I would hope that I would rather than laugh in a clients face ask why the client would want to do that, find out all the facts I could before advising that client. As I suspect your accountant would if asked as a serious question.
On the face of it the return you estimate is not a very good one and between two independent businesses would seem to be insufficient. However what is the purpose of the loan, does it protect other interests, are the two actually independent of each, is it a part of a bigger plan, does it ensure other returns etc..... Think you are wrong to insist in the example that the companies are independent very often such deals require a shareholding interest being taken if one did not exist in the first place..... otherwise the finance is sourced from financial institutions and the whole hypothesis is altered
We all know that this hypothetical situation is aimed at the loan relationship between CCC and ACL although the facts are changed in a way that suits a very hypothetical point. The council is not a business, we do not know the rate of return, etc . We do know the loan is tied to the length of the lease, it is secured on the assets of the business, the interest rate is 5% etc. Councils have a far greater social duty than an independent private or even public company. "Profits" to a council are not just monetary
Perhaps you could ask advice from your accountant about two other "clients"..... all hypothetical of course
1) first client wants to lend another company over £10m in various tranches of finance some at interest perhaps 10%pa. Client owns a minority share holding in the company taking the loan. These loans will be secured on the assets of the other company by legal mortgage. The company receiving the loans makes multi million pound losses and has done for years, it has no means of paying the interest let alone the loan capital from its own cash flow, repayment date on some of the loans is set within 12 months. The Company taking the loan has no permanent operating base. The assets providing the security have balance sheet values at less than £2.5m. Is that a good deal to consider?
2) second client is to lend another company over £20m with no security. Client did hold shares but unclear if still do as share holdings were transferred to a third party classed as the owner. Part of the loan will be interest baring. The client will give management of the money lent over to a third party. Again the company receiving the loans makes multi million pound losses and has done for years, it has no means of paying the interest or the loan capital from its own cash flow. The Company taking the loan has no permanent operating base. The assets balance sheet values are at less than £2.5m. Is that a good deal to consider?
When he has stopped falling off his chair laughing ...... his answer should be Why?
If they want to look after their assets 'by law' on behalf of the taxpayer, they shouldn't lease them to a private company!
edit - then again, is their asset really at risk? They own the freehold to it and if ACL goes belly up the leasehold returns to the council.
It depends on how much something is worth and what the outlook is. And what is there to say that the taxpayer is at risk?
If ACL can't repay the loan, then the council will have to.
If the discussion is about the JR, then taxpayers interest is beside the point.
It's about the loan being given on commercially fair conditions and in compliance within state aid guidelines.
is this thread still bumping along the bottom.
for everyone that missed it OSB gave the only relevant reply 2 hours and 5odd pages ago, see above.
also seems to be the only reply grendull hasn't commeted on which is strange as its the only one that really answers the OP.
He doesn't understand the simple concept that regardless of its ownership, ACL is a private limited company and as such is competing in the open market with other private companies.
IF SISU are right it would mean that two laws contradict each other. By law CCC must look after all assets. They secured a loan to protect an asset of theirs. And I trust that the CCC solicitors have done any checks where the laws stand before anything was done as they will have been involved. I prefer to trust this more than anything SISU say or do.
So which part do I not understand?
That EU legislation takes precedence over national legislation?
Your slithering and crawling around everything OSB says is probably as embarrassing to him as it is to your dignity. I have effectively replied to it as my relevant points are relayed in a subsequent post. I'm sure if OSB said the world is flat you would cancel your round the world cruise. I wouldn't.
What EU legislation is relevant?
The deal passes the state aid test as far as I can see https://www.gov.uk/government/uploa...e/261384/bis_13-1330_state_aid_the_basics.pdf
Careful there is to much factual evidence here. You have gone off topic this is supposed to be a Grendel only manipulated hypothetical topic !!
Please stick to the program....
What EU legislation is relevant?
The deal passes the state aid test as far as I can see https://www.gov.uk/government/uploa...e/261384/bis_13-1330_state_aid_the_basics.pdf
That EU legislation takes precedence over national legislation?
Can you keep it to the debate?
That EU legislation takes precedence over national legislation?
Would you like to share what you know?
Anyone can make any sentences look good......but where does it say that anyone can't look after their own interests?
