More about Nottingham Forest's £80m loan from Apollo Management which we reported on Saturday.
The £80million loaned from Apollo to Forest is senior debt,
meaning it takes priority when it comes to repayment; in the unlikely event
Forest were heading out of business, Apollo would be at the front of the
resultant queue.
The loan has a three-year term, due for repayment on
December 20 2027, though there is provision for that to be extended a further
two years. It incurs 8.75 per cent interest annually or, based on the £80m
balance, £7m per year. That was around half Forest’s total matchday income in
the 2023-24 season (the latest for which we have figures).
£55m of the Apollo loan has been used to repay the amounts
due to RMF. Based on most recent interest rates, those RMF loans were incurring
£6.4m in annual interest, so this refinancing — now a common occurrence in
football — works out cheaper in a sense; applying the Apollo interest rate to
£55m gives an annual charge of £4.8m.
Of course, Forest have borrowed above and beyond their
previous debt to RMF, taking out a further £25m this time around. It is unclear
what the additional funding is to be used for.
Debt has long been a dirty word in football, but it need not
be; the only way debt becomes overly problematic is if clubs are unable to
service it, or it unduly impacts their ability to spend elsewhere.
In that sense, Forest shouldn’t have too much new to be
concerned about in the immediate future. While their debt burden has increased
by £25million, the more favourable rate — and a fixed one at that — means
interest costs have only increased by around £0.6m annually.
£7m in annual interest isn’t too bad for a club in the
Premier League and the commensurate wealth that brings (The Athletic estimates
Forest earned £157.5m in domestic prize money alone last season).
An 8.75 per cent interest rate is hardly cheap, though it’s
also not as hefty as some other clubs are paying — including Forest’s own
recent payments to RMF. Rates are high generally and a potential drop into the
Championship, deemed a possibility for all but a minority of clubs, makes it
difficult to obtain low-rate lending. A positive is that Forest have now locked
in the rate on this tranche of funding, so are no longer subject to interest
rate swings and have certainty over upcoming payments — though, of course, that
could turn to a negative if rates fall in the future.
Of greater concern is whether Forest have anything to show
for it. If the money has only been used to cover ongoing costs, that’s much
less desirable than pouring it into infrastructure; for example, the imminent
works at the City Ground. Debt just to fund existing operations always raises
the question of how it will eventually be repaid. Eight Premier League
clubs paid more in interest than Forest in 2023-24, some substantially so, but
several of those did it to build new or improved facilities.
There’s also the important point that all of the club being
used as security precludes Forest from putting its assets up against any other
funding, such as whatever may be required to pay for those City Ground works.
That money will, presumably, have to come from the pockets of owner Evangelos
Marinakis.
The repayment date for the Apollo loan isn’t until December
2027, but could be extended to 2029, and it may be that Forest simply refinance
again. In the immediate term, the lending doesn’t look overly risky or
expensive — at least relative to what went before.
But finances at Forest, like most clubs outside a handful,
will remain reliant on on-field success.
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