Lukaku - transfer speculation | Gone

[ryan_forlan]

What is the difference between -
Buying a player and paying over 3 years (5+5+60)
and
Loaning for first two years at 5 per year and an obligation to buy at 60. (5+5+60)

What is the difference and financially how does either option suit any of the parties?

 

[Ronaldo's Love Child]

Because surely the point of selling him is to then use that money for our squad overhaul? How does getting 10m over the next two years help with that!? I think it’s a ridiculous offer personally. He’s still young and his goal scoring record is fantastic.

I was just about to write the same thing and then noticed your post.

I don't rate Lukaku as a Utd player but he was our main goalscorer for the last few seasons and sending him to Inter will leave a hole we need to fill (from outside the current squad). £ 9 million is not going to scratch the surface of helping us to purchase a replacement either as an established striker or a young one with potential.

If the balance is guaranteed from Inter AND the Glazers release £ 54 million into our transfer kitty for THIS season then I'd be happy with that but to lose our main striker (donkey that he is) for only £ 4.5 million this season is quite frankly a kick in the nuts.

 

[JPRouve]

@roonster09 That's no my point, I'm telling you that the settlement being over doesn't mean that they don't have to respect FFP, it's particularly important for a club that just got out of a settlement.

 

[Stookie]

Can you read? it says OBLIGATION

I havent read anything just a quick glance at what folk have posted

 

[buchansleftleg]

Any club that is willing to spend that much on a striker with no first touch is idiotic and we should bite their hand off. I fail to see how he will be a success in Italy where control and touch are valued higher than speed and aggression.

My only doubt is trusting the current setup to make a decision in who we get in to replace him - we need someone to make intelligent runs and with great first touch.

 

[settembrini]

Considering the inflation it isn't really. Lukaku is still a big name in football and we paid more for him than that, prices have only sky rocketed since.

If we want to replace him with a similar level striker we will have to pay more than that I guarantee you.

Prices have increased in the last two years but not massively so. We won't make a profit on Lukaku and if we can get the majority of our money back then that's fine with me. He cost a lot because he was a key player for Everton, under Solskjaer he isn't and won't be in the future. Rashford will be our starting striker and Lukaku will be a high earning bench player, unhappy because he was denied his move, and his value will only go down. That's the situation we need to be avoiding and selling him to Inter for £62m does this.

 

[roonster09]

@roonster09 That's no my point, I'm telling you that the settlement being over doesn't mean that they don't have to respect FFP, it's particularly important for a club that just got out of a settlement.

Yeah, that's what I said in one of previous post. They are under no restrictions (as in settlement period restrictions) and can operate as any other regular clubs (can sign players but have to comply with FFP like any other club).

 

[finneh]

If their first offer is 62m pounds, then I can see us relenting and lowering our price to around 72-73m and that'll get the deal done. Not bad.

Agreed. It's a good opening offer for both parties. United have £250m of cash in the bank so don't need an immediate cash injection to replace him; whilst Inter have FFP concerns and also it appears are struggling to shift Icardi.

I imagine an increase in the loan fee of €10-12m will do the trick.

 

[sugar_kane]

It really speaks volumes that there is only one club out there who seemingly wants him

For the prices being quoted there are plenty of teams who could swoop in and take him - premier league clubs included.

 

[Hazzer]

What is the difference between -
Buying a player and paying over 3 years (5+5+60)
and
Loaning for first two years at 5 per year and an obligation to buy at 60. (5+5+60)

What is the difference and financially how does either option suit any of the parties?

Inter are so tight to pass FFP, it would benefit them over next couple of years at around 10m pa. A rudimentary explanation is below and is due to the way player purchases and contracts are ammortised within the books of football clubs. Please note this is nothing to do with the flow of money which many fans confuse when looking at player transfers.

Essentially if they bought Lukaku for 5+5+60 this window, assuming a 5 year contract (at 10m pa), total cost of the deal would be 120m, impact to the P&L would be 24m per year over next 5 years.

By loaning for first 2 years, P&L impact over the next 2 years would be loan fee +Lukaku's wages (assuming they are paying all of these), would be (5+10), hence would make a P&L saving of around 9m pa over next couple of years compared to buying him outright.

This is a pretty significant saving over this period for a club struggling against FFP.

