Breaking News Club Statement

[Jedi Shrimper]

Eurggh. This torturous wait gets even longer.

 

[DoDTS]

Received this morning my invite to the meeting on the 17th November.

 

[SS9_Shrimper]

Strange to happen a few days after talk of people transferring their shares to the trust. Probably nothing.

 

[Massimo Giovanni]

For me the shares were a likely point of discussion, concern and looking forward, development.
A week or so ago I started a thread on shares.
The disappointing aspect is that the folks advising the consortium seemed to have just realised that at almost the 11th hour.

The protests, and lobbying, seem to have worked with making Ron a more considering person.

 

[hlane17]

Not sure what to think of this.

Ron is presumably using the money 'owed' to him by SUFC to convert debt into shares instead of the club repaying it.

This obviously dilutes the worth of everyone else's shares by increasing the overall no. of shares in SUFC Ltd.

This does send us backwards in terms of fans having a direct shareholding in the football club, as everyone's small % of the club will be worth less.

But even if everyone put their shares together tomorrow, I doubt it would give us much power over the direction of SUFC. There are probably better ways for the fans to invest in securing the club's future.

There are also future benefits to the consortium having a higher shareholding. A higher % of the club available for investment/purchase will be far more attractive to any potential investors/buyers.

 

[Shrimpergonzo]

Can any of you that know about such things professionally explain why this couldn’t be done after the sale?

After all the consortium will then be majority shareholders so will be able to approve the motion.

 

[dusterman]

This is why I'm starting to think this excuse is all bollocks.

Something else must be happening behind the scenes for this to be the only reason why

Oh christ, I spy @ForeverBlue. Go on then lay the misery on us.

If is still playing games, I have a message.

Run Ronald, run. We will get ye.

 

[Somerset Ex-TTB]

Can I ask a dumb question? Why is the embargo still in place if we have paid all football related debts? Why is the embargo going to still be in place until the change of ownership? Its in place for failure to file accounts, and failure to pay HMRC, staff salaries etc?

Assuming all staff and HMRC are paid at the end of October, there is no reason why the embargo should stay?

 

[southendkid]

Can I ask a dumb question? Why is the embargo still in place if we have paid all football related debts? Why is the embargo going to still be in place until the change of ownership? Its in place for failure to file accounts, and failure to pay HMRC, staff salaries etc?

Assuming all staff and HMRC are paid at the end of October, there is no reason why the embargo should stay?

Might be wrong but I thought it was just the amount in the winding up petition that was paid and we still owe more to HMRC.

 

[hlane17]

Can I ask a dumb question? Why is the embargo still in place if we have paid all football related debts? Why is the embargo going to still be in place until the change of ownership? Its in place for failure to file accounts, and failure to pay HMRC, staff salaries etc?

Assuming all staff and HMRC are paid at the end of October, there is no reason why the embargo should stay?

Pretty sure we're still in arrears with HMRC.

 

[The Big Dady]

Debt for Equity

As a director of a private company, it is not uncommon to take out loans to finance your business. However, it can be confusing if your company’s lender approaches you to convert the outstanding loan amount to equity. Or maybe, instead, as part of the loan agreement, there may be a provision that permits you to convert the debt to equity. This article will explain the implications behind converting debt to equity. It will then discuss important considerations, like how preference shares usually operate in a debt-for-equity swap.

What is Debt-For-Equity?​

Debt represents an amount of money that your company must repay in the future, usually with interest. Equity is a measure of ownership in a company. Most companies grow by issuing a mixture of debt and equity financing.

In some cases, your company may have borrowed money containing a provision that allows the lender to “swap” the debt for equity. Alternatively, the lender may approach your company and ask to convert the loan amount to equity. Finally, you may even approach your company’s lender and see if they would be willing to swap the outstanding debt for equity.

Regardless, if your company’s debt is swapped for equity, a portion of the debt will be written off in exchange for a corresponding amount of ownership in your company (i.e. equity).

Likewise, your company will award equity in the form of shares. However, the lender will often be issued shares of a different class (e.g. preference shares). This can often happen in the context of restructuring or refinancing, for instance, if your company is having a hard time making its payments.

Other Considerations ​

The primary commercial considerations that you will need to work out with your lender when it comes to swapping your debt for equity include:

• how much debt will you agree to swap for equity;
• the proportion of total equity in your company the lender will obtain;
• what rights will your company attach to the newly-issued shares; and
• if there will be any limitations on the lender’s right to sell the shares to a third party.

In some cases, the terms of the loan will specify these questions. But in other cases, this is a matter of negotiation based on the position of you and the lender.

