A Call To All Sainters

[VDS66]

In layman's terms...

Debt for income producing assets is OK.

Debt for funding costs is bad. Eg: borrowing to pay wages.

If your debt is larger than your assets, Bad.

If assets are larger than debt, good... As long as you can service the debt.

 

[bergholt]

In layman's terms...

Debt for income producing assets is OK.

Debt for funding costs is bad. Eg: borrowing to pay wages.

If your debt is larger than your assets, Bad.

If assets are larger than debt, good... As long as you can service the debt.

Maybe? But plenty of great service businesses have about zero assets but significant recurring revenues. They can service their debts without trying too hard. There's no particular reason for a footy club to have too many of their assets on the balance sheet, most of their assets are intangible and human, like the brand, the AFL licence, and the players.

 

[VDS66]

Maybe? But plenty of great service businesses have about zero assets but significant recurring revenues. They can service their debts without trying too hard. There's no particular reason for a footy club to have too many of their assets on the balance sheet, most of their assets are intangible and human, like the brand, the AFL licence, and the players.

Haha like I said... Layman's terms.

Baby steps...

And you are correct. Recurring income is an asset and measure of goodwill. The value of a real estate business rests with the size of their rent roll.

 

[sunny3193]

The problem with debt IS the fear factor. It is always expressed as pure dollars never a percentage of assets or some other meaningful measure so it sounds really bad and creates a perception that the club is a basket case. While we carry a large debt as a dollar value it can be used against us, perhaps to force a relocation.

Not having to service a debt would mean we could spend that money more productively in football terms (better facilities, better equipment, more coaches and support staff) or even community terms (get rid of the pokies).

I think when Eddie took over at Collingwood, one of the first things he did was fix up the finances because if you're strong financially then the club will survive no matter what happens short-term on field and you can build from that solid base.

Finance costs in 2017 was $254k, on a $40mill turnover.
Get what you’re saying but it’s not a critical issue.

 

[dct66]

Finance costs in 2017 was $254k, on a $40mill turnover.
Get what you’re saying but it’s not a critical issue.

Thanks for that. It's bugger all isn't it. Still the big bad debt figure will be thrown around and the fact that we have to service the debt will be mentioned but the actual finance costs in dollar terms won't be highlighted.

 

[sunny3193]

Thanks for that. It's bugger all isn't it. Still the big bad debt figure will be thrown around and the fact that we have to service the debt will be mentioned but the actual finance costs in dollar terms won't be highlighted.

Yes.
Joffaboy and I, hopefully you can make up the third in “The Three Amigos”, are trying to educate the board about basic financial principles.
It’s a challenging task as everyone on the board comes from different backgrounds and life experiences (like pointing me at an internal combustion engine with the demand: Please Explain. Never going to happen).
But important nonetheless.
Saints fans need to understand that we are not the financial basket case the media likes to portray.

 

[StFly]

Debt is bad if you were Melbourne and packing it in because debt was growing whilst every man and his dog was leaving, as lookit ma, no hands and a new ferrari, aren't we smexy? Debt is bad when you were Fitzroy and the insurers went "yeah.. no" when loans were called to remain solvent.

That's was what SOS was, loans were called, someone was going to die.

It ended up being Fitzroy not because of anything we did specifically, but because our debt has always been able to be insured and paid if it came to it.

No need to rattle the tins or blow that horn, that's simply fear mongering, if push came to shove and someone had to die again, we're about 5th from the bottom sure, but there's other clubs that would be shitting themselves before we do.

 

[JiggsteR45]

What’s all this fuss about “debt”? I’m not sure how many other folk have noticed, but the world revolves BECAUSE of “debt” ask anyone who maintains a home or has a credit card. Governments govern by the prudent ( ? ) use of “ debt “


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[Saint Watto]

Thanks for that. It's bugger all isn't it. Still the big bad debt figure will be thrown around and the fact that we have to service the debt will be mentioned but the actual finance costs in dollar terms won't be highlighted.

