Debt Repayments - how does it work?

Before I get lots of replies saying do a search, I have done a search and the questions I'm about to ask haven't been covered.

1. If Man Utd's debt in the game is, for example, £640m (I'm guessing as I'm not sure of the figure) and repayments are £X amount over 20 years, does that mean at the end of the 20 years the debt will have been repaid or does the £X only cover interest payments and so there must be a principal repayment of £640m at the end of the 20 years or a refinancing?

2. If there is a principal repayment of £640m due, can this be refinanced? Or will it likely bankrupt the club?

3. How does the game set the level of interest repayments - i.e. how does it set the interest rate which in recent months has dived.

Before I get lots of replies saying do a search, I have done a search and the questions I'm about to ask haven't been covered.

1. If Man Utd's debt in the game is, for example, £640m (I'm guessing as I'm not sure of the figure) and repayments are £X amount over 20 years, does that mean at the end of the 20 years the debt will have been repaid or does the £X only cover interest payments and so there must be a principal repayment of £640m at the end of the 20 years or a refinancing?

2. If there is a principal repayment of £640m due, can this be refinanced? Or will it likely bankrupt the club?

3. How does the game set the level of interest repayments - i.e. how does it set the interest rate which in recent months has dived.

1. Yes the debt will have been repaid at the end of the loan agreement.

2. You can't refinance this loan yourself. If the club becomes bankrupt, which can happen with the heavy loan payments, then something to do with a Company Voluntary Agreement can kick in. From what i've seen at Liverpool by 2017, their debt has been wiped, and a CVA has been introduced of £100mill which they're paying back at £680k per month.

3. Interest Rates don't really exist in the game. You have a set fee which you pay back each month for the loan and this never changes.

1. Yes the debt will have been repaid at the end of the loan agreement.

Thanks. So basically, throughout you are payiong off principal plus interest (i.e. it amortises).

2. You can't refinance this loan yourself. If the club becomes bankrupt, which can happen with the heavy loan payments, then something to do with a Company Voluntary Agreement can kick in. From what i've seen at Liverpool by 2017, their debt has been wiped, and a CVA has been introduced of £100mill which they're paying back at £680k per month.

Not worried about going bankrupt during the term of the loan more at the end if the club has to come up with £640m.

3. Interest Rates don't really exist in the game. You have a set fee which you pay back each month for the loan and this never changes.

Even so, there must be some kind of nominal interest rate set by the game to calculate the interest payment?

1. It's the entire debt including interest. Once you get to the last month, you pay the last repayment and that debt is gone.

2. No, you cannot refinance. I've read you might pay the loan early, but that's pure speculation and I've never seen any proof of that.

3. I'm not sure if pre-set debts have different interest levels.

3. Interest Rates don't really exist in the game. You have a set fee which you pay back each month for the loan and this never changes.

There are Interest Rates, they don't see to change, but the actual loans and repayments appear to follow valid loan repayment types. If you could see the set monthly fee broken down, a small part would be account fees, and the rest would be made up of the interest repayment, then the principal repayment, with the interest payment going down over time, and the principal repayment going up over time, as you end up at the end of the loan with paying very small amounts of interest, and paying off the final few £100'000's off the principal to end the loan.

I believe every new stadium is built on the same calculations. My own stadium is:

Cost (aka Principal): £100,000,000.

Debt: *£975,000 x 12 months x 15 years = £175,500,000

Interest (Interest): £175,500,000 - £100,000,000 = £75,500,000

Which at least, seems to make the interest rate about 8.35% from my basic calculations based off home loan type calculations, with daily interest charged on the principal remaining, with monthly repayments.

or just use fmrte hehe

1. It's the entire debt including interest. Once you get to the last month, you pay the last repayment and that debt is gone.

2. No, you cannot refinance. I've read you might pay the loan early, but that's pure speculation and I've never seen any proof of that.

3. I'm not sure if pre-set debts have different interest levels.

I believe every new stadium is built on the same calculations. My own stadium is:

Cost (aka Principal): £100,000,000.

Debt: *£975,000 x 12 months x 15 years = £175,500,000

Interest (Interest): £175,500,000 - £100,000,000 = £75,500,000

Which at least, seems to make the interest rate about 8.35% from my basic calculations based off home loan type calculations, with daily interest charged on the principal remaining, with monthly repayments.

Thanks for that very helpful.

IMO 8% is probably reasonable, depending on how high leverage is for the club (i.e. amount of borrowings compared to profits). The base rate is about 2% for bank loans for corporates (LIBOR) and an average margin of 6% is probably reasonably accurate given that normally these debts are in tranches with the most risky having a higher margin (e.g. Man Utd's highest risk debt is 14.25%, lowest is 2.50%).

or just use fmrte hehe

:confused: This has nothing to do with FMRTE.

FYI what I am looking at is the realism of the FM09 debt system with that of real life and doing a comparison for SI (of my own accord obviously, they haven't asked for it). The system in FM09 is good but could be better and my feeling is that it won't take much in tweaking to make it right.

Thanks. So basically, throughout you are payiong off principal plus interest (i.e. it amortises).

Not worried about going bankrupt during the term of the loan more at the end if the club has to come up with £640m.

Even so, there must be some kind of nominal interest rate set by the game to calculate the interest payment?

There may be some interest added on somewhere, but it's not an editable value and its not shown anywhere as to what the rate is.

Having looked at Man Utd in 2017, they have paid off 2 of 3 debts and are now stuck with a remaining £510mill debt to be paid off by 2035.

Paying off £4.7mill per month for the next 204 months.. well you can see yourself it doesn't quite work out at £510mill! Almost £960mill in total! Is that the interest rate being astonishingly high? or a bug in the game? I don't know

EDIT: 8.4% Rate.

It's probably completely unrealistic compared to real life, it seems to use a basic home loan style finance system, instead of the dodgy complex schemes the big, big clubs and corporations use. In the end, SI probably want it to be realistic enough (which I believe it is), without crippling clubs who go into a debt situation or needing to simulate weird loan types.

Once it's all said and done, it's all money. Regardless of the loan type or where the financing is from.

The interest rate on the riskiest loans Man Utd have is 14.25% per annum.

or just use fmrte hehe

Yeah, you can get a massive new stadium if you do that!

2. No, you cannot refinance. I've read you might pay the loan early, but that's pure speculation and I've never seen any proof of that.

yes you can pay the loan early if you have enought money avaliable

Example:-

if you were to use FMRTE and put the balance of your club upto say £200,000,000 then you would recieve a message like this from the board

http://i588.photobucket.com/albums/ss325/seattle4eva/1.png

yes you can pay the loan early if you have enought money avaliable

Example:-

if you were to use FMRTE and put the balance of your club upto say £200,000,000 then you would recieve a message like this from the board

http://i588.photobucket.com/albums/ss325/seattle4eva/1.png

Interesting, that settles that then!

I guess it does. Thanks for that info.

Yeah, you can get a massive new stadium if you do that!

hehehe yes you do

Interesting, that settles that then!

This also can happen in the event of a takeover. If you cant get a takeover just make as much money for transfers and the board will most likely clear that debt.