going to sit in his fancy new stand to watch Ksanavicius and Zaliukas as half our midfield with Miko and Cesny playing 45 minutes each?

 

you dont sit in the old stand watching them:p

[WalterEgo]

 

No one would buy us as our debt would be more than our assets.

 

Not quite. Future cash flows.

[Dirk Diggler]

I will.

 

I'll happily try out the bar.

 

[Ryan Gosling]

I'll happily try out the bar.

 

 

You'll need it when you see Kestutis running the midfield.

[tazhearts]

Not quite. Future cash flows.

 

But we have never posted a profit in living memory and if we were to ever break even you would be looking at a massive cut in our wage bill which would affect the players we could sign/keep.

[Hans007]

you dont sit in the old stand watching them:p

 

Exactly

[Hans007]

I will.

 

Well the bandit won't be getting my dough to pay them.

[Spellczech]

But who's going to sit in his fancy new stand to watch Ksanavicius and Zaliukas as half our midfield with Miko and Cesny playing 45 minutes each?

 

I?ll no doubt be there so that?s one.

[Dirk Diggler]

You'll need it when you see Kestutis running the midfield.

 

Believe.

 

[tynie]

Bricks and mortar lasts more than 4-6 more years...One notable thing about Wednesday?s team was that all the players except Ksanavicius and Banks were a lot younger than Velicka...Our average age has dropped again.

 

yes so has the standard of our play which directly reflects our talent. Lousy.

[Coco]

But we have never posted a profit in living memory and if we were to ever break even you would be looking at a massive cut in our wage bill which would affect the players we could sign/keep.

 

In general you are right. Very rare that football clubs make a profit. But Hearts will make one this year due to the Craig Gordon sale!

[topcat]

What would happen if Romanov had enough of his scottish football project and pulled out?

 

No one would buy us as our debt would be more than our assets.

 

Vlad would have to wind us up and would as a result lose ?5 million from this venture (the difference between our debt and our assets).

 

I assume that by "Winding us up" you mean putting the company into administration.

 

Administration is essentially a way of settling the conflicting interests of the various creditors. The assets of the company are distributed amongst the people who were left being owed money by the company.

 

Given that the main creditor is UBIG (through Ukios) this would mean effective ownership of the failed company would pass from UBIG back to UBIG and they'd be back where they started holding a large stake in a non-performing company that they wanted rid off.

 

Winding up the company (in the conventional sense) is not an option to UBIG.

 

If the whole project fails and UBIG wants to get out then, realistically, they would have to write off enough of the debt to make the company attractive to a buyer. To do this you'd have to reduce the debt to match the assets in essence taking the ?5m loss in your example.

 

Because UBIG is doing this with its own money there is simply no way it can walk away and let someone else sweep up the mess.

 

Chris Robinson, on the other hand, was running the club on HBOS's money.

 

This is both the best and worst thing about the current situation.

 

Through his control of UBIG Vlad can do what he likes at Hearts.

 

Vlad having control that borders on total is good because it means he can pursue a high risk expansionist plan that a more conservative low risk backer like HBOS would never have funded.

 

It's bad because...

 

...well I think there's been enough threads on that since Wednesday so I don't need to reiterate the key points so I'll return to the original subject of UBIGs potential exit strategy however.

 

From our perspective the amount of money lost by UBIG if they abandon the project is not important what is important is where it leaves the club and ultimately whether the club is sold on as a going concern.

 

For this to happen we would need a bidder to materialise who could assemble an attractive enough bid to compete with the likes of Cala homes.

 

There was a conspicuous absence of these in the dying days of the Robinson regime but if the new stand is built before UBIG decide to get out then it will become substantially easier to formulate a business plan that makes Tynecastle more valuable as a football ground than as a housing scheme, even if it's not valuable enough to pay UBIG back all the money they ploughed in.

 

Another thing to consider is that, assuming we stay at Tynie, for the next couple of seasons Hearts will be, in business terms at least, a building site with a football team attached.

 

Current turnover is around ?10m.

 

With reduced capacity that will drop to ?7m or ?8m (about ?15m over two seasons)

 

The Construction project represents about ?50m of investment over two seasons around three times bigger.

 

So if the whole project fails to the point that UBIG want out it will be because of a collapse in the commercial property sector as opposed to Vlad's meddling with the team or Callum Elliot's slipshod striking.

[ring-of-fire]

For someone who does not have a financial background please can someone comment on my understanding of hearts debt situation....

 

Vlad owns about 95% of Hearts (let's say he owns them outright for arguments sake).

 

If we had no debt, then Hearts would be worth about ?25 million (i.e. that would be the value of our assets...Tynecastle plus the playing squad)

 

Hearts debt (for arguments sake) is now at ?30 million. Yes we owe all of that money to Ubig / Ukios Bankas which are both owner by Romanov.

 

What would happen if Romanov had enough of his scottish football project and pulled out?

 

No one would buy us as our debt would be more than our assets.

 

Vlad would have to wind us up and would as a result loose ?5 million from this venture (the difference between our debt and our assets).

 

Now if you think Vlad is about to plow another ?50 million into the new stand project then that could take Hearts debt up to ?80 million yet would not increase our assets by anything like that (the main stand is pretty much worthless unless a football/sports team wants to use it).

 

Am I correct?

 

Where does this leave us?

 

A couple of things here;

 

- Although we have some pritty large numbers being thrown about, the debt that Hearts have (from my experience) isn't hard debt. We have borrowed large amounts of money of Ukio Bankas which is perfectly normal, we are simply trying to make the value of the land of Tynecastle etc work for us.

 

- We have borrowed money of a foreign company that is owned (in majority) by our owner. This is plain and simply fantastic. If hearts were to go into administration it would be becasue Ukio Bankas have refused to extend our debt or we cannot afford the repayments to said bank. Neither of these situations would benifit Romanov or his Mum (who i think owns the other part of Ukio?) and therefore just wouldn't happen.

 

- I think Romanov is an ass. No doubt. But the levels of debt and the losses posted etc etc does not bother me as I can see what is going on. The way he is running the club is a joke but he clearly knows what he's doing when it comes to running a bank (you dont become THAT rich by being as stupid as he is being with our football club).

 

- You cant count players as a listable asset on your books. Think thats why Leeds went down the pan. Thats part of the whole Kaunas loan situation IMO as if they are being paid by Kaunas then this dodges tax etc and im sure there will be something shifty going on with Ukio and Kaunas

 

- If Romanov was to get fed up - which i think he is - he will have to lose alot of money. For him to fold us he would be out of pocket (both because of Hearts and because of Ukio Bankas) by VAST sums of money which no rich person enjoys doing. IMO he will settle thing down, get our stand built or on the way to be being built, get a nice wee manager in, sort our finances out (ie paying people money they are owned) and then **** off. He is going to lose money if he sells up soon, the better he gets things sorted he less he will lose. I hope he goes and leaves us all alone.

 

- Finally....Romanov OUT!

 

FTH