[Ernie Ernie Ernie]

h again, on Jan 18 2007, 11:55 AM, said:

It's favourable to the club. I shouldn't think they could borrow money that cheaply anwhere else. They may have picked the wrong time though - with inflation on the rise and looking like rising a lot more, the fixed 6% may not be very attractive to investors.

That's ok then I thought you were suggesting the 6% was particularly appealing

[spireite72]

h again, on Jan 18 2007, 12:32 PM, said:

Look, I'm not trying to make you look silly, but would you PLEASE try to understand what's happening here. The loans made by the CFC Board have simply been converted into Preference Shares - the net financial effect is nil. We're still borrowing money, paying interest on it, and one day in the future will have to pay it back. The Board are also going to buy an extra 250K of Preference Shares - a much needed injection of money, but not enough to make a serious difference and just the same kind of loan that has to be repaid. If any new investors buy these shares, then the club will be commited to paying them back as well. You can add to this the fact that the whole exercise is designed so that the CFC Board can get the Banks to lend them a lot more money to finance the new ground - the original idea of its being built without any further borrowing seems to have died the death - and the whole of this vast new edifice of borrowed money is being raised in the hope of the new ground paying for it all. The best possible scenario is that we end up with only another 250k of debt - if that's all it costs us we'll have been exceptionally lucky.
If I had a spare 5k I wouldn't touch this scheme with a bargepole, incidentally. The headline inflation figure is about 3% at the moment. The realistic figure is much more, and both are rising fast. You'd already be effectively losing money after you'd paid tax on the interest - this is not a good time to take on a fixed interest investment. Therefore this scheme is not going to attract money from anybody who is simply interested in investment to make money - the only people who might buy it are those who particularly want to GIVE money to CFC, and they haven't exactly been queuing up in the past five years.
The great moving forward you seem so confident about is a myth unless a multi-millionaire buys out the whole lot - which has been the case for the last five years. The CFC Board are not going to put in significant amounts of extra cash and we remain dependant, as always, on what comes through the gates. And it looks increasingly as if any extra cash generated by the new ground will simply disappear in interest and capital repayments.
I hope that explains what I'm trying to get across. I am not arguing for the sake of arguing - I'm simply trying to show you what's actually happening. If you must reply with more abuse, then at least have the courtesy to read and try to understand the situation first.

If we assume that there will be no significant new investment and pref shares are given the vote all that will happen is that the current CFC Board take control of the club without any risk to their investment.

[Town_Fan]

One thing to bear in mind is that the preference share "dividend" isnt always guaranteed. I believe in the situation where a company cant meet the the payment preference shares are converted into ordinary shares presumably so that share holders could aquire voting rights, obviously in this case it looks like they will already have a vote.

[Torteval]

spireite72, on Jan 18 2007, 01:04 PM, said:

If we assume that there will be no significant new investment and pref shares are given the vote all that will happen is that the current CFC Board take control of the club without any risk to their investment.

You are right again here - not necessarily a bad thing because the people in question are as committed as anyone else to taking the club forward, and imo have already done an enormous amount to save the club.

However, despite the assurances of dalekpete that the CFSS board were fully aware of the voting rights of the preference shares, it is astonishing that this point was missing from the letter they sent out to members.

As under normal circumstances RPS get no vote, it would be right to assume that in the absence of any information to the contrary, that this was the case here.

Obviously the subsequent vote was taken without members being aware of this crucial information.

And the consequence of voting rights for RPS - well the only difference between the 2 share types is that the RPS are more secure, and they also get a dividend. And if there are enough RPS relative to ordinary shares for someone to buy the club (I know its remote!) then the ordinary shares are rendered worthless unless the club becomes a money-making machine in the future.

[Town_Fan]

MP-Spire, on Jan 18 2007, 02:09 PM, said:

I THINK you are totally wrong with that TF. I thought preference shares generated a fixed amount (6% in this case) regardless of performance. If a company can't pay the dividend, why would the preference shares be converted into ordinary shares? The idea of preference shares is if a company goes belly up, preference shareholders are higher up the pecking order.

Just going on what I read MP. Happy to be corrected if incorrect.

Edit: Although it seems I cant find the link anymore where I had read it so it is exceedingly possible I might be talking a load of bottom.

