It has just been announced that a further set of Convertible Loan Notes (CLNs) held by Jason Levien, Steve Kaplan, and Jake Silverstein will be converted into equity at the club. For the avoidance of doubt, the Trust were aware of the impending conversion prior to it happening.
The agreement to convert the loans to shares in the club has been in place since the introduction of the CLN structure back in 2020 and is part of the ongoing push to ensure the club is financially sustainable.
The conversion of the loan notes, which total GBP 6 million, into equity will reduce the total debt owed by the club and improve the financial stability in the short-medium term, which is undoubtedly a good thing. This conversion will take the total investment into the club to GBP 16 million (in line with what Jake Silverstein said during his interview with the Trust on 1st February 2023).
The use of CLNs and other financial instruments to support clubs is common in the football league, and we have seen similar capital injections from investors and ownership groups throughout the pyramid. This has been particularly prevalent in the past 24 months as clubs manage the financial challenges brought on by both the pandemic and the rise in inflation.
What this means for the Trust
The day-to-day influence of the Trust, and the strong relationships formed with the senior management team within the club, will not be affected by this change. In the months since dilution first occurred, we have not seen any decline in our standing amongst, or relationship with, the majority owners or the senior management team at the club.
The conversion of the latest round of loan notes will mean the Trust’s shareholding becomes 13.1% from 16%.
We should of course remember that 5% of our holding is not dilutable, a benefit gained as part of the settlement agreement, and the Trust’s share rights will never dip below 5%, unless we agree to sell this shareholding.
We recognise the ongoing efforts to make the club more financially sustainable, but also know that there is more to do in this regard. The Trust has been open to investment in the football club but has stated previously that we would like any further investment to be focussed on improving the playing squad or the infrastructure. Creating a more sustainable financial model where outgoings are matched by revenue is vital to do that.
We continue to discuss financial sustainability with the majority owners and the club’s senior management team and are happy with the level of information that is being shared on both subjects on a regular basis.
The Government’s recent announcement that it will set up an independent regulator, as well as the ongoing discussions between the Premier League and EFL over rights distribution are important steps forward in the protection of football clubs, especially those in the EFL pyramid. We fully back the establishment of this new regulator, and will continue to support it through our involvement with the Football Supporters’ Association (FSA).
If you have any questions about today’s announcement, please email us at info@swanstrust.co.uk
Swansea City Supporters’ Trust
28th February 2023
