On Thursday 9th March 2006 the Official Site announced details that an AFCW plc Extraordinary General meeting would take place straight after Dons Trust Special General Meeting at Kingsmeadow on Thursday 30th March with the first meeting 19:30.
The following is my understanding of the two options, it's important that as a Shareholder, Dons Trust Member you read all information that has been issued and consider which you think is the best option for the club, and if possible you attend the meetings on Thursday 30th March, if you cant make the meeting make sure you return you paperwork so that your vote counts.
Back in 2003 as supporters the decision was taken to enter into an agreement to purchase the Kingsmeadow site, and since then we have made an incredible achievement in reducing what seemed an impossible figure of £2,500,000 down to approximately£800,000 at the current date. As it currently stands we still own approximately £400,000 to Mr Khosla
When we undertook the agreement with Mr Khosla the terms of the Loan were that we would pay an interest rate of 5% above the current base rate this means the current rate 9.50% the Loan had no date that it had to be paid off by and as long as we paid the interest each month the ground cannot be claimed back by him.Whenever any business starts it's always difficult for them to get starting capital so at the time this was the best offer we could get in the road to making our great club what it is. Three years down the line we have a basic track record and now we have a new option with regards to our future and this is what we are being asked to consider at the meeting.
The "Financial Working Group" have spent a lot of time over the past 3 years approaching various commercial lenders about the possibility of securing finance that would reduce the interest that we pay on the outstanding amount. During this time they have approached 17 companies and 16 of these have turned round and said "No" various reasons but the main one being "We don't deal with Football clubs, we had nasty experience's in the 1990's with them" but now we have proved that we are well run one bank Barclays Bank has offered us terms.
The terms that Barclays Bank have offered us are a loan of up to£600,000 on an Interest rate of 2.5% above the current base rate this means that the current rate would become 7.00% but the amount borrowed would need to be paid back over a period of 10 years. This loan also has a couple of extra conditions that I will explain below.
Barclays Bank would take a charge over the ground, This "charge" currently belongs to Mr Khosla, what this means is that if we were unable to pay loan they would be able to claim the site, this is the same as any mortgage that you or family may have and with any lender they require what is called a first Charge on the site, this means that we would clear the debt with Mr Khosla and the loan would become fully owned by Barclays Bank. lenders won’t lend money to us if they are second in line for getting hold of the ground if we fail so we need to borrow enough to pay Khosla off in full and then Barclays can get the “first charge” they require.
Whereas The loan with Mr Khosla could go on for ever as long as we pay the monthly interest the Barclays loan requires for interest and capital to be repaid each month. So as the time goes on the Loan and Interest payments (if they remain at current levels) although thee same monthly payment would be made more would go towards reducing the capital sum. The item that is complicated is the one that says that states we must have cash flow also of 1.5 times the amount of the loan.
The cash flow requirement of 1.5 times the amount of the loan is basically saying that our profit before deducting depreciation of fixed assets and before deducting interest much be 1.5 times the annual amount of interest and capital.
If we were to use £400,000 of the £600,000 to re-pay the outstanding Mr Khosla loan it would obviously leave an additional £200,000 available well what about the remainder of the loan, one of the big talking points recently have been about the 'second lease' this is the area behind the Kingston Road and John smith's stand that would allow us at the initial stage to add addition Turnstiles and exit's which would be defiantly needed in the Conference it is expected that this would cost £100,000 for the land but if we didn't get this land it could well mean potential promotions could be turned down with the ground not up to standard. The other £100,000 could be used when required for additional ground improvements.
I will now list what I believe to be the good points and bad points of each arrangement.
| Mr Khosla Loan | Barclays Bank Loan | ||
|---|---|---|---|
| Good | Bad | Good | Bad |
No date must be paid off by |
5% above base rate interest |
2.5% above base rate |
Amount of loan must be paid off in 10 years |
Doesn't change credit rating |
Keeping up payments will improve credit rating and therefore future loans will be easier to acquire finance. |
If certain conditions are not met they could take control of the ground. |
|
| Loan of up to £600,000 available to be accessed as required. | |||