From the introduction:
The UK and EU support strong state aid rules to ensure aid is well targeted to address market failures and avoid negative effects on competition. With strong rules, those who receive advantages from the state won’t become overly reliant on aid and will remain incentivised to innovate or make efficiencies. New market entrants are encouraged and weak companies are less likely to stay in the market. Ultimately, it’s a better deal for consumers.
How is a company independent if they are owned by you? The business objectives of both are aligned.
Are your hands independent of one another?
According to the accounts, the income had increased.
IF SISU are right it would mean that two laws contradict each other. By law CCC must look after all assets. They secured a loan to protect an asset of theirs. And I trust that the CCC solicitors have done any checks where the laws stand before anything was done as they will have been involved. I prefer to trust this more than anything SISU say or do.
So which part do I not understand?
Many people on here have maintained that these two companies are independent. For example when the rejection of the CVA was made many posters differentiated between the two organisations and stated that ACL were independent and had a duty to their shareholders and not the council or the club.
At least we now acknowledge that this is hogwash. ACL is a council quango.
The loan deal if the terms are as suggested proved this. Why was it done? OSB’s health check on ACL’s accounts is very positive and the cash flow doesn’t appear to be an issue at all. The payback on the loan now is upwards of £32 million based on the assumed interest rate so the Yorkshire Bank loan would have had to have had an interest payment in excess of 13% to even match the capital outlay.
As a commercial loan the council will at the estimated rate profit by around £880,000 which means ACL must exist as a going concern for some 38.5 years to avoid a loss. As a return it is not an investment worth pursuing.
So a healthy company is given a revised loan from a public body that owns the company and clearly dictates strategy.
I am sure some people will be happy with this and I suspect some others may not.
This is the test, you must answer YES to ALL questions:
- Is the assistance granted by the state or through state resources? (YES)
- Does the assistance give an advantage to one or more undertakings over others? (NO - what "others" were about that ACL were competing with? No Sisu do not count, they were not a competitor)
- Does the assistance distort or have the potential to distort competition? (NO - Again, no competitors)
- Does the assistance affect trade between Member States? (NO - we're not in European competition)
This is the test, you must answer YES to ALL questions:
- Is the assistance granted by the state or through state resources? (YES)
- Does the assistance give an advantage to one or more undertakings over others? (NO - what "others" were about that ACL were competing with? No Sisu do not count, they were not a competitor)
- Does the assistance distort or have the potential to distort competition? (NO - Again, no competitors)
- Does the assistance affect trade between Member States? (NO - we're not in European competition)
The part that protecting an asset isn't providing assistance to a private company. The asset is already protected by the terms of the lease agreement and the freehold.
You're completely wrong on points 2 and 3. SISU were going to buy ACL's loan out at a lower (distressed) rate than the council paid for it and takeover the company (this hasn't been denied by the council and isn't illegal). The council's assistance has stopped SISU taking over the company, thus has distorted the market.
So you think that the European law would say that a local council can't give protection to something owned by the same local council and a charity? There isn't any private holding anywhere. SISU are really stretching it to make out as though they have a case and a few seem to have fallen for it.
So what market has been distorted? It wasn't put up for sale, bought or sold. Are you saying there is a law where forced sales can go through?
You're completely wrong on points 2 and 3. SISU were going to buy ACL's loan out at a lower (distressed) rate than the council paid for it and takeover the company (this hasn't been denied by the council and isn't illegal). The council's assistance has stopped SISU taking over the company, thus has distorted the market.
So you think that the European law would say that a local council can't give protection to something owned by the same local council and a charity? There isn't any private holding anywhere. SISU are really stretching it to make out as though they have a case and a few seem to have fallen for it.
We actually don't know if the council haven't denied this because they are saying nothing before the judicial review on the advice of their lawyers. It may well be that everything Tim and Mr Labovitch say is true and that's why it hasn't been denied - we don't know and therefore probably shouldn't read anything into the silence.
We actually don't know if the council haven't denied this because they are saying nothing before the judicial review on the advice of their lawyers. It may well be that everything Tim and Mr Labovitch say is true and that's why it hasn't been denied - we don't know and therefore probably shouldn't read anything into the silence.
135 posts on a thread that is irrelevant
136 counting this
I am gob smacked
Fairplay Grendel you must be chuckling your ass off.
135 posts on a thread that is irrelevant
136 counting this
I am gob smacked
Fairplay Grendel you must be chuckling your ass off.
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