Another Cardiff City curiosity

I have blogged before on the rather curious way that Peter Ridsdale can use the English language (see Planet Ridsdale).

Last Wednesday he was reported as saying the following to Malcolm Bloom of the South Wales Echo (1):

“I am confident that the stadium will be debt-free in 12 months by paying the money we borrowed off PMG,” said Ridsdale.

“The funding for that fee will be done through normal financial institutions and nothing to do with any new potential investment.

“The stadium debt is a totally separate debt to Langston.”

What can this mean?  Repaying the debt to PMG ‘through normal financial institutions’ surely means ‘by taking out another loan’, which will hardly mean that the stadium is debt free!

Does he mean that the club will be receiving a gift from ‘normal financial institutions’?  If so, he obviously knows a trick unknown to all the other Chairmen living up on Debt Mountain.

Next day up he pops on the BBC website (2) with:

“This club has two levels of debt, one of which is the stadium and the other is to do with Langston and we are actively through normal financial routes looking to repay both those levels of debts.

“The first one is simple because it is known, which is the cost of the stadium and the other one is less easy to quantify because when I arrived at this football club the debt was £24m and we then did a deal in 2006 to make it £15m.”

He continues:

“I am confident that when we have the Langston agreement signed there are routes to pay off our debts in the shorter term not the longer term and by that I mean the next 18 months not the next six years.

“Whether that be routes that we have already talked to routes we haven’t thought of, time will tell.

“We might substitute one level of debt for a different level of debt but at least it might be with somebody with a name over the door we recognised rather than somebody we don’t know who they are.

“The current debts that we have we intend repaying and we intend in part refinancing and if we can pay it off completely.”

The ‘people who he didn’t know who they were’ refers to former owner Sam Hammam, the man behind the Langston debt.  How does this square with his assertion made on October 15 to the South Wales Echo (3) that “We have been in constant negotiations with Sam Hammam and I have met him personally over the last couple of weeks a number of times“  (3)? Or on 26 May “I am in regular dialogue with (former City chairman) Sam Hammam as Langston’s representative” (4).  I could go on.

Good.  I’m glad that’s all been cleared up. 

Administrations review extra

A couple more cases:

A – In Administration

• Bromsgrove Rovers
  A club for whom it has all gone wrong since finishing second in the Conference in 1993, and which is the latest club to seek the cloak of Administration, succumbing earlier this month.
  In 2001 the club survived a winding-up order from HMRC and a large bank loan by going into Administration, a state which lasted almost three years.  There remained a dispute over the issue of shares to fans who had bailed the club out, not finally resolved until 2009 (1).
  The underlying issues had not gone away however, and a divide between the Chairman, Tom Herbert, and the Bromsgrove Supporters Society remained (2 and 3).  Herbert resisted attempts by a consortium involving former directors to take over the club, and a deeply unpopular proposed merger with Redditch United came to nothing (4).
  This year debts have mounted up, as has the pressure on Herbert to quit.  Former director John Teece served a winding-up order on the club a month ago, prompting Herbert to place the club in Administration.  Although the Teece debt is over a disputed £5,000, total debts are reported to be in the order of £500,000, with debtors including Herbert, his wife and a pub they own (£240,000), HMRC (£64,000), All for One Engineering (£40,000), Coors Brewers (£26,000) and Bromsgrove District Council (£11,890) (5).  A number of bids have been placed with the Administrator, but clearly the agreement of a CVA will be fraught with difficulty.

B – Facing a Winding-Up Order

• King’s Lynn
  [Many thanks to Tony Mowles for getting this one back onto my radar screen]
  King’s Lynn’s problems surfaced during 2008/09.  Benefactor Mike Chinn resigned as a director (6), and shortly afterwards players were hit with a wage deferral of 30% (7).
  At the end of April the Conference announced the demotion of the club over ground standards (8).  The decision was contentious as King’s Lynn Borough Council had given an undertaking that all the necessary improvements would be in place for the start of the new season (9).
  Managerial staff started to leave amid complaints of non-payment, and a winding-up order was served by HMRC on 9 July. The club now has until 25 November to pay the outstanding £65,000 (10).

