Leicester City owners King Power braced for £250m payout, ‘it doesn’t look good at all’
EFL Analysis’ finance expert Adam Williams has helped to shed some light on the current situation involving Leicester City’s owners King Power and how it will affect the club going forward.
Reports in Thailand that emerged over the weekend revealed King Power’s struggles financially in recent years.
Leicester’s current chairman, Aiyawatt Srivaddhanaprabha has recently been appointed to become chairman of King Power and Nitinai Sirismatthakarn has been appointed president.
Over the years, the Foxes have relied on cash injections from King Power which have often been turned into equity. But does the recent news change that?
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King Power could be facing huge pay out
EFL Analysis’ Chief Finance expert Williams explained how the appointment of Sirismatthakarn will mean Khun Top won’t be as involved in the day-to-day running of King Power but the decision to appoint the new president is timely as the company face the possibility of a huge pay out.
“King Power are suffering because of the decline of the tourist market in Thailand. That in turn has been caused by a hangover effect from the pandemic, as well as the collapse of tourism from China. To counteract those cash flow issues, there has been some pretty aggressive short-term borrowing to maintain operations. The problem now is that they will be struggling to generate enough revenue to meet its obligations in terms of debt,” explained Williams.
“The new guy is significant because he used to president of AOT, Airports of Thailand. King Power are looking to either withdraw from their agreement with AOT to handle duty-free retail in five of nine Thai airports or renegotiate the contract at a cheaper rate.
“From the outside, it looks like the latter is a real possibility given that AOT rely heavily on King Power for revenues and profits. They’ve been given a 60-day timeline to respond to their requests. On the flip side, AOT will be able to demand almost £250m from King Power if they do terminate the contract.
“The debt that King Power have taken on is substantial, so focusing on the airports that are actually profitable for them might be the pathway they choose eventually, but then you’ve got to bear that £250m cost at a time when cash is strained. Based on official filings in Thailand, the wider King Power empire doesn’t look diversified enough to cope with that shortfall. They lost about £15m in the last financial year on revenues of £770m, but it sounds like things have worsened since then.”
How will King Power’s troubles affect Leicester City?
King Power has been a huge part of Leicester ever since the family chose to buy the Foxes from Milan Mandaric in 2010.
You will find King Power pretty much everywhere, from the stadium name to the sponsor on the front of shirts over the years.
Anything that happens to the company will also affect the Foxes and Williams admitted that in the short term nothing will be noticeable, but down the line is where cracks may begin to appear.
“It depends to what extent they are reliant on external cash injections from the owner,” he said.
“Historically, the owners have loaned the club money which has since been converted to equity. Whether they are in a place to do that now, I’d be very sceptical. However, they have over £100m of resources in undrawn credit facilities which Leicester can use if cash is tight.
“Ultimately, I think they’ll be okay in the short-to-medium term, but there could be problems further down the line if they can’t get back out of the Championship, lose their parachute payments and need to rely on owner funding again.”