For United it would most largely have the exact opposite impact, however is less significant as United have no FFP issues. I think they would likely agree inprinciple however expect a premium on the loan fee or purchase price in order to agree.

Not sure if this makes sense, Im and accountant so better with numbers than words!

 

[roonster09]

It really speaks volumes that there is only one club out there who seemingly wants him

For the prices being quoted there are plenty of teams who could swoop in and take him - premier league clubs included.

It doesn't work like that. He wants to move to different league and Inter/Conte had a deal with him from long back. He has made his decision and he even made it publicly. There is no point for other clubs to try when he wants to play for Conte and Conte wants the player, unless Madrid, Barca, Bayern wants him.

 

[JPRouve]

Yeah, that's what I said in one of previous post. They are under no restrictions (as in settlement period restrictions) and can operate as any other regular clubs (can sign players but have to comply with FFP like any other club).

And I literally said in the first post that they got out of the settlement, it seems that you understood me saying that they were still in it. My point is that Inter will try to not be repeated offenders.

 

[Cloud7]

Its shocking that even in this inflated market we are taking a bit hit on a 26 year old, but the loan proposal is an interesting concept.

It’s not shocking in the slightest when you think about the fact that Lukaku was worth probably half of what we paid for him. 75 mill rising to 90 mill? It’s absolute madness. We do need to keep that in mind, that we can’t expect another club to match our madness for what is a player who was never worth what we paid for him.

 

[roonster09]

And I literally said in the first post that they got out of the settlement, it seems that you understood me saying that they were still in it. My point is that Inter will try to not be repeated offenders.

Yeah might be something is lost in reading few posts.

Yeah, Inter don't want to be repeated offenders. Might get harsher sanctions. I think they have done well in increasing their revenue (Chinese sponsors and all that) and they are in CL for second season. I think they are in decent position.

Also they made few loan + option to buy deals before, so redeeming those players might be too much for them if Lukaku signs this season.

 

[Ikon]

It’s not shocking in the slightest when you think about the fact that Lukaku was worth probably half of what we paid for him. 75 mill rising to 90 mill? It’s absolute madness. We do need to keep that in mind, that we can’t expect another club to match our madness for what is a player who was never worth what we paid for him.

So it is shocking that we overpaid so much in a knee-jerk deal..!

 

[sullydnl]

What is the difference between -
Buying a player and paying over 3 years (5+5+60)
and
Loaning for first two years at 5 per year and an obligation to buy at 60. (5+5+60)

What is the difference and financially how does either option suit any of the parties?

Good question.

As I understand it if we sold Lukaku outright (even in installments) we'd be able to lose the remaining "cost" of purchase fee and wages from our books straight away. In fact, depending on the figures involved, we could sell him for less than we initially paid and still record an accounting profit on his transfer.

I'm guessing that recieving an obligation to buy wouldn't allow us to do that this year? That we'd still be carrying the cost of Lukaku's purchase on our books, just slightly offset by the loan fee?

As others have said, recieving money up front wouldn't be an issue. However, there may be limitations in place on yearly expenditure that removing Lukaku's cost from the books immediately could ease?

 

[Cloud7]

So it is shocking that we overpaid so much in a knee-jerk deal..!

Well yeah from our point of view it was absolutely shocking

 

[Stookie]

It’s not shocking in the slightest when you think about the fact that Lukaku was worth probably half of what we paid for him. 75 mill rising to 90 mill? It’s absolute madness. We do need to keep that in mind, that we can’t expect another club to match our madness for what is a player who was never worth what we paid for him.

yeah that’s true, we massively overpaid for him.

 

[ClaytonBlackmoorLeftPeg]

They should stick to their guns and get Inter to pay every last cent of that 80M after how they stonewalled over Perisic. Lukaku is a professional enough player to not kick up a fuss even if he doesn't get a move.

Lukuku who can’t even keep himself fit, and who goes mouthing off about wanting to play in Italy and for Conte!

Professional, my arse. One of the key reasons he needs to be jettisoned further than his first touch. Adios.

 

[haram]

 

[joedirt87]

Didn't Inter try and back out of the Stefan Jovetic option to buy obligation? As long as the terms to meet the obligation are guaranteed to happen (like Lukaku making 5 appearances, or Inter finishing above relegation) I would be fine with the deal structured that way. Just don't want Inter to worm their way out of the deal, which I could easily see happening. Maybe Conte doesn't get his way like at Chelsea and he doesn't last more than 2 years, or Lukaku doesn't do as well in Italy as many think he will.