• Lewes
  Lewes fought off two winding-up orders earlier this year brought by Portakabin for £15,000, but at the beginning of August HMRC served one for a debt of around £100,000 (11).  With the help of £30,000 from an anonymous donor, the club have so far managed to keep negotiations going (12).  They are currently paying the debt off at £10000 per month, and on 3 September were granted a three month adjournement (13).  Further donors are being sought to maintain the repayment schedule.

Any further additions to the review will be added to this posting and notification given on Twitter.

The main review is here.

Administrations review

With several court appearances due to consider various aspects of insolvency at different clubs, now seemed a good time to take a broad look at clubs that have been in trouble recently:

• Bournemouth
  Bournemouth has been well covered in postings passim. £150,000 is due to HMRC but the club’s bank account remains frozen.  Eddie Mitchell is adamant that the funds are available however (1).  This impasse will need to be resolved, as the winding-up order heard on 5 October resulted in six-week stay of execution.  The club remains seriously affected by a transfer embargo, yet still manages to be top of League 2.

• Chester City
  Again, this has been covered in postings passim.  The club faces expulsion from the Conference as it “has not complied with the terms of the compromise agreement set by the Football Conference to allow the club to participate in the competition at the commencement of the current season” and football creditors Wrexham and Vauxhall Motors remain unpaid  The deadline to comply is 17:30 tomorrow, 26th. October (2).  The club also remains under a transfer embargo.

• Darlington
  The club came out of Administration in August, under the control of new owner Raj Singh (3).

• Halesowen Town
  See postings passim.  Two offers have been made to the Administrators, one from the Ingram brothers, who have stated that they have no intention of involving Morell Maison with the club in the future, and the other from Robert McNaughton.  Creditors are to decide on 11th. November which bid to accept, both having been cleared by the FA (4).  In the meantime, investigations contnue regarding alleged fraud (which relates to the club) by previous owner/manager Morell Maison (5). In an unrelated case former Halesowen Town chief executive Guy Simpon has appeared in court charged with evasion of customs duty after counterfeit cigarettes with a retail value of around £5.3m were imported into the UK (6). [Did someone mention Fit and Proper Person tests? ]

• Merthyr Tydfil
  The Supporters Trust are now running the club under licence from the Administrator (7) and new sponsorship has been secured (8). Annis Abraham has recently reappeared as a potential buyer of the club however (9).

• Northwich Victoria
  A debt of £450,000 to HMRC remains a hurdle to moving into an agreed CVA (10). As is all too often the case with clubs in deep debt, dreams are being refloated of buying the stadium back (11) – dreams are fine, but perhaps clearing the HMRC debt should be a tad higher as a priority.

• Ringmer
  At the end of July (the club has been in Administration since last November) the club announced that coming out of Administration was going to happen in ‘the very near future’ (12).  I’ve not managed to find any more recent news, but have not been helped by the fact that my browser seems to take a strong dislike to the club’s website!

• Salisbury
  One offer for the club had been received by the Administrator’s deadline of 1st. October, but negotiations with HMRC and the club’s debt of £200,000 appear to remain ongoing barriers to progress (13).  Would-be purchaser is a consortium consisting of William Harrison-Allan (chief executive of the Country Gentlemen’s Association), Jeff Hooper (wholesale florist), and Chris Bramall (managing director of Wilton Carpet Factory) (14).  [Honestly, I'm not making that last bit up - click through if you don't believe me.]

• Stockport County
  The club went into Administration back in April. A much mooted takeover by a consortium headed by Jim Melrose has not materialised, although a CVA was agreed in July, with debts written off at 1p in the pound.  A recent announcement by the Administrator spoke of ‘around 10 enquiries from potential buyers‘ (14), but the Edgeley Park ground remains a contentious issue.

