The Financial Situation (43 Viewers)
- Thread starter ReBeL
- Start date
So, your response to the club generating money is that they did it to sell Dybala? Amazing!
Well, I am a bond analyst by trade, so any questions, I probably can give some insight. The total amount issued was 175MM euro @ 3.375%. I want to find the document given to investors because it should say use of proceeds. There is a possibility that it could have been simply to term out bank debt. The majority of Juve's debt is short term bank debt, which usually have high amortization payments. It could also mean they want 175MM in incremental cash to buy a player. Dunno. I will dig.
https://www.football-italia.net/127915/juventus-confirm-€19m-loss
You can read this article it says that our debts have doubled from 147 million euros to 309 but Ronaldo transfer will be accounted for in the next financial year
You can read this article it says that our debts have doubled from 147 million euros to 309 but Ronaldo transfer will be accounted for in the next financial year
Our debt has been increasing because our cash profit on operations (revenues less wages and other operating expenses), subtract payments owed to other clubs for previous transfers, interest expense, and investment in new players, the club is in cash deficit. It then borrows using its bank credit lines to make up this deficit. Typically bank loans are stringent with high amortization payments. Bonds on the other hand are more flexible, and Juve can wait 5 years before making any payments.
Whether it is good or not?
Well, it depends. interest payments on bonds are generally higher, but as I said, they are more flexible, and usually don't have a direct claim on company assets. Also, no amortization payments are due, and instead the whole amount owed can be paid or refinanced in 5 years. Also it depends on what the use of proceeds are. If it is to refinance bank debt it is neutral, and if it is to buy players well, good for us, but obviously it needs to also manage debt levels.
Whether it is good or not?
Well, it depends. interest payments on bonds are generally higher, but as I said, they are more flexible, and usually don't have a direct claim on company assets. Also, no amortization payments are due, and instead the whole amount owed can be paid or refinanced in 5 years. Also it depends on what the use of proceeds are. If it is to refinance bank debt it is neutral, and if it is to buy players well, good for us, but obviously it needs to also manage debt levels.
there might be multiple benefits of the debt, just to name a few in a nutshell:
- tax shield
- usually cheaper than equity
- can be more flexible than equity
- in case of juve, building a stadium from equity alone wouldn't have been possible
- bond buyers won't have any influence on how the money is spent
- ownership stays with the original owners (no new owners involved)
debt is not like drugs.
- tax shield
- usually cheaper than equity
- can be more flexible than equity
- in case of juve, building a stadium from equity alone wouldn't have been possible
- bond buyers won't have any influence on how the money is spent
- ownership stays with the original owners (no new owners involved)
debt is not like drugs.
Debt didn't double. Debt grew from 305 to 328 million euro. Net debt is net of cash. The reason net debt increased was because we had 135 million in cash on the balance sheet, and spent all but 15. The bond deal could either refinance of that 328 million in debt and push out the repayment date further into the future (5 years with no amortization payment), or it could be to fund player purchases. If commercially we are doing well enough, perhaps management feels comfortable raising incremental debt. I wish I had the debt issuance presentation or offering memorandum, maybe I can get it from my Morgan Stanley sales person lol
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It depends on profitability. Debt is not bad. Too much debt is mad and not enough debt it bad. If Juventus expects enough growth in revenue and profits, it is totally fine. Also if it expects that the value of the business will continue to increase it is also ok. Even if a company has massive cash deficits, it could be ok if the value of the company is still increasing and it can access more capital to continue funding investment. For example: Netflix. Netflix's cash generation less content investment is negative but debt as a percentage of netflix' market value is only 8%. Netflix for example could make a cash profit if it reduced investment today, but believes it makes better financial sense to borrow money, and invest in content which will keep the growth engine going. So each case is different.
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unless you default on payments, can refinance bonds. then you lose all ownership, and the bond holders own you. That is exactly what happened with Milan. Also remember that a bankruptcy isn't necessarily disastrous unless you can't find a new buyer. Elliot Management, Milan's owners simply took control of the business after it defaulted. Parma was such a disaster that nobody bought it and it went into liquidation. That is why it was relegated. You only get relegated if you get liquidated.
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It depends on profitability. Debt is not bad. Too much debt is mad and not enough debt it bad. If Juventus expects enough growth in revenue and profits, it is totally fine. Also if it expects that the value of the business will continue to increase it is also ok. Even if a company has massive cash deficits, it could be ok if the value of the company is still increasing and it can access more capital to continue funding investment. For example: Netflix. Netflix's cash generation less content investment is negative but debt as a percentage of netflix' market value is only 8%. Netflix for example could make a cash profit if it reduced investment today, but believes it makes better financial sense to borrow money, and invest in content which will keep the growth engine going. So each case is different.
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unless you default on payments, can refinance bonds. then you lose all ownership, and the bond holders own you. That is exactly what happened with Milan. Also remember that a bankruptcy isn't necessarily disastrous unless you can't find a new buyer. Elliot Management, Milan's owners simply took control of the business after it defaulted. Parma was such a disaster that nobody bought it and it went into liquidation. That is why it was relegated. You only get relegated if you get liquidated.
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