The loan: in 5 minutes

Just a quick post – and a massive over-simplification – about a letter sent to shareholders regarding the non-repayment of a £10m loan to Amulya.

Here’s the broad thrust of what it’s all about…

Most QPR fans are aware of the infamous ABC loan. This was a £10m loan which enabled the club to come out of administration in 2002, paying Chris Wright some of the money he was owed as a result of his time as chairman and owner.

This loan was bad news, and the interest repayments alone were a noose around the club’s neck. It meant that ABC Corporation, in loaning QPR that money, had the right to acquire Loftus Road should that loan not be repaid at the due date. In short, Loftus Road was used as collateral to secure that loan.

What’s never said about the ABC loan is that a large chunk of it was also used to fund QPR’s promotion by making the club the biggest spenders in Division Two. Without that additional capital, it’s doubtful Rangers would have gone up. Most wrongly believe that promotion was achieved on a shoestring.

Before and after the 2007 takeover, the ABC loan was a big issue facing the club, and by definition the new owners.

In order for QPR to repay ABC, the club was loaned £10m by Amulya – a company the club say Flavio Briatore and Amit Bhatia have an interest in.

This did NOT mean that the issue of the £10m loan had gone away. It meant that the loan had been transferred from ABC to Amulya, who then had the option to acquire Loftus Road just as ABC did previously.

The loan to Amulya was due to be repaid by QPR by the end of July 2010, at which time the likes of Briatore expected to be owning a Premier League club, with all the financial rewards that brings.

When the loan was not repaid by QPR to Amulya, that option to acquire – the ‘deadline’ for the club – was extended to the end of October 2010 and then to the end of January 2011.

With the second date now passed, the directors are looking to move it to May 2011 – by which time they really do expect QPR to be in the Premier League.

In the meantime, Loftus Road will remain as their collateral, or to put it another way, their insurance, should that not happen and the loan remain unpaid.

Like ABC, Amulya have the option to effectively acquire the stadium for the £10m they loaned to QPR (even though the stadium was last valued at more than £21m).

This can seem confusing, and I’ve been asked how the directors can “default on their own loan”. The answer is to stop seeing QPR and the owners as one and the same. They’re not.

The loan isn’t “theirs” and neither is the default on the repayment. It’s QPR’s alone.

The club was given that £10m by Amulya to repay the ABC loan. And like that previous loan, QPR must repay it or face the prospect of losing Loftus Road.

The bottom line is that the ‘sorting’ of the ABC loan was no more intended to be a gift to QPR on the part of the current owners than Wright’s investment back in the mid-90s. Both were directors’ loans – a fact that in both cases was overlooked because of the hype surrounding the respective regimes and their willingness to spend money on players.

And in an important sense, those two eras are linked by this £10m loan. The Amulya loan was used to pay off the ABC loan, which was arranged in response to the troublesome directors’ loans that QPR were not in a position to repay in 2001, when Wright quit.

Got that? It’s a loan to repay the loan that settled the other loan.