Often Partisan

Birmingham International Holdings Announce Convertible Bond Issue

Birmingham International Holdings have today made an announcement to the stock market that they are to issue two convertible bonds to raise funds to improve the liquidity of the company.

The announcement also confirms that there is to be a deed of novation in relation to the debt of BCFC to Carson Yeung, with that debt being exchanged for further equity. The announcement also confirms that a creditor of BIH has taken a 50% haircut on the debt provided it is paid within three months.

As it’s a lengthy announcement it will require some time to digest properly and to look into the ramifications for the club and thus a full analysis should be posted tomorrow.

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72 Responses to “Birmingham International Holdings Announce Convertible Bond Issue”

  • blewnozejohn says:

    the big question for me Dan is…. was the reference to a haircut a joke?

  • blewnozejohn says:

    on a more serious note…. I would think that this strategy is to ensure that administration is avoided

  • Frankie says:

    Its either being made to look a more attractive ‘proposition’ for prospective buyers.
    Or more tenable for Carson and BIHL to ‘grind it out’.

  • Dean says:

    It’s the biggest indictment of modern football, capitalism and life in general that a) OP needs to post this as news, b) that the future of the club depends so much on this type of news, and c) I have no idea what any part of ‘Birmingham International Holdings…issue two convertible bonds’ even means.

    Like reading about ‘undisclosed fees’, the voice on my head simply shouts ‘tax dodge/on the fiddle’ whenever I hear about holding companies, bonds and like when related top football clubs. Why did we let football and finance come to this?

  • DoctorD says:

    I have absolutely no idea what any of the announcement really means BUT, at the very least and from the sheer length of the announcement, it looks (to my untrained eye) that something properly thought-out and solid is taking place. I wait Daniel’s assessment of it with interest.

  • JohnR200 says:

    Good luck Dan with making sense of it.

  • darren says:

    so this means he is selling of nearly 20% of the company for £5m, this values blues at £20m.

    I read that this is good news because

    1. the above suggests more realistic value of blues
    2. Tidying up of debt by paying it off at a lower value
    3. Yeung converting his debt into shares – sale is just a straight purchase with no further loans to complicate.

    Hate to get carried away but £5m isnt going to go far £2.5m will be repayment of 2 above leaving £2m to pay zigic for the rest of his contract.

    Hope this means a good old tidy up for someone to come in and buy the club so we can move on

    • Dan H says:

      With the new shares they’re still valuing the club at circa £40m once the new shares are considered and converting into sterling

      Yeung’s debt alone is £15m

      Yeung only controls 26% there are other parties that are owed money, I think U-Continental loaned BIHL about £2m about a year ago.

      It’s still positive news as Yeung’s links start to be diluted and the path is clearer for investors and potential new owners

  • Therealdeal says:

    Deed of Novation explain as….

    A deed of novation is an agreement which transfers one party’s rights and obligations under a contract or agreement to a new third party. The terms of the agreement remain the same, but the identity of one party changes.

    Sounds very sinister

    • Dan H says:

      It’s pretty standard stuff, we use Novation Agreements in Construction Contracts when we want the Main Contractor to take on Design responsibilities for Design and Build Projects.

      It must be positive that the debt remains within the football club rather than externally where a third party could call upon it.

      It seems to be a move to raise capital, increase other parties controlling stake in BIHL and clear the way for investment

  • darren says:

    if you look right at the bottom it says:

    Reasons for and benefit of entering into the Deed of Novation, the Debt Capitalisation
    Agreement and the Subscription Agreement
    The Company is in negotiations with third parties regarding a possible disposal of an interest
    (being less than a controlling interest) in BCP and/or BCFC (the “Disposal”). Against the
    backdrop of Mr. Yeung’s ongoing court case in Hong Kong, it has come to the attention
    of the Board that some potential buyers’ interest in BCP and/or BCFC are deterred by the
    financial links between BCFC and Mr. Yeung.

    Bad news – this points to small disposal i.e. further investment to keep us limping along

    • DoctorD says:

      Yeah but the good news is the statement also says:

      ===By virtue of novating the Debt from BCFC to the Company, the value of the Company’s interest in BCFC to prospective buyers may be increased.===

      Sounds good to me.