This post has been edited by Town_Fan: 18 January 2007 - 02:51 PM

[Wooden Spoon]

h again, on Jan 18 2007, 12:32 PM, said:

Look, I'm not trying to make you look silly, but would you PLEASE try to understand what's happening here. The loans made by the CFC Board have simply been converted into Preference Shares - the net financial effect is nil. We're still borrowing money, paying interest on it, and one day in the future will have to pay it back. The Board are also going to buy an extra 250K of Preference Shares - a much needed injection of money, but not enough to make a serious difference and just the same kind of loan that has to be repaid. If any new investors buy these shares, then the club will be commited to paying them back as well. You can add to this the fact that the whole exercise is designed so that the CFC Board can get the Banks to lend them a lot more money to finance the new ground - the original idea of its being built without any further borrowing seems to have died the death - and the whole of this vast new edifice of borrowed money is being raised in the hope of the new ground paying for it all. The best possible scenario is that we end up with only another 250k of debt - if that's all it costs us we'll have been exceptionally lucky.
If I had a spare 5k I wouldn't touch this scheme with a bargepole, incidentally. The headline inflation figure is about 3% at the moment. The realistic figure is much more, and both are rising fast. You'd already be effectively losing money after you'd paid tax on the interest - this is not a good time to take on a fixed interest investment. Therefore this scheme is not going to attract money from anybody who is simply interested in investment to make money - the only people who might buy it are those who particularly want to GIVE money to CFC, and they haven't exactly been queuing up in the past five years.
The great moving forward you seem so confident about is a myth unless a multi-millionaire buys out the whole lot - which has been the case for the last five years. The CFC Board are not going to put in significant amounts of extra cash and we remain dependant, as always, on what comes through the gates. And it looks increasingly as if any extra cash generated by the new ground will simply disappear in interest and capital repayments.
I hope that explains what I'm trying to get across. I am not arguing for the sake of arguing - I'm simply trying to show you what's actually happening. If you must reply with more abuse, then at least have the courtesy to read and try to understand the situation first.

as i understood it, the debentures are converted to ordinary shares, wth extra or new shares being issued in the form of preference shares, up to the total value of £10M.

fixed 6% gauranteed isnt bad at all BTW. roughly twice that of premium bonds, better than most banks, and on a par with some ISA`s, which although tax free, have upper investment limits.

as for inflation, that will effect any and all investments in exactly the same way, so im not sure what point your trying to make regarding inflationary pressures.

as for moving forward being a myth,if it means were not still at a crumbling saltergate, gates going down, debentures going up, and no way of paying it off, then yes ,I`m all for that. a football club will always have to rely on gate money, its a football club afterall. the point being new grounds tend to generate interest and larger crowds. thus more money. so again, im not sure what your trying to say.

[Balearic Mac]

death, on Jan 18 2007, 05:54 PM, said:

as i understood it, the debentures are converted to ordinary shares, wth extra or new shares being issued in the form of preference shares, up to the total value of £10M.

fixed 6% gauranteed isnt bad at all BTW. roughly twice that of premium bonds, better than most banks, and on a par with some ISA`s, which although tax free, have upper investment limits.

as for inflation, that will effect any and all investments in exactly the same way, so im not sure what point your trying to make regarding inflationary pressures.

as for moving forward being a myth,if it means were not still at a crumbling saltergate, gates going down, debentures going up, and no way of paying it off, then yes ,I`m all for that. a football club will always have to rely on gate money, its a football club afterall. the point being new grounds tend to generate interest and larger crowds. thus more money. so again, im not sure what your trying to say.

It's a bit higher than most ISA's, but with the preference shares you're tied in to a set term, whereas the cash ISA generally offers greater flexibility in that there's no set term. The point h makes about inflationary pressures is that interest rates will rise to kerb the threat of inflation, and the consensus is that the B of E base rate may peak at around 5.75% this year, before falling towards the end of the year. If that's the case, a fixed interest of 6% is potentially rendered less attractive as rates offered by premium bonds, gilts and other fixed interest investments will increase proportionately. If the rate's uncompetitive, there won't be too many takers, though doubtless the added bonus of securing voting rights opens up a world of other possibilities.