Two other clubs, who have not been in Administration, are due in court over debts shortly:

• Accrington Stanley
  Deadline for clearing the debt of £308,000 owed to HMRC is next Wedenesday, 28th. October.  As I write, the Save Our Stanley Fund barometer stands at a smidgeon below £120,000 (15), to which other revenues from charity matches etc. need to be added.  Even if the full £308,000 is raised, there are no indications that the current Chairman, Dave O’Neill, will be able to manage a positive cashflow in the future.  It is a pity for the club’s sake that he could not have come to an agreement with Ilyas Khan who had wanted to buy the club and give significant control to fans.

• Southend United
  An unusual case which seems to have attracted little attention outside Southend.  The club is due back in court this week over £660,000 due to HMRC; owner Ron Martin cooed to BBC Essex “There’s not a financial crisis, we are in a transitional stage moving Southend United from Roots Hall” (16), in a near-repeat performance of a confrontation with HMRC a year ago.  Maybe Martin is just using HMRC as a handy overdraft facility, but the overall fortunes of the club are on a downward swing, with a move from an annual profit of £1.34m to a loss of £2.4m reported this June (17).
  Martin’s use of the word ‘transitional’ with respect to the stadium move is curious. The stadium saga dates from 1998 when the current Roots Hall stadium was sold to clear debts and a rent-back agreement reached.  Plans for the new Fossetts Farm stadium have grown ever more elaborate, and now include Southend’s fourth casino as well as flats, retail units and a 22,000 seater stadium (Southend’s gates are good by League One standards but this season have been averaging around 8,000).
  Let me put it this way – if I were a Southend fan, I’d be beginning to wonder whether Martin’s high-risk high-return strategy wasn’t beginning to smell more of ‘risk’ than of ‘return’ (probably a bit rich, you might well counter, coming from a Pompey fan, and I’d have to concede that!)

Weymouth too will face a legal crisis point this week (see postings passim). The latest announcemnt on the club’s future, and how they will deal with Malcolm Curtis’s ultimatum that the club settle its overdraft with Barclays (18), is scheduled for Wednesday. Administration or new owners look the only likely possibilities, although they are not of course mutually exclusive, and the former followed by the latter is probably the favourite here.

And finally, Hyde United.  At the beginning of October, the club managed to fight off a winding-up order brought by HMRC.  The club is not yet in the clear, however, as it still has debts of £50,000 (19).

I say ‘finally’, but, with so many cases of insolvency and impending insolvency, it’s increasingly hard keeping up.  If I’ve missed a club, let me know and I’ll provide what news I have. I am off to Greece on Thursday for a conference, back on Sunday, so will do my best to cover events as they unfold this week

Mitchell further muddies South Coast waters?

Following my last posting, prompted by Eddie Mitchell’s call for government support, there is an extraordinary report in the Dorest Echo today (1).  While on the one hand Mitchell (see postings passim) is calling for government help for clubs like ailing Bournemouth, which he recently bought into following his involvement at Dorchester Town (where he tried to leave his sons in control to ‘avoid’ a conflict of interests by ownership of more than one club), it emerges that he is alleged to have offered Weymouth, where the continuing crisis may well lead to the announcement of going into Administration on Wednesday, £5,000 a month to take son Tom Mitchell on to the playing staff, in a bundle which included Eddie’s manager from Dorchester Town, Shaun Brooks!

He is reported to have sent Weymouth the following in an email, one of three, “My motivation is my football life revolves around my son. He has failed to make the team at DTFC since I left the club. I believe there is a hidden agenda for this and I would be indebted to any club in the BSS league who would consider playing him on merit and there is no doubt Brooks is to me the best manager there could be in the BSS league. I would consider considerable financial and personal support if your board takes up my offer. I have fallen out of love with DTFC. This email is off the record please.”

It is not exactly hard to see why he would want it kept off the record, if he did indeed send it.