      • zxcv says:

        I agree DoctorD Just my opinion but I am more convinced then ever that this is a clearing of the decks for a sale to go ahead after BHL has been relisted.

        • Dan H says:

          It’s more likely to be investment with a new board going forward as they still value the club at £40m.

          I’m not sure there are many people who would pay anywhere near that for a Championship Club, Leeds and Nottingham Forest went for around £25m and they both get more fans than we do

          • zxcv says:

            No, they will be valuing bcfc at 20 million mate.

          • carsons nemesis says:

            Looking through all the convoluted figures, imo it appears that a valuation of £20m for BCFC together with the extra capital raised within BIHL, could leave Yeung (through his new 27.63% of BIHL) a lot better off than at present.
            Fingers crossed anyway………..
            Only cloud could be a partial and minority sale of BCFC with BIHL (and hence Yeung) still having a controlling stake, and say, in BCFC.

          • Dan H says:

            Increasing share capital to HKD500,000,000 means that they can trade equity up to that value which equates to £40,000,000

            We all know they won’t get anywhere near that but it gives you an idea of how they’re attempting to over inflate the value

  • BigmanSteve0 says:

    This man is absolutely desperate to keep our club, other than the obscene amount of money he paid for it why is he so desperate??? I believe if he was offered what he paid for it he still wouldn’t sell up, he seems determined to keep his hands on it & I don’t think he ever has had an interest in selling it, look what he went through to buy us in the 1 st place, that went on & on ….thinking back he could have brought a number of clubs for so much cheaper but for some reason he had to buy the blues, the last lot must have realised how bad he wanted this club that’s how they got as much as they did for it…? The question is why……….could it be St. Andrews is built on top of an oil well or gold mine lol……I wonder what the reason is?

    • chas says:

      Bigman, even if the ground was on top of an Oilfield, Goldmine or whatever, we wouldn’t see any of it, all land below 6′ is the property of the Crown, so Lizzie would get it.

      • Jimbo says:

        This isn’t accurate at all. When you hold a freehold interest the only reasons you wouldn’t own the land beneath it is if you a) sold it after buying the plot or b) it wasn’t included in the property when you purchased it. Generally if you own the it face you own the air and soil beneath it.

  • carsons nemesis says:

    Bottom line it all means:

    1) Yeung has agreed to relinquish the £15.25m that BCFC owe him personally, in exchange for BIHL paying him that debt.
    2) Yeung won’t get the £15.25m in cash, but will (in the end) take up shares in BIHL to the equivalent amount.
    3) Other loans and a placement will inject money into BIHL – NB not BCFC
    4) After all sorted Yeung will INCREASE stake in BIHL to 27.63% (from existing 26.31%)

    5) MOST IMPORTANTLY
    All this means that BCFC can now be sold YEUNG DEBT FREE
    This will make the Club 1000x easier to sell

    Yeung still playing his money merry go round, and making sure he doesn’t lose out (in fact he gains again!), BUT who cares because that will be the headache of stakeholders left with him in BIHL

    All we need now is a genuine bid, from a genuine prospective owner, who has GENUINE MONEY!

    Once these agreements go through, prospective bidders will not have any excuses as to why they can’t complete.

    KRO

  • bluebob172 says:

    at the moment yeung has only 26% stake in blues, if I am right by doing this deal he can up his stake to a nice large amount and when he sells blues he will get most of the profit instead of splitting it with all at B.I.H.L, The down side is he is completely bonkers and still thinks that we can win promotion to the premiership and get back his £81,000,000 he paid for the club.
    Lets hope a bluenose wins the £80,000,000 euro Friday and buys this clown out and sends him back to his barbers shop in Kowloon.

    • almajir says:

      You’re not right

      • Dan H says:

        Dan, are U-Continental the firm that loaned BIHL about £2m a year ago?

        Do they have links with Yeung on a family basis?

        • almajir says:

          Yes and no, I believe not.

          U-Continent is owned by Yang Yuezhou apparently though… who has been connected before.

