Aston Villa news: Stefan Borson reacts to confirmed loan update
Aston Villa have likely secured third-party debt because there is a limit to how much equity their owners want to put into the club.
That is the view of finance expert Stefan Borson, who exclusively told Football Insider the new loan is an endorsement of the recent progress the West Midlands giants have made.
A Companies House submission on 26 November revealed Villa have taken out a loan from Kroll Trustee Services.
The loan appears to be secured on all of the club’s properties and commercial contracts.
Villa’s owners Nassef Sawiris and Wes Edens (NSWE) have offered strong financial support at Villa Park since securing their takeover in 2018.
Aston Villa loan is endorsement of club’s recent progress
Borson believes the fact Villa have been able to raise the third-party debt suggests people are confident in the financial strength of the club.
“It won’t be Kroll doing the lending,” Borson told Football Insider.
“It’s effectively there is somebody behind them or a syndicate behind them. We don’t know who that is.
“But it’s just a commercial loan. I don’t think it’s very exciting and it’s secured on the assets. It makes the rate that they borrow at less because it’s a secured loan.
“I think it’s pretty typical for you to structure your balance sheet in that way if you can. If you get third-party debt, you do it because there is a limit to how much cash equity the owners want to keep putting in.
“At the moment, despite their success on the pitch, Villa are still quite heavily loss making. I think it’s a sign they are able to raise third-party debt, so in many ways, it’s a positive in terms of an endorsement of the progress of the club.
“But not many people would say that as a fan you want to see your club go into debt. There are two sides to it.
“If you want to look at it from a corporate finance perspective, if this business could not sustain the debt a third party is putting on it, then it wouldn’t be able to raise it.
“But the fact that they have been able to raise it suggests that people are confident in the covenant that Villa present with the strength of their business.
“It’s either because it’s got good underpinning from the ownership, which will be one element, but it’s more likely because they see the club is going in the right direction and starting to look like it can generate £300million, £400million or £500million revenue that some of the top clubs do.”
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