Hibs - Debts
The car park sale in 2003 made a big dint in the amount of money owed.
The first graph shows that in July 2003 Hibs owed various people a total of £14.5m. The largest amount was the mortgage on the ground at £6.5m. The money owed to HFC is money that has essentially been loaned to the club by Tom Farmer/Rod Petrie.
In 2004 the car park was sold bringing in a net 9.3m for HFC. Consequently the amount Hibs Football club owed to HFC was reduced by £4m. The new debt analysis, as of July 2004 is shown below. The difference between the two graphs is all in the amount owed to HFC.
As shown on the interest page, Hibs will be paying roughly £100,000 per year in interest on the outstanding part of the loan from HFC.
The third graph, shown below shows the state as of July 2008. The debt the club have is now split between the mortgage and the money lent to them by Tom Farmer. There may be an argument for the club to use the cash it has in the bank to pay off the loan from Sir Tom now and make a big saving on the interest payments.
2008 - the loans are now 95% related to the mortgages.
We need to look at accounts of HFC to see what difference it made to them. Their debt position for July 2003 is shown below. The three elements are a loan from the bank, a loan from Tom Farmer and "loan stock". Loan stock is shares in a business held in return for a loan, in this case there are no interest payments on this.
After the sale of the car park the loans to Farmer, and to the banks are cleared, and only the loan stock is left. None of the remaining debt is going to attract interest.
In 2006 HFC came to an agreement with Morston Securities Limited regarding the loan stock. 500,000 shares in HFC were sold to Morston for £5m. In return for this Morston will receive a fixed percentage of any future profits, above an unspecified certain level.