    • zxcv says:

      His stake maybe increased be about 1.3% That would not give him anywhere near his 81 million quid back. He would hardly get much of a retune on his 15 million loan let alone his capital investment back.

  • nigel says:

    if some one has taken a fifty % hit on there money they must be confident it will go through
    in the three months and that means money comeing into bih and they hav only 1 saleable asset

    • carsons nemesis says:

      It is within 3 months of BIHL starting trading again on the Hong Kong SE ( i.e. no longer suspended), not 3 months after agreements completed. Might be quite a while before that happens. BCFC can still be sold (part or whole) whilst BIHL is suspended.

  • Dove says:

    Almajir, Have I got this right – On page 26, in the summary of shareholding, if everything completes, there will be 8,984,178,136 shares in BIH. If you base the value of these share at HK$0.03 (as per Debt Conversion Share value), this values the whole of BIH at around £21 million. Obviously the shares could trade higher than this. If I have got that right, at least this is a realistic value for the business which is prominently BCFC.

    Also looks like Carson to taking £5 million of shares (Valued at HK$0.01) HK for his £15 million debt . If they trade at HK$0.03 he gets the £15 million and anything over he is in profit.

    • Dan H says:

      If they sell they’ll be looking to get close to the Share Placing price of HK 0.05 / share not the debt conversion share price of HK 0.03/share is this is discounted

      It values the club somewhere between £21m – £36m

      • Dove says:

        Thanks Dan H for clarify that. Still a realistic price range for a debt free club and less complicated to sell.

  • The Francis Fake says:

    What a fascinating document. It seems in the light of the court case the fact that BCFC currently owes CY is a problem to any potential takeover or new investment therefore this debt burden is being removed from BCFC which will clear this particular obstacle to a sale. It also appears that new money is being pumped in to BIH as loan which can be converted into shares at a later date and when this conversion takes place it will be at a much lower value or discount of around 80% of the value of the shares when they were last quoted on the Hong Kong stock market in June 2011.The question is who is putting money the money in, are they committed in the long term or in to do a Wonga on BIH. It could that this is the start of a takeover in all but name. I think that for whatever reason a takeover cannot take place until the shares are re-listed and hopefully this is a first step. At least BCFC is in a better position to sold off with CY’s debt being removed.

  • bluenoseb says:

    Does this announcement have anything with the outcome of how the court proceeded today or would this announcement been made regardless?

  • ...sappy sad says:

    …………we have a dream,… when you are very rich in this hardened world and you have done most things and the stardust is fading and new dreams are hard to come by.and you meet people that has a quest and are willing to follow that quest even when you have cocked up ..you see a new dream to follow

  • romanblue says:

    i dont get it!! i will await what the trust or OP as to say.

  • ForevertheOptimist says:

    Thanks for the effort and time spent on keeping us all in the loop.
    Cracking site.
    Lets hope the outcome is what we all want.

  • Steve Aerobic says:

    I think that todays decision by the judge could actually reinforce Carsons resolve. Had his assets been frozen for an indeterminate time he would have been forced to concede the club in my opinion. Its odd that the bond announcement has come following this decision, I think he knows that he will be forced to act now irrespective of the verdict in order to hang on.

  • Chris W says:

    All this legal jargon and I may be missing the point, however, I trust Dan and his wisdom to simplify things for use laymen.
    I know CY loaned BCFC monies, I thought it was about £8M, though page 29 claims approximately £15M.
    Nowhere does it list who these third parties are, as I said I might be missing something and await Dan’s overview.
    My overall assessment is that they are now looking to trade without CY, so it looks bleak in his court case, and they are offering options for potential buyers to buy a stake in the club before they get full controlling options, this will generate much needed cash possibly in time for the transfer window and a full buy out come the summer, I maybe well off the mark, so await Dan….
    KRO+DNM

    • chris says:

      he loaned around £16 million to BCFC and BIHL loaned around £5 million to Blues .
      In the accounts ending Dec 2012 i think that these loans had been reduced to around £14 to £15 million due to the scheduled repayments due on any loan and these were paid by BCFC.

  • ESONEULB says:

    This has just come out in the mail

    Football finance expert Peter Knowles said: “I totally agree with Blues fans that any sale of the club would be made easier following this announcement.

