DETAILED: Dissecting Tornante's fresh £5m equity investment and what it really means for Portsmouth
Tornante’s fresh £5m investment has been described as ‘nothing negative you can say about it’.
That’s the verdict of Pompey Supporters’ Trust chairman Simon Colebrook, who is encouraged by the injection of cash as equity, as recently detailed at Companies House.
It represents Tornante’s first tranche of additional investment since taking over the Blues in August 2017.
Following the £5.67m purchase from fan ownership, Michael Eisner’s company at that point also put £10m into club coffers.
Now, with further investment required to fund the ongoing Fratton Park’s £11.5m development project, Tornante have handed over £5m more.
Crucially, it comes as equity rather than debt in the form of a loan.
And Colebrook, a chartered accountant, cannot see any reason to criticise Tornante’s issuing of fresh share capital.
He told The News: ‘This represents a permanent long-term investment into Pompey by the owners – and there is nothing negative to say.
‘The reason that equity is preferred to debt in terms of stability is that, usually in football, debt is done on an on-demand basis, so the owners - if they are the people lending the money - can call in their debt at any time.
‘If the value of the debt is big enough, that can bring down the business or football club.
‘If it’s equity then once you’ve bought the shares, in normal terms you can’t then ask for your money back as it’s an investment.
‘It means that money has been forwarded to the club, it is locked into the club, and it’s essentially the club’s property to do as it sees fit.
‘Tornante’s initial £10m injection, which happened at the point of the takeover, funded a pretty heavy investment into infrastructure, with the final chunk ending up supporting the club through Covid.
‘That £10m has run out and we’ve got his new programme of work which obviously needs funding - so we see the next stage of investment.
‘I’m sure there’ll be a second batch, certainly to fund the Milton End.
‘It’s a welcome investment to fund some much-needed work. We are going to see some improved facilities and it is being done at equity.
‘So there really is nothing negative you can say about it.’
Colebrook, however, has warned against viewing debt accrued by football clubs as dangerous.
And he uses the building of stadiums and stands as examples of when loans can be used constructively to enhance a club’s infrastructure.
He explained: ‘In my opinion, in the scheme of how to fund a football club, equity is always better than debt.
‘That is not to say debt is always bad – and that is something worth explaining.
‘The analogy I use is we all have mortgages and that debt is fine because it’s long-term, you are using it for a long-term purpose in owning a home.
‘You structure it so that you know you can afford repayments after your income.
‘In a lot of ways, it’s the same at a football club. If you take on debt to do stadium work or build a stadium, then it is long-term, it is being used for a long-term asset.
‘As long as you make sure your income can cover the payments then it is perfectly workable.
‘Where clubs fall into trouble is when they are taking on debt to pay wages – which is a never-ending commitment and the debt then just piles up.’
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