# Puzzled how individuals who buy a soccer club can transfer the loans to the Club?



## dewdrop (24 Sep 2010)

This is not a sports question really.

I am puzzled how individuals who buy a soccer club can in some way transfer the loans they incurred to the club. 

I thought  a  company which owned a club could not borrow to give a loan to the purchasers.


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## ajapale (25 Sep 2010)

Hi Dewdrop,

this question has puzzled me also. Ive expanded your title - let me know if its ok.

I think it is something to do with the concept of a "Leveraged Buy Out". Leveraged buyout - Wikipedia.

aj


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## dewdrop (25 Sep 2010)

Thanks Ajapale. Title now much better. I worked for 45 years  in a financial institution in Ireland retired l0 years ago and during my working time never heard the word leverage applied to financial transactions. In recent years nearly every financial report includes this term.  Maybe it is one of the causes of ourproblems!


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## RMCF (26 Sep 2010)

You a Man Utd fan by any chance?

Or Liverpool !!


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## Statler (5 Oct 2010)

The acquisition of the club wll be undertaken by a limited liability company established specifically for the purpose. Individuals will provide equity and the company may also take on debt to finance the acquisition. Assuming your question relates to the UK the following link provides a short note on lenders taking security:
[broken link removed]
Cashflow from the club will be used to sevice debt.

There are other potential aspects to the structure, such as equity being provided via a holding company of the acquiring company to structurally subordinate the claims of equity-holder to those of lenders or a debt push-down for tax purposes, but the idea is essentially as above.


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## NorfBank (5 Oct 2010)

dewdrop said:


> Thanks Ajapale. Title now much better. I worked for 45 years  in a financial institution in Ireland retired l0 years ago and during my working time never heard the word leverage applied to financial transactions. In recent years nearly every financial report includes this term.  Maybe it is one of the causes of ourproblems!



A mortgage is basically a leveraged purchase. Leverage is essentially the use of borrowed funds to complete a transaction so although the term may not have been used, leveraged transactions were taking place.


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