Loans with options to buy

[Vespa Red]

Now that Graeme Garden Higgs-Bosun has signed on loan with the option to buy, just trying to recall the last time that we actually triggered that option to buy because the loanee shone during their time here?  Did Andy Cole come on that basis or did we just buy him in the Summer because we'd all fallen in love with him?

I think that Diony came on that basis (we didn't take up the option THANK GOD), Leto maybe (again, no deal).  Kasey Palmer maybe?

sadly, the phrase "Loan with the option to buy" leaves me feeling somewhat "meh" 

Edited August 23, 2023 by Vespa Red

[RedRoss]

Well you've sort of demonstrated why loan to buy is a great option because you can give them back if their no good. That's the benefit!

Just because Diony was rubbish and was a loan to buy doesn't automatically mean that TGH will be also just means we can cut our losses if he is. On the flipside if he's good we'll take up the option and he'll be a bargain which you've obviously don't get with a regular loan.

 

Edited August 23, 2023 by RedRoss

[Bristol Rob]

We ended up buying Tomlin after a loan, not sure if that was us exercising an option to do so.

Likewise, Kalas was originally a loan.

 

[SBB]

Jay Dasilva?

[brad blit]

I was thinking this last night in regards to TGH loan move - it says a deal was "option to buy included" but who has the final say on this?

For example, if he has a successful year and City decide to activate the pre agreed amount (apparently 1.3 million) do West Brom still have to agree to the deal, or is it solely up to City whether we continue with the pre agreed deal?

 

[Nathandao]

1 minute ago, brad blit said:

I was thinking this last night in regards to TGH loan move - it says a deal was "option to buy included" but who has the final say on this?

For example, if he has a successful year and City decide to activate the pre agreed amount (apparently 1.3 million) do West Brom still have to agree to the deal, or is it solely up to City whether we continue with the pre agreed deal?

 

I believe it is completely our choice if we wish to exercise it.

[Bristol Rob]

53 minutes ago, RedRoss said:

Well you've sort of demonstrated why loan to buy is a great option because you can give them back if their no good. That's the benefit!

 

Like fostering, with view to adoption. Sort of.

 

[Betty Swallocks]

5 minutes ago, brad blit said:

I was thinking this last night in regards to TGH loan move - it says a deal was "option to buy included" but who has the final say on this?

For example, if he has a successful year and City decide to activate the pre agreed amount (apparently 1.3 million) do West Brom still have to agree to the deal, or is it solely up to City whether we continue with the pre agreed deal?

 

It’s City’s option but the likelihood is that we would still have to negotiate a contract with TGH. If he starts off well, you’d imagine those talks would start to happen way before end of his loan. 

[Shuffle]

Just curious but does the £700k loan fee cover his wages or are they on top? 

[ExiledAjax]

Loan to buy was a favourite of Ashton, along with the one year option.

With Ashton he was, I believe, trying to be clever and almost short a player's registration by fixing a price at the start of the loan. He then hoped the player would have an excellent loan, and this we'd get a "bargain" when we exercise the option. The plan being that you then sell on at a higher price, and pocket the profit. Not true shorting as you'd not have that onward sale agreed, but that was the principle.

I suspect this has a different motive, but it will be an option of ours to buy him or not. A price is almost certainly already agreed, although there could be several prices, and which is paid could depend on how he performs. There may be conditions to satisfy before we action the option as well.

22 minutes ago, Shuffle said:

Just curious but does the £700k loan fee cover his wages or are they on top? 

On top. The fee is just for the privilege. It's a £700k one year contract essentially. His wages could be paid entirely by WBA, entirely by us, or most likely in some sort of split between us.

[Fuber]

50 minutes ago, brad blit said:

I was thinking this last night in regards to TGH loan move - it says a deal was "option to buy included" but who has the final say on this?

For example, if he has a successful year and City decide to activate the pre agreed amount (apparently 1.3 million) do West Brom still have to agree to the deal, or is it solely up to City whether we continue with the pre agreed deal?

 

Solely up to the purchasing club. Option in the contracted agreement of the transfer. 

Kulusevski is an example -- his option was automatically triggered based on an appearance clause - Juventus had no way to cancel it.

[GrahamC]

48 minutes ago, Shuffle said:

Just curious but does the £700k loan fee cover his wages or are they on top? 

My guess is on top.

So basically this lad is £2m if we want to sign him permanently but we would already have paid £700k of it upfront.

