AVFC: The £50million loan

When is a loan for £50million not a loan for £50million? Rumours were doing the rounds on social media that Tony Xia had organised a rescue plan for AVFC by arranging to borrow as much as £50million from one of his listed companies, to inject as much needed capital to AVFC. However, like most things in this situation, it’s not as simple as that.

Finances

I’m not sure where this idea of a £50million loan originated.

However, a trawl through the announcements made by one of the companies connected to Xia, Teamax Smart City Technology Ltd, shows that at a board meeting on June 5, Teamax did indeed to act as guarantors for a loan for £50million to be made available to a wholly-owned subsidiary of Teamax.

Part of the problem of confirming whether this loan is to be made available to AVFC is understanding exactly who owns AVFC.

Under Football League Regulation 109.6, every club in the football league is duty bound to:

109.6 Each Club shall publish the identities of the ultimate owner (Person, not Entity) of each Significant Interest in the Club (as that term is defined Rule 1.1 of Appendix 3). That information shall as a minimum be published on the Club’s official website on a page accessible directly from the home page of that official club website.

I’ve not been able to find anything on the AVFC official website confirming who owns the club under this regulation, either via checking the home page or using Google’s site index.

Checking via Companies House shows a byzantine company structure that has at least four layers of UK companies and two in China, with the accounts for AVFC confirming that the ultimate owner is Zhejiang Ruikang (Recon) Investment Co Ltd, which is ultimately controlled by Tony Xia.

While it’s not easy to obtain Companies House type data in China, it is possible – and this link confirms exactly who Zhejiang Ruikang are.

It confirms that there are two shareholders in Zhejiang Ruikang; Tony Xia and Hangzhou Huigu Investment Co Ltd. As of 26 May 2016, Tony Xia had an investment of 40million RMB in the company while Hangzhou Huigu has a 100million RMB investment.

Hangzhou Huigu lists two shareholders: Tony Xia (99%) and Jin Qihang. (1%)

Thus it’s difficult for me to see how AVFC would be given any money as a direct subsidiary of Teamax.

What I think is possible is that Xia has arranged for Teamax to act as a guarantor for an investment company subsidiary to borrow money, which Xia will then possibly use to buy equity in AVFC or one of its parents.

There is no way of knowing if Xia will be able to borrow all £50million, or if he would inject it all into AVFC.

The big question that AVFC fans must ask is if Xia does borrow money to pay bills, is he not kicking the can down the road? The tax bill that was outstanding was one for PAYE – something that has to be paid every month.

Paying it with a loan is akin to sticking a plaster on a huge open wound – the wound is covered, but it’s not going to heal very quickly and it may become worse without proper attention.

The obvious solution realistically is to increase revenue and decrease expenditure. This means cutting wages and bringing in transfer fees to improve the lack of cashflow within the club.

With the John Percy reporting in the Telegraph that AVFC need to find another £4.5million to pay wages and tax again this month, AVFC need to act quickly to prevent this situation getting worse.