Mitchell strenuously denies sending the emails(2), telling the Dorset Echo, “There’s no truth in it whatsoever. Tom’s on a contract at Dorchester. He’s disappointed he hasn’t been featuring as much lately but that’s up to him to get back into the team. Someone’s out to get me and they’ve made up a mock of my email address.“

Why anyone would want to engage in an elaborate series of forgeries and is ‘out to get’ Mitchell is unclear.

It has to be to the credit of Weymouth that, even with club’s back to the wall, they would have no truck with such an offer, whether genuine or forged.

Bournemouth meanwhile have been blocked from paying debts due to HMRC because their bank account is frozen (3).

Focus this week will no doubt be on the two clubs, but the provenance of the alleged emails needs to be clarified urgently.

Government intervention?

Hard times at Bournemouth have prompted Eddie Mitchell to suggest drastic intervention: “The club is at the heart of the town and should have money invested in it by the government. It’s up to the government to restructure the game and I see it all over the country. It was the same with Dorchester in the Blue Square South. These football grounds are smack in the middle of towns and a lot of them are falling apart. If only the government could see a way to invest into the hubs of communities, it would help keep youngsters off the streets and give them somewhere to go to enjoy themselves.” (1)  I assume that he is not calling for Westminster to cough up for Bournemouth alone, and is making a case for clubs in general. In just a couple of sentences he’s managed to pack in some serious issues that need unpicking.

First of all, are the concerns of Bournemouth (or Accrington Stanley or whichever club for that matter) really something that warrants government intervention?  Surely these are local issues for local people (no, I’m not writing from Royston Vasey!).  Each case is highly individual and surely needs consideration by local councils rather than at the government level.  In any case, the local council will have a much clearer understanding of not only what might need to be done, but also what the causes of the predicament are, and what the broader community benefits might or might not be.

Which raises a second point – why should the state intervene to bail out cases of poor management of a private company?  In Mitchell’s case, he inherited many of the problems at the club, but he entered football management at the ownership level as recently as 2007 and is already weaving his magic at his second club.  He has explained how he came into football as “I’m not a passionate football fan – my son plays and that’s what drew me into football” (2).  His son has of course ‘kept off the streets’ and played at Dorchester, which Mitchell previously owned, and more recently on loan at Bournemouth (see 3).

If there is a case for intervention with state money (and I’m not personally convinced there is), it has to be made in the community context, with the club at the heart of the town indeed.  This is a nonsense when a club is owned by a property developer.  It only makes sense if a club is owned by the local council, which I would not advocate, or by a Supporters Trust, which I would.

Emotive though Mitchell’s arguments are, they are perhaps being made by the wrong person if they are to be taken seriously.

The hard truth is that many clubs in financial  trouble are often in that situation because of bad management by ‘benefactors’ (often serially) who are not, in any non-legal use of the words, fit and proper persons to own and run a football club.  Too often the ‘benefactor’ fails to realise the demands of running a money pit.

If, and it’s a big ‘if’ that would require much wider debate, state involvement and money are to be considered, we need to recognise that a) football is not the only sport, b) it is not universally popular (even if it should be!) and c) fan democracy should be the only basis for any club-specific subsidy from the public purse.

Chester City drinking at last chance saloon

It was less than a fortnight ago that I was blogging on the Stephen Vaughan approach to management, and some of the odd theories he proposed on how to run a club (1).

The Conference is now running out of patience with the way Chester City is being run.  This afternoon they published this blunt statement:

“In accordance with Membership Rule 11 – for the non-payment of football creditors – Chester City FC have been placed under an immediate player embargo, in as much that:

“1. Chester City FC has not complied with the terms of the compromise agreement set by the Football Conference to allow the club to participate in the competition at the commencement of the current season; and further to that fact, the club has been given 7 days, operative up to 5.30pm 26th October 2009, in which to meet the said payment terms of that agreement, otherwise they face the threat of expulsion from the Football Conference.

“2. Chester City FC has failed to pay monies owing to Wrexham FC for away ticket sales relating to their fixture played on 27th September 2009 and further to that fact, the club has failed to meet a 7-day payment deadline imposed by the Football Conference.