Good call there dct66.......our "debt number" gets mentioned quite a bit in the media but I've never seen an article or heard a comment(aside from sunny3193 above) that states what our yearly cost is to service that debt.

I guess that wouldn't make the whole situation seem so dramatic.

I'm also guessing that most reasonable minded people would think that on a turnover of $40 mill.....$254K to service the debt(as sunny has stated above) is quite reasonable.

 

[Saint Watto]

Finance costs in 2017 was $254k, on a $40mill turnover.
Get what you’re saying but it’s not a critical issue.

sunny3193...thanks for posting that number.....I've always wondered since the big reported losses of 2013/2014 what the yearly cost is to service our overall debt.

As dct66 commented above....it's not as big a number to service the debt as what I thought it would be.

 

[Saint Watto]

What’s all this fuss about “debt”? I’m not sure how many other folk have noticed, but the world revolves BECAUSE of “debt” ask anyone who maintains a home or has a credit card. Governments govern by the prudent ( ? ) use of “ debt “

Chocolates for you there JiggsteR45.

I saw a stat earlier in the year that worldwide debt since the GFC has doubled.

To try and get out of the GFC mess.......debt was used to "fire up" everything again.

Some huge left field dire event could leave a lot of people/countries very exposed.

 

[plugger66]

Good call there dct66.......our "debt number" gets mentioned quite a bit in the media but I've never seen an article or heard a comment(aside from sunny3193 above) that states what our yearly cost is to service that debt.

I guess that wouldn't make the whole situation seem so dramatic.

I'm also guessing that most reasonable minded people would think that on a turnover of $40 mill.....$254K to service the debt(as sunny has stated above) is quite reasonable.

I must say that cost doesn’t make sense. If someone could explain why it is so low I would be interested. I would have thought it would be close to a million dollars.

Also I have debt on my house but that is fine because the house value has nearly doubled since I borrowed. I just can’t think of any sellable assets we have that could go up in value. Our assets will only drop in value and really can’t be sold. That is the bid difference with most people’s debt. Having said that the afl aren’t going to let anything happen to us.


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[Joffaboy]

I must say that cost doesn’t make sense. If someone could explain why it is so low I would be interested. I would have thought it would be close to a million dollars.


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Really, very simply if the bogey man 10 mill debt cost us a mill a year we have got our money from a loan shark.

Money is dirt cheap, 250k on 10 mill is about a 2.5%rate, around the going rate of a commercial loan.

Thats not taking into account and intrest free debt owed to the AFL, so maybe the rate is a bit higher but 1 million is not correct.

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[plugger66]

Really, very simply if the bogey man 10 mill debt cost us a mill a year we have got our money from a loan shark.

Money is dirt cheap, 250k on 10 mill is about a 2.5%rate, around the going rate of a commercial loan.

Thats not taking into account and intrest free debt owed to the AFL, so maybe the rate is a bit higher but 1 million is not correct.

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There is no way you are getting a loan for 2.5% even for a commercial loan. Come off it JB. How would anyone make money on that. It would be at least 5% if not more especially as we have no real sellable assets.

 

[sunny3193]

Of the total $17mill “debt”, $4mill approx is interest bearing.
The balance of $13mill “debt” consists of non interest bearing items like: trade payables, income received in advance, unsecured loans and unsecured trade payables. Stuff that does not incur interest.
That’s why the Finance Costs are the amount they are.

 

[bergholt]

There is no way you are getting a loan for 2.5% even for a commercial loan. Come off it JB. How would anyone make money on that. It would be at least 5% if not more especially as we have no real sellable assets.

It wouldn't need to be secured against anything if the AFL guaranteed it, which they surely would.

 

[plugger66]

It wouldn't need to be secured against anything if the AFL guaranteed it, which they surely would.

Don’t they? You could be right. Still not getting it at 2.5%


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[VDS66]

Don’t they? You could be right. Still not getting it at 2.5%


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See Sunnys posy above that only $4m incurs interest.

Beat Norf and this thread wouldn't exist...