 

[giorno]

I think it's a way to stretch the payment terms to accommodate their cash flow i.e. that after the loan it will take shape as a regular transfer after the 'loan' with payments over 3-5 years. They would be boxing themselves in if they needed to drop such a big fee in once, especially considering their financial position.

I still think it is an acceptable offer to United. I don't think that we are as desperate for bigger and quicker instalments as people seem to think.

Honestly it's far more likely the payment would be structured into 3 installments of let's say, 30-20-20

This is an accounting trick is what it is. Whether it's for FFP reasons or accounting reasons(the two aren't quite the same since FFP allows for the exclusion of several expenses from their calculations. For example, let's say inter projects revenue for 500 and expenses for 400, before new trasnfers, but with only 300 of those counting against FFP. Writing down Lukaku for 14 instead of 5 for FFP would not be an issue, but for the books it would as it might push them in the red. So the ownership would prefer not to register a loss they would have to cover, but for FFP there would be no problems)

 

[giorno]

What happens if a club can't meet their obligation to buy? Do we have to accept a devalued player back after the loan?

The deal would not happen if Inter weren't able to guarantee their ability to cover the obligation

 

[Jezpeza]

No, that's just how the deal is reported for accounts. Payments structure are not fixed, it depends on the deals. For example Higuain's 94 million was paid in 2 or 3 installments, not over the length of contract.

I hate this. Someone looked at uniteds accounts and thought they saw something they didnt and everyone took it as fact. Amortisation is different in accounting terms to purchase terms, and no one seems to get that. We can write off the cost of a players purchase fee wages and agent fees across the length of his operational use - i.e his contract for accounting and FFp purposes. Its a tax trick. The actual amortisation of his transfer fee wouldn't be reported - but as an example, say we bought sancho for 100 million, we would agree to pay 90 million ‘upfront’ paid as something like 9 million a month for ten months, we do have to cashflow the business, with perhaps 10 million in performance related add on clauses.


This idea we pay for transfers over 5 years is utter s***e. So if we want to spend the lukaku money now, we need most of the cash to arrive this financial year - not in two years time. We could borrow against that income - but with interest added would make the amount even less in terms of spending.

Imagine you sell your old car to someone for 7 grand - and they agree to buy it and pay you in two years time. They write this down in an agreement. You need a new car now so You take this to a bank to borrow against. The bank offer you money - they offer to lend you five grand now with 2 grand interest, so theres your seven grand reduced to 5 grand.

Essentially, we will end up with a downgrade on lukaku. The other option would be for the Glazers to stick 70million cash into the club interest free and take the money when it arrives in a few years, but its the Glazers so no chance

 

[ryan_forlan]

Inter are so tight to pass FFP, it would benefit them over next couple of years at around 10m pa. A rudimentary explanation is below and is due to the way player purchases and contracts are ammortised within the books of football clubs. Please note this is nothing to do with the flow of money which many fans confuse when looking at player transfers.

Essentially if they bought Lukaku for 5+5+60 this window, assuming a 5 year contract (at 10m pa), total cost of the deal would be 120m, impact to the P&L would be 24m per year over next 5 years.

By loaning for first 2 years, P&L impact over the next 2 years would be loan fee +Lukaku's wages (assuming they are paying all of these), would be (5+10), hence would make a P&L saving of around 9m pa over next couple of years compared to buying him outright.

This is a pretty significant saving over this period for a club struggling against FFP.

For United it would most largely have the exact opposite impact, however is less significant as United have no FFP issues. I think they would likely agree inprinciple however expect a premium on the loan fee or purchase price in order to agree.

Not sure if this makes sense, Im and accountant so better with numbers than words!

Thanks for explaining. Makes sense.

 

[roonster09]

I hate this. Someone looked at uniteds accounts and thought they saw something they didnt and everyone took it as fact. Amortisation is different in accounting terms to purchase terms, and no one seems to get that. We can write off the cost of a players purchase fee wages and agent fees across the length of his operational use - i.e his contract for accounting and FFp purposes. Its a tax trick. The actual amortisation of his transfer fee wouldn't be reported - but as an example, say we bought sancho for 100 million, we would agree to pay 90 million ‘upfront’ paid as something like 9 million a month for ten months, we do have to cashflow the business, with perhaps 10 million in performance related add on clauses.