“3. Chester City has failed to pay Vauxhall Motors FC monies owed in relation to the loan of Paul Taylor, which should have been met no later than 14th October 2009.

“The Football Conference will not be making any further statement on this matter at this time. “

So, pay up by Sunday evening, or be expelled from the Conference.  Quite where they could go if expelled mid-season is unclear.

Not paying football creditors is of course considered to be the ultimate sin by the governing bodies – it led to Halesowen Town being banned by the FA in July (2) under Morell Maison (who, incidentally, has been arrested on suspicion of fraud in an investigation “in relation to various allegations concerning matters in relation to Halesowen Football Club” [3]).

This all needs to be seen in the context of Chester City coming out of Administration on 26 May via a CVA which saw creditors being paid 15p in the pound (4).  It has to be asked – was allowing this a wise decision on the part of the Administrator, Martin Shaw of Refresh Recovery?  Refresh Recovery are relative newcomers to the football Administration scene, but also provide the Administrator of Northwich Victoria.

It must also raise questions regarding the Fit and Proper Person tests, the FA variant being the one applicable to Conference clubs.  The position of Ian Watmore, Chief Executive of the FA, at least as he expressed at the Supporters Direct Conference (5), will ensure that the vital issue of the harmonisation of the variants of the Test is addressed.  However, the fact that the pass rate is similar to that of, say, O Grade Breathing, does not seem to be a matter of concern to him.

As for Stephen Vaughan at Chester City, surely it is time for him to bow out before the club hits an ultimate low.  However, unless a miracle happens by the end of this week, he may have no option but to put the club back into Administration, a bigger blow to the long-suffering club than to him!  It’s time the FA addressed this paradox – we saw the iniquity of punishing the club rather than the perpetrator at Luton.

On the present evidence, I have to say it doesn’t look likely that any changes are imminent.

Fit and Proper Person Tests – news of graduates

During the course of yesterday, news emerged of ‘Dr’ Al Fahim, a PL graduate of 2009 (1).  Normally I sprinkle my postings with these numbered click-throughs out of academic habit, the citation of my sources, but on this occasion I would strongly encourage readers to look at the full interview which Al Fahim gave to asharg alawsat, which describes itself as ‘The leading Arabic International Daily’.  Don’t worry, the click-through is to their official English version.

Al Fahim makes some amazing statements.  He argues that Premier League clubs in debt (well, that doesn’t really cut the field down much, does it?) are easy pickings for a quick profit.  Asked about his reasons for selling Portsmouth after owning it for only six weeks, he replies “It was purely a matter of investment. I saw that there was a good opportunity in selling for an excellent profit. Praise be to God as Ali al Faraj’s [another PL graduate of 2009; JB] presence helped me a lot, as he was interested in buying the club when I was negotiating with the former owner. That helped me buy the club and then put it up for sale again“.  So presumably when he said on 28 May “I’m excited about the club, and I’ve signed the memorandum” (2) what he meant to say was ‘I’m excited about the quick profit I’m going to make when I get Ali Al Faraj to sign the next memorandum’.

He also states that he made a profit of £10 million by buying the club for £60 million and promptly selling 90% of the shares for £70 million.  Clearly a nice little earner, and just the sort of thing a Fit and Proper Person would do.

He continues “I will remain head of the club’s board of directors for two seasons. Moreover, I kept 100 percent of the club’s real estate assets and this is something nobody has paid attention to or spoken about. I am announcing this for the first time that [the real estate assets] are owned by the Al Fahim Group. Without doubt the real estate aspect is important in sports investment. Praise be to God, I was able to transfer all the club’s debts to the new owner and I gained excellent revenue.“

Words fail me for once, other than to point out I have added a probably long overdue ‘Ethics’ tag for postings.

I wonder if Al Fahim reads the Jewish Chronicle.  If you are not familiar with this newspaper, it was founded in 1841 and describes itself as ‘the world’s oldest and most influential Jewish newspaper‘.  Yesterday it covered the ongoing Portsmouth saga with a piece on Avram Grant: The Real Story. Again, I would commend clicking through and reading the whole article, with a whole new twist to the Fratton Fiasco.  Of particular intgerest is the statement by Mark Jacob, Ali Al Faraj’s nominee on the Portsmouth board, that “My client owns 100 per cent of the company that owns Portsmouth“.

