Foxes fans get £100m Christmas present

The owner of Leicester City has provided fans with an early Christmas present - he's gift wrapped a debt-free club.

The Thai chairman has effectively wiped out the £103 million he was owed by the Foxes in a deal known as a "debt-for-equity swap". In other words he's exchanged the debt he was owed for shares in the club.

You may ask: 'didn't he already own 100 per cent of the club anyway, so why do this?' There are two main reasons why he has:

By preventing himself or his family from ever calling in the debt he sends a very strong message about his commitment to the club. Secondly, it allows City to make a £8 million loss this season - the maximum limit permitted under the Financial Fair Play rules, brought in to cut back on the excessive deficits which have been racked up by some clubs, including the Foxes. It also puts the club in better shape to comply with these rules in the future.

Many may see the move by Mr S as merely an accounting exercise - and to be fair chief executive Susan Whelan had indicated this was being planned back in March - but it has to be seen as far more than that.

It had been thought by many the owner would only convert a portion of the debt into shares, because he would never want to rule out getting back at least some of the £77 million in loans he has put into the club. However, he has created 103 million new shares valued at £1 each and swapped them for his very large collection of IOUs. He's also issued an extra 10,000 of these £1 shares, with the intention of buying them in the future. This latter part of the deal allows him to pump £5 million into the club this season, and potentially another £5 million next season, without it being a loan. He would instead be making an investment in the so-called "share capital" of the club. This process of investment is looked at more favourably by the Financial Fair Play rules and allows City to make that £8 million loss this year without being fined or having a transfer embargo imposed.

All in all, Mr S seems to have accepted, if he hadn't from the beginning anyway, that it would take decades to get back his loans and so has done the practical thing. After all, this financial arrangement is nothing new - both Manchester City and Chelsea have done it in recent years.

This eases the concerns of supporters who were always going to fret about what would happen to the club if Mr S decided to walk away, died or was somehow incarcerated (Thailand's politics have been known to change like the wind, after all). So far Mr S and his son Top have proved Far Eastern ownership doesn't always have to turn into a circus, as at Cardiff now and Man City previously. They have come across as benevolent benefactors, and this move only goes to cement that image.

To avoid any questions about the debt situation I'll seek to explain exactly how it was made up. About £77 million of the £103 million came from the chairman's loans, made through his King Power duty free empire. The remainder was from the £26 million debt Mr S inherited from the Milan Mandaric era.

On a more pressing and probably - to most of those reading this - a more interesting one, the three points we took against QPR yesterday will help us towards the financial Eldorado of the Premier League. Bangkok may have its golden temples, but Mr S, like the club's fans, is seeking his City of Gold.

Click on link below for the full story as broken by the Leicester Mercury:

http://www.leicestermercury.co.uk/Future-City-secure-owner-wipes-huge-debts/story-20352762-detail/story.html