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THE FINANCIAL SITUATION AT DEPORTIVO

12 Apr 2014
Tino Fernández explained on Friday the situation of the club after signing the deal with the Spanish Treasury. For now the debt is €140 million though pending of some legal resolutions and the agreement with the banks.

President Tino Fernández was hoping to offer a press conference as soon as he was able to sign the final deal with the banks, however since the negotiations are taking so long he decided to concede a press conference. For almost an hour he explained the current situation of the club after signing the deal with the Spanish Treasury.

The agreement with the banks is important as it will finally determine the real debt of the club, though it’s also true that the final amount depends of an appeal presented by the Tax Agency regarding the reclassification of part of their subordinated debt. The current is the summary of Depor’s situation according to what was explained by the president.

GLOBAL SCENARIO OF THE DEBT
The original debt of Deportivo was €160,461,449.01. Of this amount the debt can be classified in three parts according to the privilege of the creditors: privileged debt (€99,157,574.71), subordinated debt (€31,036,578.76) and ordinary debt (€ 30,267,295.54).

In the creditors meeting held in January it was fixed a 33% of forgiveness in this amount, which means that the debt was reduced to €140,231,170.49. This percentage is only applied to the subordinate and ordinary debt, so the reduction was for €20,230.278.52. This was the situation after the meeting held on January 10 and that was later signed on March 7.

ORDINARY DEBT
This is the debt had with the major part of the creditors. The global amount is now €20,279,088.01 –after deducting the forgiven debt- The reduction applied to this debt was € 9,988,207.53. The debt will be paid in 17 years and the agreement stipulates that the first payment will be made until 2015. This is what was signed in the meeting held on January 10. Tino Fernández explained in the press conference that the intention was use the 24% of the 20% of the yearly incomes in order to pay this debt.

SUBORDINATED DEBT
This type of debt is the one ranked between the ordinary and the privileged debt. It’s paid before the ordinary debt, but the percentage of forgiveness is also applied and the deadline is the same. For now the amount of this debt is €20,794,507.77 and the amount of the forgiven debt is €10,242,070.99

The banks and the Tax Agency have big part the debt classified in this term and that’s one of the problems right now. The Tax Agency presented a demand asking to reclassify €21 million as privileged debt (to remember that the global amount of this type of debt was €31,036,578.76), which would mean other condition, to reduce the forgiven debt and therefore increase the global debt of the club. The final resolution of the judge regarding this petition will be released on March 24. On that day it will be possible to determine not only the real subordinated debt, but also the total debt of the club.

PRIVILEGED DEBT
Tito Fernández explained that there are five entities composing the privileged debt, which is the biggest at the club and the only one to which it cannot be applied the reduction agreed in January’s meeting. These five entities are: the Tax Agency (€61,945,886.71), NovaGalicia Banco (€26,549,676.27), Sabadell Gallego (€9,496,666.59), Caixa Bank (€153,569.42) and the Social Security TGSS (€360,000).

THE DEAL WITH THE TREASURY
The agreement was signed on March 7; there’s no forgiven debt, but the club can deduct the €19.74 million that were sequestered two years ago, though this is still pending as its part of the deal with the banks that hasn’t been signed yet. In this way the debt with the Tax Agency is reduced to €42,483,429.42. There’s also the chance to reduce the debt in €2.1 using the pledged money in the case of Luque. But this will depend of a future agreement with Caixa bank.

The agreement established that Depor will make the first payment to the Tax Agency in January 20, 2015. There will be two payments per season and the yearly amount to pay is around the €5 million. If Depor are playing at Liga Adelante, then it will only pay the 50% of each payment, the rest of the money will be delayed, which means to extend the deadline, originally determined in 8 years.

So, if Depor are able to stay at Primera then it will make the last payment on January 20, 2023. If instead Depor spend at least three seasons at Segunda then it will end paying the debt with the Treasury until July 20, 2024. There’s also an interest of 2% already included in the calculation of €5 million per season.

The deal with the Tax Agency also stipulates that the entity will collect money for the extra incomes received by Deportivo. In this sense the Treasury will collect the 25% of all the transfers, plus the money collected from the UEFA and FIFA, it also includes the full amount of any sell of the subsidiaries and the 100% of the excess in the TV contract in case the club is able to sing a new deal for €23 million. This means that if the new TV deal is for €24 million, then €1 million will go directly to the Treasury.

A final aspect in the deal with the Treasury is that board of directors is forced to present and approve and increase in the club’s capital. The key here is that Depor’s board of directors is only forced to present and approve the measure among the shareholders, but not to fulfill the increase. It means there are no sanctions in case the increase isn’t possible.

The increase in the capital is for €6 million and the agreement is that this money will only be used to cover the club’s expenses, though Tino expect to use part of it in the payment of the debt. This increase must be subscribed before the end of the year, though the shareholders are only forced to pay €1.5 million before December 31.

THE DEAL WITH THE BANKS
Tino Fernandez didn’t give further information in this case. He only said that the negotiations are still open and that they are pending to decide how to pay the €36,406,342.86 owed to the two major banks. To clarify that the deal is taking so long as the banks and the Treasury are pending to solve what to do with the €19.74 million that were sequestered before. It’s a complex situation as it also includes other negotiations as the publicity of the banks at the Riazor.

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