This idea we pay for transfers over 5 years is utter s***e. So if we want to spend the lukaku money now, we need most of the cash to arrive this financial year - not in two years time. We could borrow against that income - but with interest added would make the amount even less in terms of spending.

Imagine you sell your old car to someone for 7 grand - and they agree to buy it and pay you in two years time. They write this down in an agreement. You need a new car now so You take this to a bank to borrow against. The bank offer you money - they offer to lend you five grand now with 2 grand interest, so theres your seven grand reduced to 5 grand.

Essentially, we will end up with a downgrade on lukaku. The other option would be for the Glazers to stick 70million cash into the club interest free and take the money when it arrives in a few years, but its the Glazers so no chance

I have no idea whether you agreed with my post or disagreed and added few more points.

 

[Jezpeza]

I have no idea whether you agreed with my post or disagreed and added few more points.

Agreed. There was a big post in the anti glazer thread the other month where someone spotted the amortisation of the transfer fees in our financial accounts and took it to mean that we were paying transfer fees over 5/6 years. And everyone has been fed it. Obviously there are two types. Payment structure amortisation like you said is quicker. Look at today, barcelona bought Neto for 26mil upfront with 9 in add ons. That might be split into 10 months of 2.6 mil but they will get the cash reasonably quick. The idea they will pay 6.5 mil a year for him over the course of his contract is toss.

 

[roonster09]

Agreed. There was a big post in the anti glazer thread the other month where someone spotted the amortisation of the transfer fees in our financial accounts and took it to mean that we were paying transfer fees over 5/6 years. And everyone has been fed it. Obviously there are two types. Payment structure amortisation like you said is quicker. Look at today, barcelona bought Neto for 26mil upfront with 9 in add ons. That might be split into 10 months of 2.6 mil but they will get the cash reasonably quick. The idea they will pay 6.5 mil a year for him over the course of his contract is toss.

Yeah, FFP accounting is misunderstood as regular payment structure by many.

 

[JPRouve]

Agreed. There was a big post in the anti glazer thread the other month where someone spotted the amortisation of the transfer fees in our financial accounts and took it to mean that we were paying transfer fees over 5/6 years. And everyone has been fed it. Obviously there are two types. Payment structure amortisation like you said is quicker. Look at today, barcelona bought Neto for 26mil upfront with 9 in add ons. That might be split into 10 months of 2.6 mil but they will get the cash reasonably quick. The idea they will pay 6.5 mil a year for him over the course of his contract is toss.

Yeah, on that particular topic the simpler example is to tell people that even if you pay everything upfront from an accounting standpoint and precisely from the income statement the cost of the asset will be spread over the length of the useful life of the asset basically his contract, but that's reevaluated every year and extensions or sales alter it, extensions lengthen the amortisation while sales shorten it.

 

[giorno]

Imagine you sell your old car to someone for 7 grand - and they agree to buy it and pay you in two years time. They write this down in an agreement. You need a new car now so You take this to a bank to borrow against. The bank offer you money - they offer to lend you five grand now with 2 grand interest, so theres your seven grand reduced to 5 grand.

If your income is 500m every year, then the 2m interest is a drop in the ocean. You're talking from a basis that the club lacks cash, and that borrowing money would have a non-negligible impact on your finances. Neither is the case.

You also for whatever reason decided that the Glazers can't just open a line of credit for the club, using the 60m as guarantee

And you're also ignoring the fact that most transfers of money between clubs happen through surety bonds. It's all going through banks anyways. Interest might or might not be added depending on how the surety is covered, but reducing yearly expense is almost always the preferred option anyways, as quite unlike what you're saying, it "frees" more funds

 

[Harry190]

How the mighty have fallen. This whole negotiation is disgraceful.

 

[Jezpeza]

If your income is 500m every year, then the 2m interest is a drop in the ocean. You're talking from a basis that the club lacks cash, and that borrowing money would have a non-negligible impact on your finances. Neither is the case.