Discharging the Loan ​

Your company and the lender will need to document an agreement with the following information:

• the amount of the loan to be discharged;
• the number of shares and their nominal value to be issued to the lender;
• if the shares will be issued at par or a premium amount; and
• that the lender accepts the shares as full satisfaction of the loan.

In practice, you should execute this agreement as a “deed of release.” This is simply a more formal way of recording this agreement.

Process of Swapping Debt for Equity ​

In the simplest of swaps, the process is fundamentally no different than issuing new shares:

• shares are allotted either by the directors’ powers to do so. Alternatively, if they do not, then shares are allotted by an ordinary resolution of the shareholders;
• shareholders agree to waive their “preemption rights”, i.e. the right to maintain the same proportion of equity ownership;
• directors will convene a meeting to approve the terms of the share issue. Likewise, they will need to approve the agreement with the lender; and
• Form SH01 is completed and returned to Companies House.

Preference Shares​

In many cases, the lender will want their own special class of shares. Such shares are commonly called “preference shares” because it gives lenders preferential treatment over other classes of shareholders. Most commonly, such preference shares will stipulate:

• a superior right to a return on capital; and
• the right to dividends paid at a fixed amount.

Additional, from your lenders’ perspective, they will want the class of shares issued to them to behave like the initial loan. Your company can achieve this by negotiating certain redemption rights and dividends.

Redemption Rights​

The mechanics of how share redemptions operate are beyond the scope of this article. But in general, redemption rights in shares give the relevant class of shareholders the right to “redeem” their shares for cash.

This means that your lender can exercise the right to redemption after a set period or upon the happening of some event. Accordingly, your company will pay a specified amount per share back to the lender.

The effect is similar to being repaid the principal sum of a loan. The only difference is that redemption rights can specify a repayment amount above the price of the shares at the time they were issued. For this reason, swapping debt for equity can be advantageous to the lender if they think the underlying value of the company will increase over time.

Dividends​

It is common for the preference shares to give the lender the right to dividend payments at a fixed rate. You may notice the effect is similar to interest payments: i.e. the lender will receive a fixed amount over a certain period.

However, dividends differ from interest payments in one critical way. Importantly, your company cannot issue dividends unless it has made a profit. Therefore, compared to debt, this is advantageous to your company because there is no obligation to make a payment unless your company is doing well enough to turn a profit.

Keep in mind that parties may negotiate rights attached to the preference shares so that the dividend rights are “cumulative.” Cumulative dividend rights mean that at the first chance your company can declare a dividend, that the dividends that your company should have paid over a period of time, it pays at once.

 

[Harry Bullocks]

Impressive Mr Dady

 

[danbowen]

At least Ron hasnt left it until the last minute this time to give us an update. If this had waited until 1st November everyone would be complaining but it is clear to see that things are progressing and it sounds like this will be a formality. Cant blame him for legal requirements re the 21 days etc and I would rather this start now than on the 1st November.

 

[kentblues]

Is it not the case that at least one director has loaned the club a substantial sum? Not impossible that it's debt held by an individual(s) (not corporate debt) being converted to shares? One director, at least, is already part of the consortium.

 

[in the know]

Good to see the club hasn't lost its skill of announcing unsettling news 24 hours before a game. Hopefully its only unsettling because of our sceptisism towards anything ron related.
However, it does seem odd why the 21 day period wasnt considered more carefully before announcing dates such as 1st nov for the official takeover.
Maybe waters down the excitement of JRs appearance at the game a little, but hoping its still a great atmosphere tomorrow and a good win

 

[kentblues]

At least Ron hasnt left it until the last minute this time to give us an update. If this had waited until 1st November everyone would be complaining but it is clear to see that things are progressing and it sounds like this will be a formality. Cant blame him for legal requirements re the 21 days etc and I would rather this start now than on the 1st November.

The letters for the meeting on the 17th were posted yesterday- so keeping quiet/announcing later was hardly an option..

 

[Supa Shrimpa]

It's sad that the rat has such a poor reputation, that even if this is good new, we're always going to fear the worst

 

[Thundersley Blue]

A real shame from the playing perspective. Means that it will probably be December before Kevin is able to properly start strengthening the squad. Given the fixture list, guess the play offs could be out of reach this season.

 

[defender05]

One positive to take from it is that things are still going ahead. If not none if this would be needed.

 

[kentblues]

It's sad that the rat has such a poor reputation, that even if this is good new, we're always going to fear the worst

Quite. On the other hand the fact that the statutory notice is being given is concrete evidence that the takeover is progressing even if at a somewhat more funereal pace than we would like...