[Wooden Spoon]

Balearic Mac, on Jan 18 2007, 06:37 PM, said:

It's a bit higher than most ISA's, but with the preference shares you're tied in to a set term, whereas the cash ISA generally offers greater flexibility in that there's no set term. The point h makes about inflationary pressures is that interest rates will rise to kerb the threat of inflation, and the consensus is that the B of E base rate may peak at around 5.75% this year, before falling towards the end of the year. If that's the case, a fixed interest of 6% is potentially rendered less attractive as rates offered by premium bonds, gilts and other fixed interest investments will increase proportionately. If the rate's uncompetitive, there won't be too many takers, though doubtless the added bonus of securing voting rights opens up a world of other possibilities.

interest rates will effect any financial investment. so what applies to one will apply to all, so to speak. its fixed yes, but then how many high interest accounts with banks,for example, are higher than 6%? any how many of these are variable? not too many.most high interest investments (including the ISA i have) are fixed term, with 90 day release and penalty clauses.

so i really dont see the big deal, just seems like H arguing for the toss of it. as usual.

one thing is for sure, its a better option than the current set up, where we pay 6% on debt when we will get nothing in return, the ground crumbles around us, the debts rise year on year,crowds dwindle, and the club slowly meanders downwards.

This post has been edited by death: 18 January 2007 - 07:48 PM

[Town_Fan]

What happens if the club is in a position where it cant meet the 6% dividend for investors?

Dividend isnt probably the right word but you get my drift.

[Balearic Mac]

death, on Jan 18 2007, 07:46 PM, said:

interest rates will effect any financial investment. so what applies to one will apply to all, so to speak. its fixed yes, but then how many high interest accounts with banks,for example, are higher than 6%? any how many of these are variable? not too many.most high interest investments (including the ISA i have) are fixed term, with 90 day release and penalty clauses.

so i really dont see the big deal, just seems like H arguing for the toss of it. as usual.

one thing is for sure, its a better option than the current set up, where we pay 6% on debt when we will get nothing in return, the ground crumbles around us, the debts rise year on year,crowds dwindle, and the club slowly meanders downwards.

The big deal is that both the rate of interest and the investment term, as I understand it, are FIXED at outset. With the majority of higher interest accounts, the interest is variable and if the rate increases (or, of course, decreases) then the rate payable on your deposit will be adjusted accordingly. I suspect h is referring to the fact that should anyone wish to tie up a minimum of £5k over a few years, they'll need to feel confident that the rate of interest fixed at outset will remain at a competitive level, and in a climate of rising interest rates, many will err on the side of caution, use a bit of common sense, and keep their investment tie-in as short as possible.

If you think back to the time when BH and his chums rode into town and gatecrashed the boardroom, they agreed a rate of interest on their friendly loans of, yes, you've guessed it 6% If you check back to this time I think you'll find the bank base rate was something in the region of 3.25% to 3.5% giving them a clear margin. With the base rate now around 2% higher, 6% offers little margin and I'd be hard pushed to convince many of my clients (should I wish to) to invest their hard-earned in CFC. However, those people to whom voting rights may be a more attractive part of the deal may not be too interested in such side issues...

[h again]

death, on Jan 18 2007, 07:46 PM, said:

interest rates will effect any financial investment. so what applies to one will apply to all, so to speak. its fixed yes, but then how many high interest accounts with banks,for example, are higher than 6%? any how many of these are variable? not too many.most high interest investments (including the ISA i have) are fixed term, with 90 day release and penalty clauses.

so i really dont see the big deal, just seems like H arguing for the toss of it. as usual.

one thing is for sure, its a better option than the current set up, where we pay 6% on debt when we will get nothing in return, the ground crumbles around us, the debts rise year on year,crowds dwindle, and the club slowly meanders downwards.

It's exactly the same as the current set-up, except that the holders of Preference Shares get voting rights where debenture holders didn't. Financially NOTHING HAS CHANGED. We can issue shares up to the value of £10 million but if nobody buys them they're waste paper.
You're also staggeringly badly informed about fixed-interest investments. No serious investor is going to compare interest rates with Premium Bonds and Building Societies. For one thing these Preference shares will tie up your money for 5 years at least - for that time scale you would expect a much better rate of interest. But inflation is the disaster waiting to happen - it's rising, it's higher than the official figures, and it's expected to go on rising. If it rises to 6% - and it's been a lot higher in the past - any gain from interest payments is wiped out, and you've still got the tax to pay on it. No financial advisor would look at a 5-year, 6% fixed interest investment in a football club - if you don't believe me, ring round a few.
All this deal amounts to is a device to give the CFC Board more voting rights. It won't attract anybody who's looking to invest to make money, which is no bad thing in itself, but there doesn't seem to be anybody else around prepared to take a loss just to help us out.

[Balearic Mac]

h again, on Jan 18 2007, 08:47 PM, said:

All this deal amounts to is a device to give the CFC Board more voting rights. It won't attract anybody who's looking to invest to make money, which is no bad thing in itself, but there doesn't seem to be anybody else around prepared to take a loss just to help us out.