You also for whatever reason decided that the Glazers can't just open a line of credit for the club, using the 60m as guarantee

And you're also ignoring the fact that most transfers of money between clubs happen through surety bonds. It's all going through banks anyways. Interest might or might not be added depending on how the surety is covered, but reducing yearly expense is almost always the preferred option anyways, as quite unlike what you're saying, it "frees" more funds

Our income is accounted for. Half of it is wages pal. We dont have much cash and we dont want more debt.

Also surety bonds work with the surety party taking a premium to insure your promise of payment is met. So in our case, they will pay out if inter fail. If inter pay they will take a percentage.

The glazers can open a line of credit but why? We pay interest to get money now we want to spend, so we to let inter pay later?

I might try this next week. Order a curry, say i’ll pay in two years, and then the restaurant owner can take out a loan on the money i will pay him and take an interest hit on it, or we can work up a surety bond so he can make interest payments on my debt.

This inter lukaku offer is a shite deal.

 

[devilish]

Our income is accounted for. Half of it is wages pal. We dont have much cash and we dont want more debt.

Also surety bonds work with the surety party taking a premium to insure your promise of payment is met. So in our case, they will pay out if inter fail. If inter pay they will take a percentage.

The glazers can open a line of credit but why? We pay interest to get money now we want to spend, so we to let inter pay later?

I might try this next week. Order a curry, say i’ll pay in two years, and then the restaurant owner can take out a loan on the money i will pay him and take an interest hit on it, or we can work up a surety bond so he can make interest payments on my debt.

This inter lukaku offer is a shite deal.

True. Unfortunately very few clubs are interested in the Belgian Heskey

 

[Jezpeza]

True. Unfortunately very few clubs are interested in the Belgian Heskey

I know that but if someone cant afford something you are selling you dont sell it. Instead we seem to be looking to take their interest on on the debt we are that desperate.

I wouldn't have a problem with it if we didnt need to spend the money now. But if the 100m transfer budget and sell to buy is a thing then how does this aid it? We get no money for him now, so will be a player down and wont be able to replace him?

 

[giorno]

Our income is accounted for. Half of it is wages pal. We dont have much cash and we dont want more debt.

Again, this is only relevant if you're in financial difficulties. Which to my knowledge you are not.

Also surety bonds work with the surety party taking a premium to insure your promise of payment is met. So in our case, they will pay out if inter fail. If inter pay they will take a percentage.

Yes. Didn't make myself clear. Let's say inter and united agree on a payment of 50m from inter to united. Inter and United then go to a bank to release a surety bond, with either club or owners acting as guarantor. After that, either inter pays united the 50m, or, often, the bank does, then the bank gets its money back from the guarantor, which let's say it's Inter, who will pay the money back through a bank loan

Even in the case that inter pays the surety themselves, they would still likely do so through a bank, then pay back the bank

This inter lukaku offer is a shite deal.

The structure of the deal and the structure of payment are entirely different things. You might agree to a 1m 10 year loan with 60m obligation to buy at the end of it, and structure the payment in 2 instalments of 35m each to be paid in full by next year, for example

 

[stepic]

problem with selling him is that there isn't much else out there on the market. Ben Yedder will be 29 in August ffs.

real lack of quality strikers out there.

 

[AJ10]

problem with selling him is that there isn't much else out there on the market. Ben Yedder will be 29 in August ffs.

real lack of quality strikers out there.

One foot in the grave.

 

[ClaytonBlackmoorLeftPeg]

How the mighty have fallen. This whole negotiation is disgraceful.

Here we go again - so apparently the negotiations for AWB were appalling, despite no one knowing what was actually happening. By all accounts, most people seem happy with the deal at the end?

Now negotiations for the sale of a player are disgraceful - based on a small amount of info on twitter which is essentially “Inter are preparing a bid!”. FFS man, get a grip.

 

[Harry190]

Here we go again - so apparently the negotiations for AWB were appalling, despite no one knowing what was actually happening. By all accounts, most people seem happy with the deal at the end?

Now negotiations for the sale of a player are disgraceful - based on a small amount of info on twitter which is essentially “Inter are preparing a bid!”. FFS man, get a grip.

With Inter, it's a pattern. They are indeed under the cosh when it comes to the books.

 

[Leftback99]

problem with selling him is that there isn't much else out there on the market. Ben Yedder will be 29 in August ffs.

real lack of quality strikers out there.

Anyone saying sell him for £60m seems to be ignoring this.