[Selred]

1 minute ago, GrahamC said:

My guess is on top.

So basically this lad is £2m if we want to sign him permanently but we would already have paid £700k of it upfront.

Exactly. Speeds the deal through, West Brom get £700k right now so they are happy, we get a player for £2m just spread over a couple of years.

[HoldenBall]

Our little blue friends are having success with this at the moment. Bringing a player in on loan and then buying him the season after. 

[Taz]

2 hours ago, TomF said:

Andy Cole was just purchased after not an option to buy during loan.

I think Lee Matthews was signed on loan just so he could play that Friday night then competed later. 

Nobody mention Tony Dinn.. 

I wasn't sure/couldn't remember if that was a loan with an option, or whether we just decided to buy him after/during his loan period. If I'm honest I think I've put everything related to him out of my mind completely.

1 hour ago, Bristol Rob said:

We ended up buying Tomlin after a loan, not sure if that was us exercising an option to do so.

Likewise, Kalas was originally a loan.

 

Neither had an agreement in place though I don't think, as both were signed a while after their loans had finished IIRC. 

Tomlin definitely wasn't, as it took him all summer to bait the gullible fans who were asking him to sign whilst trying to flog his caps or some other type of crap at the time. Probably whilst visiting the nanny 

[Davefevs]

1 hour ago, SBB said:

Jay Dasilva?

Is the right answer.

1 hour ago, brad blit said:

I was thinking this last night in regards to TGH loan move - it says a deal was "option to buy included" but who has the final say on this?

For example, if he has a successful year and City decide to activate the pre agreed amount (apparently 1.3 million) do West Brom still have to agree to the deal, or is it solely up to City whether we continue with the pre agreed deal?

 

As others have stated, we have the right to trigger the option to buy.

It is also very likely that we have discussed contract terms (amounts / length) with TGH too.  I would imagine that it would be at least 2 years (to summer 2026) to align with his existing contract expiry at West Brom, but in all likelihood it will be longer, 3 years (2027) at least.

Assuming we trigger, then it becomes TGH’s decision as to sign for us.

Re his wages during the loan, I suspect we are paying them, but that’s guesswork.  And they’d be on top of the alleged (but very likely imho) £700k loan fee.

[Mr Popodopolous]

£700k 1 year hit ie now. £700k loan fee would go West Brom and their inbound.

If we decide to buy then £1.3m in a year, instantly on the books for West Brom, while for us £1.3m/contract length would be reflected in amortisation in the usual manner.

[Davefevs]

1 minute ago, Mr Popodopolous said:

£700k 1 year hit ie now. £700k loan fee would go West Brom and their inbound.

If we decide to buy then £1.3m in a year, instantly on the books for West Brom, while for us £1.3m/contract length would be reflected in amortisation in the usual manner.

There is an option to do the whole £2m into the books now, and spread over the full term (2).  Unlikely though, we will likely do as you suggest above (1).

[Mr Popodopolous]

9 minutes ago, Davefevs said:

There is an option to do the whole £2m into the books now, and spread over the full term (2).  Unlikely though, we will likely do as you suggest above (1).

Interesting, thanks Dave. Sounds like a newish development?

[IAmNick]

1 hour ago, ExiledAjax said:

With Ashton he was, I believe, trying to be clever and almost short a player's registration by fixing a price at the start of the loan. He then hoped the player would have an excellent loan, and this we'd get a "bargain" when we exercise the option. The plan being that you then sell on at a higher price, and pocket the profit. Not true shorting as you'd not have that onward sale agreed, but that was the principle.

That's more like buying a £1.3m July 24 CALL option for £700k (using Gardner-Hickman) than shorting then right

You'd short something if you think the price is going to decrease - first you sell it for X, then buy the asset in the future for Y when you have to cover your short. You then pocket the difference between X and Y.

[Bristol Rob]

1 hour ago, Taz said:

 

Tomlin definitely wasn't, as it took him all summer to bait the gullible fans who were asking him to sign whilst trying to flog his caps or some other type of crap at the time. Probably whilst visiting the nanny 

Which given the state of the current City merchandise offering looks a fair deal.

[Davefevs]

53 minutes ago, IAmNick said:

That's more like buying a £1.3m July 24 CALL option for £700k (using Gardner-Hickman) than shorting then right

You'd short something if you think the price is going to decrease - first you sell it for X, then buy the asset in the future for Y when you have to cover your short. You then pocket the difference between X and Y.

