Birmingham International Holdings Ltd. (2309), owner of the English soccer club Birmingham City, plans to borrow as much as HK$80 million ($10.3 million) from its newly appointed deputy chairman.
The Hong Kong-based company entered into a two-year loan agreement with Yang Yue Zhou, who was appointed executive director and deputy chairman yesterday, according to a statement to the Hong Kong stock exchange. The interest rate for the unsecured loan is 12 percent a year, it said.
Birmingham shares have been suspended since June 30 when Chairman Carson Yeung was charged with money laundering in a Hong Kong court. Earlier this year, the company said its liabilities exceeded assets by about HK$348 million. Birmingham City was dropped from England’s Premier League last season, three months after winning the League Cup, its first major trophy in 48 years.
“The loan is borrowed at a very high interest rate and it clearly shows that Birmingham is short of cash,” Castor Pang, Hong Kong-based head of research at Core-Pacific Yamaichi International Ltd., said by phone today. “The company has difficulties generating sustainable cash flow, especially after the football club’s relegation.”
Proceeds from the loan will be used for the repayment of debt and as general working capital, the company said in today’s statement. Birmingham International generated 95 percent of its HK$375.4 million in revenue from its football operations in the six months ended Dec. 31, 2010, according to the company.
Hong Kong dollar loans signed by companies in the city since January pay an average margin of 42 basis points more than the Hong Kong interbank offered rate, data on 58 loans tracked by Bloomberg show. A HK$700 million, five-year facility signed by China Oil and Gas Group Ltd. (603) in January offers the highest margin, at 370 basis points more than Hibor, according to the data. Today’s three-month Hibor rate was quoted at 0.27964 percent.
Yang will hold office until the next annual general meeting of Birmingham, the company said in a separate filing to the stock exchange today.
Yeung, the former hairdresser who bought control of the West Midlands-based football team in 2009, faces five charges of dealing with property “known or believed to represent proceeds of an indictable offense,” with a total value of HK$721.3 million, according to court documents.
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