The way I see it from my glass half empty perspective is that the deal has been little more than an exchange of power and the playground bully has formalised his absolute control. CFSS's final humiliating legacy is that their impotence has led them to surrender in a customarily incompetent and ill-judged manner.

My real fears about BH's unhealthy authority will unfold in time. As some notable US President memorably said, "You ain't seen nothing yet!"

[Wooden Spoon]

Town_Fan, on Jan 18 2007, 08:01 PM, said:

What happens if the club is in a position where it cant meet the 6% dividend for investors?

Dividend isnt probably the right word but you get my drift.

same as now i guess, the manager has his budget cut, or the club directors "budget" for a loss. as such, we are still no worse off.

i would presume that the interest @ 6% on the total of the preference shares(a fixed, known amount) is similar to the amount the "franchise deal" will bring in. i would guess any businessman would look at such eventualities.

hubbard may be many things, but idiot isnt one of them.

[Wooden Spoon]

Balearic Mac, on Jan 18 2007, 08:29 PM, said:

The big deal is that both the rate of interest and the investment term, as I understand it, are FIXED at outset. With the majority of higher interest accounts, the interest is variable and if the rate increases (or, of course, decreases) then the rate payable on your deposit will be adjusted accordingly. I suspect h is referring to the fact that should anyone wish to tie up a minimum of £5k over a few years, they'll need to feel confident that the rate of interest fixed at outset will remain at a competitive level, and in a climate of rising interest rates, many will err on the side of caution, use a bit of common sense, and keep their investment tie-in as short as possible.

If you think back to the time when BH and his chums rode into town and gatecrashed the boardroom, they agreed a rate of interest on their friendly loans of, yes, you've guessed it 6% If you check back to this time I think you'll find the bank base rate was something in the region of 3.25% to 3.5% giving them a clear margin. With the base rate now around 2% higher, 6% offers little margin and I'd be hard pushed to convince many of my clients (should I wish to) to invest their hard-earned in CFC. However, those people to whom voting rights may be a more attractive part of the deal may not be too interested in such side issues...

i take all of that on board, but i ask you this.

during the dark days of john major and norman lamont, we had interest rates much higher than now. much much higher. up to 15% for a while was it not? (if its not hurting its not working??????)
yet i dont recal my bank offering to raise the interest on my savings account to 18 or 20% to offset this. they kept it at 4%.
its only since the bank of england took over base rates that we have had such stability. i think you forget this.
6% is better than being in a box under the bed, and better than the standard rate many banks offer, regardless of the base rate.

[malcolmr13]

h again, on Jan 18 2007, 08:47 PM, said:

It's exactly the same as the current set-up, except that the holders of Preference Shares get voting rights where debenture holders didn't. Financially NOTHING HAS CHANGED. We can issue shares up to the value of £10 million but if nobody buys them they're waste paper.
You're also staggeringly badly informed about fixed-interest investments. No serious investor is going to compare interest rates with Premium Bonds and Building Societies. For one thing these Preference shares will tie up your money for 5 years at least - for that time scale you would expect a much better rate of interest. But inflation is the disaster waiting to happen - it's rising, it's higher than the official figures, and it's expected to go on rising. If it rises to 6% - and it's been a lot higher in the past - any gain from interest payments is wiped out, and you've still got the tax to pay on it. No financial advisor would look at a 5-year, 6% fixed interest investment in a football club - if you don't believe me, ring round a few.
All this deal amounts to is a device to give the CFC Board more voting rights. It won't attract anybody who's looking to invest to make money, which is no bad thing in itself, but there doesn't seem to be anybody else around prepared to take a loss just to help us out.

I am appreciative of the latest inputs from B Mac, Death and h on the financial implications of the change agreed by CFSS.
In practical terms there is a more or less justifiable investment case for Preference shares if yoiu are a supporter of the club and can spare the cash for the term.
This may be even more relevant if you are a small/medium sized business and would like to help the club.
As we have learnt it will be cheaper money than obtainable from a finance house.
Perhaps the "external" loan bill can be cut down to size and the "new ground economics" kick in within 5 years.
I hope so!