    “The Hong Kong parent company is basically insolvent, so the only way people can stop it being insolvent is by converting debt into equity. It does not have the ability to pay any money back.

    “Carson Yeung is converting that debt into equity and the brokers are raising more money by further capital. The debt is being removed – Carson Yeung has lent money to the Hong Kong company and it does not have the money to repay him.

    “My understanding is that Carson Yeung has given the money to the Hong Kong company and the Hong Kong company gave the money to its subsidiary, Blues.

    “By converting his debt into shares it will make the Hong Kong company a going concern, and hence able to control any sale of the football club.

    “Overall it will be better news for the club, but it is important to stress that no cash is going to Birmingham City.”

    One Blues fan said on the respected Often Partisan website: “Most importantly, this means that Birmingham City can now be sold Yeung-debt free. This will make the club 1,000 times easier to sell.

    “Once these agreements go through, prospective bidders will not have any excuses as to why they can’t complete.”

    • Chris W says:

      Coming from a financial expert, which the average fan isn’t, it seems that BIHL is looking to sell in the near future, though I doubt this will be in time for the January transfer window.
      All we need do is tread water and stay in the Championship this season and see where the summer takes us.
      KRO+DNM

  • Bluehobba says:

    Might be a good christmas this year then. And if we can follow the form of last January onwards it might not be a bad season KRO fingers crossed!

  • Bluenosesol says:

    Expect Paladini to make his move!

  • Agent McLeish says:

    It is a coincidence that this happened after CYs stay application was rejected?

  • StaffsBlue says:

    I would be very surprised if they didn’t have at least 2 contingency plans, depending how the court case went.

  • mark says:

    Not surprised by the hearing to be imo, a lot of face on either side. still think their are more surprises in store……carson will have had plenty of time and guidance through the loop holes possibly open to him…. One can never say never until the fat lady sings……..imo

    • StaffsBlue says:

      I quite like Adelle actually. ;-)

      • mark says:

        lol top 5 lady singer for mate…….

        Imo i dont believe any of this has been forced on Carson he would been financially advised imo his inner circle just got bigger…………

        • StaffsBlue says:

          As I said mark, I think they’ve had plans for whichever way the court case goes. It’s not as though they haven’t had enough time to put strategies into place..

  • SW16girl says:

    As I suggested when the news was first announces about equity/debt changes they could well be being put in place to make it more difficult for the HK authorities to seize CY’s assets if he is found guilty. That is what this does, whether that is simply a welcome side effect (to CY) of the action or its main purpose one needs to wait and see. however by converting the debt to equity in the main Company it certainly appears to release BCFC from debt to CY. It looks as if those people whose money it may actually be are taking steps to try and protect their assets.

    • almajir says:

      I don’t think it’s anything to do with that. I think it’s more likely it’s to make the sale of the club a cleaner prospect, nothing more.

  • BhamCityJulian says:

    At the moment nothing is signed. Now us that just because CY gas been concentrating on his case or does he feel he’s been painted into a corner and is resisting?

    Let us also remember though that whilst BIH itself has no significant revenue and no cash flow it hold options / rights on mainland China development projects that may eventually come to fruition so CY may get his money back before we win a major again.

  • Quokkasskip says:

    This is the best news this year relating to blues.

    Prob take a couple of months to resolve but then it should open to a sale.

    Could all happen about the same time the trail finishes? Coincidence? I think not

  • Jeffers says:

    Am I correct in thinking that currently BIHL are a company that owns one asset, namely a championship football club. This club currently in the lower half of the table with performances that are patchy at best, do not actually own their own stadium; this being mortgaged to the HBOS banking group. One can only assume that the reason the mysterious investor in BIHL does not mind taking a 50% haircut on his/her investment is that a 50% cut of nothing is nothing. Surely it is more important to ascertain who owns the shares in Birmingham City FC ltd and BCFC Ltd. These are the ones that have actual value.

    • almajir says:

      Eh?

      Bcfc is owned 100% by Birmingham City PLC.

      BC PLC is 96.58% owned by Birmingham International Holdings.

      There are no other companies involved.


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