Going back to Dasilva, although I have said “I think Dasilva was a good signing at £2m”, I’ve never really looked at it in terms of - I wonder how much the loan fee was?

And then I wonder some more - what we’re the loan fees for Kalas and Palmer.

Add those to their eventual fees and it’s possible they cost even more than I thought!!! Eek.

I know we paid a substantial loan fee for Afobe.  I still recall a certain BBCRB phone-in caller saying that Mark Ashton told him we never paid loan fees.  Of course he’d say that!!!

1 hour ago, Mr Popodopolous said:

Interesting, thanks Dave. Sounds like a newish development?

That doc is 5 years old!!

[IAmNick]

38 minutes ago, Davefevs said:

Going back to Dasilva, although I have said “I think Dasilva was a good signing at £2m”, I’ve never really looked at it in terms of - I wonder how much the loan fee was?

And then I wonder some more - what we’re the loan fees for Kalas and Palmer.

Add those to their eventual fees and it’s possible they cost even more than I thought!!! Eek.

I know we paid a substantial loan fee for Afobe.  I still recall a certain BBCRB phone-in caller saying that Mark Ashton told him we never paid loan fees.  Of course he’d say that!!!

Yeah, I guess that's where you'd hope the skill comes in as the loan fee is partly a bet isn't it?

I suspect that if you've already paid a high loan fee, then some kind of sunk cost fallacy would exist where you think we might as well take up the option even though we're not sure - whereas really you should be thinking about it as if it's a totally new transfer. Perhaps paying hefty loan fees and negotiating options to buy (which presumably could affect the loan fee as well?) and then taking none of them up is a bit of an ego hit as well.

Perhaps you should add the loan fee to the transfer fee, and +1 year to his contract as that's effectively what we got for the money.

[RedRoss]

3 hours ago, HoldenBall said:

Our little blue friends are having success with this at the moment. Bringing a player in on loan and then buying him the season after. 

Do you mean the gas? If so who? Don't think they've done any deals like this.

[cider hoss rules]

5 hours ago, Bristol Rob said:

We ended up buying Tomlin after a loan, not sure if that was us exercising an option to do so.

Likewise, Kalas was originally a loan.

 

well it certainly wouldn't have been him!

 

[Vespa Red]

5 hours ago, Bristol Rob said:

Like fostering, with view to adoption. Sort of.

 

Or an engagement with a view to marriage...

[cheese]

25 minutes ago, Vespa Red said:

Or an engagement with a view to marriage...

Definitely like that, once you exercise the option to purchase (marry) you suddenly aren't getting what you were getting before.

[Ashtongatered]

What happens if he becomes a gem can WBA get him back at the end of the season ?

[PHILINFRANCE]

1 hour ago, RedRoss said:

Do you mean the gas? If so who? Don't think they've done any deals like this.

I suspect @HoldenBall was being sarcastic.

During the summer, Rovers bought Luke(?)) Thomas from Barnsley, who they had on loan a season or so ago.

You may recall that JAB was called out for criticising him for his mental attitude, when LT had a known mental problem, but LT then confirmed that JAB’s criticism was just the kick up the backside he needed - he seems to be quite a useful player.

Similarly, young Connor Taylor, a central defender on loan from Stoke, played a prominent role in Rovers’ promotion season, and he was also signed on a permanent deal a few weeks ago.

 

[38MC]

22 minutes ago, Ashtongatered said:

What happens if he becomes a gem can WBA get him back at the end of the season ?

Yes - by him refusing to join us. 

The easiest way to consider this is we already have had a bid of £1.3million accepted and it will remain accepted until the option runs out (that date will be pre-agreed but we won't know it). 

We can at any point discuss contracts with the player because we have had a bid accepted. If we agree personal terms with player before the option runs out, we just complete paperwork, pay the money as agreed and he's transferred to us. Nothing West Brom can do to stop it because the £700k we have paid is not solely for him to join us on loan, some value will have been an inducement for West Brom to agree an option to buy clause. Without that the loan fee may have been £500k for instance. 

Someone else could come in and offer £10m for him, and have a bid accepted. Nothing we can do about that and the player is free to sign for us (for £1.3m as that has been accepted) or sign for another club for £10m. West Brom cannot block his move to us in that example - except maybe paying us a premium to pull out of the transfer.