[Wooden Spoon]

h again, on Jan 18 2007, 08:47 PM, said:

It's exactly the same as the current set-up, except that the holders of Preference Shares get voting rights where debenture holders didn't. Financially NOTHING HAS CHANGED. We can issue shares up to the value of £10 million but if nobody buys them they're waste paper.
You're also staggeringly badly informed about fixed-interest investments. No serious investor is going to compare interest rates with Premium Bonds and Building Societies. For one thing these Preference shares will tie up your money for 5 years at least - for that time scale you would expect a much better rate of interest. But inflation is the disaster waiting to happen - it's rising, it's higher than the official figures, and it's expected to go on rising. If it rises to 6% - and it's been a lot higher in the past - any gain from interest payments is wiped out, and you've still got the tax to pay on it. No financial advisor would look at a 5-year, 6% fixed interest investment in a football club - if you don't believe me, ring round a few.
All this deal amounts to is a device to give the CFC Board more voting rights. It won't attract anybody who's looking to invest to make money, which is no bad thing in itself, but there doesn't seem to be anybody else around prepared to take a loss just to help us out.

so a "serious investor" is gonna invest in town? then you say they wont? in the same paragraph??????????
that takes your revolving door court jester style of arguing to a new level.

tell me where i can get better than 6% garaunteed on a 5 year term. for £5000. its not as unatractive as you think. and most investments pay tax on interest. or did you forget that too?

as for inflation, see my post above. it went up to 15%, yet i dont recall banks putting interest payments up to 18-20%. do you? if so, where do you bank? as im changing to the same one.

i would be more concerned as how the inflationary pressures will effect the housing market(and thus the land value of saltergate). a 20%(not unthinkable) drop there is gonna hurt far more, as thats short term, these shares are medium/long term

This post has been edited by death: 19 January 2007 - 04:40 AM

[dim view]

death, on Jan 19 2007, 04:33 AM, said:

tell me where i can get better than 6% garaunteed on a 5 year term. for £5000. its not as unatractive as you think. and most investments pay tax on interest. or did you forget that too?

as for inflation, see my post above. it went up to 15%, yet i dont recall banks putting interest payments up to 18-20%. do you? if so, where do you bank? as im changing to the same one.

i would be more concerned as how the inflationary pressures will effect the housing market(and thus the land value of saltergate). a 20%(not unthinkable) drop there is gonna hurt far more, as thats short term, these shares are medium/long term

BH quipped last night to the audience that his pension advisor had advised him that he would consider placing part of BH's lump sum into these preference shares. I'm no expert but there may be tax advantages in this for people with private pensions.

[Balearic Mac]

dim view, on Jan 19 2007, 08:22 AM, said:

BH quipped last night to the audience that his pension advisor had advised him that he would consider placing part of BH's lump sum into these preference shares. I'm no expert but there may be tax advantages in this for people with private pensions.

I wouldn't touch them with my pension fund.

This type of investment would only potentially interest someone nearing retirement with around 5 years to go and looking to place their accumulated funds in a low risk/return environment. (Though you must bear in mind that in reality many people have seen their invested funds achieve disappointing returns anyway, so they still need to be more aggressive in their investment approach than might ideally be the case as they seek to repair some of the damage caused by market volatility at the start of the new millennium).

Bear in mind also that most pension funds typically charge 1.5 to 2% per annum in management charges and if you consider the government's preferred method for measuring inflation gives a (disputed) annual figure of around 3%, the real rate of growth achieved by investing in CFC Preference Shares is around 1 to 2% per annum. I wouldn't want my pension fund to be achieving such a paltry real rate of growth unless, of course, I quite liked the idea of living in abject poverty when I retire.

This post has been edited by Balearic Mac: 19 January 2007 - 10:37 AM

[h again]

death, on Jan 19 2007, 04:33 AM, said:

so a "serious investor" is gonna invest in town? then you say they wont? in the same paragraph??????????
that takes your revolving door court jester style of arguing to a new level.

tell me where i can get better than 6% garaunteed on a 5 year term. for £5000. its not as unatractive as you think. and most investments pay tax on interest. or did you forget that too?

as for inflation, see my post above. it went up to 15%, yet i dont recall banks putting interest payments up to 18-20%. do you? if so, where do you bank? as im changing to the same one.

i would be more concerned as how the inflationary pressures will effect the housing market(and thus the land value of saltergate). a 20%(not unthinkable) drop there is gonna hurt far more, as thats short term, these shares are medium/long term

YOU pay the tax on YOUR interest. You may be in an arrangement where you receive the interest after tax but make no mistake, you've payed the tax.
As for the rest, I'm afraid that all attempts to talk some financial sense into your head have been a waste of time, so I'll tell you what - sink your savings into these Preference Shares if they're as good as you think. At least they may do the club a bit of good.