Time for some clarification, not that I suspect we will get it. Certainly time some attention was indeed paid to Al Fahim’s claim that he “kept 100 percent of the club’s real estate assets“.

Supporters Direct Conference

For those of you who didn’t attend, my commiserations!  A very interesting event indeed.

Much of the day was spent in structured discussion along a choice of themes, using a technique called ‘fishbowl’, which worked really well.  My clearest impression of these sessions is of just how broad the church of Supporters Trusts is, the sheer number ensuring that there was a fascinating variety of Trusts represented at very different stages in their development, stretching from those in ownership through to the fledglings. I’m not personally involved in a Supporters Trust, but this was no barrier to getting a great deal out of the day.

The climax of the day was a series of presentations by major movers-and-shakers – the charismatic Lander Unzueta, Chief Marketing and Commercial Officer of FC Barcelona, who admirably demonstrated that it is possible to be a major world brand and fan-owned, Alex Phillips, Head of Professional Football Services at UEFA, and our very own Ian Watmore, Chief Executive of The Football Association.

Watmore does not appear to be a regular reader of the Supporters Direct blog, where the Fit & Proper Person tests have recently been a major theme, or, rather more worryingly, the views he expressed yesterday are representative of what he actually thinks.  The good news is that he does see issues with the current situation – the lack of effective harmonistaion between the PL, FL and FA versions – citing the problems with Chester City and their move from the FL to the Conference (and hence the application of the FA rather than the FL version of the test).  The bad news is that, even when pressed by a number of questioners – it wasn’t just me I hasten to point out – he showed a marked reluctance to express any concern about the remarkable ease with which would-be directors and owners currently sail through with flying colours.

Perhaps the news items I cover in my next posting may help him see the light.

Supporters Trusts v. Benefactors

There is an interesting piece in today’s Guardian (1), welcome not least because it promotes the Supporters Direct Conference at the NEC this Friday. I’m attending and it would be great to meet up with any readers who are attending too (there’s a photo of me on the About tag for those who haven’t met me before).

But back to David’s article.  He is of course constrained on the length of article he is allowed to publish (fortunately no such constraint in the blogosphere, although I do try to police myself!) and offers an even-handed overview of the successes and the failures of the Supporters Trust model of ownership and governance.  To argue however that “This has not, on the face of it, been the best 12 months for the enlightened idea that football clubs should belong to their supporters” is, to me, a little misleading.

After all, it would be difficult to make the case that this has been the best twelve months for the unelightend view that clubs should belong to benefactors.  The clubs which have faced insolvency events in the last twelve months include Ringmer, Darlington, Stockport County, Gresley Rovers, Fisher Athletic, Darwen, Northwich Victoria, Chester City, AFC Hornchurch, Merthyr Tydfil, Farsley Celtic, Salisbury City and Halesowen Town.  These cases are populated much more by failed benefactors than they are populated by failed Supporters Trusts.  In the cases of Merthyr Tydfil and Halesowen Town, Supporters Trusts were not prepared to bolster failing benefactors even at the priceof the club entering Administration, sensible decisions in my view.

There are also the ‘nearly cases’.  At Accrington Stanley, a failing benefactor is trying to ‘save the club’ when actually this means ‘save the current board’.  He has rebuffed attempts by an alternative benefactor who has offered to back a supporters group to take over the club.  At Portsmouth we have seen in recent weeks the benefactor model at its worst, with a brief takeover by a wannabe benefactor who couldn’t actually produce the funds in time, a story which echoes through clubs all the way down the Pyramid.

As David points out, a major problem for a Supporters Trust is to compete financially, especially with clubs in the higher echelons.  I watch with interest nonetheless an ingenious scheme being proposed at Newcastle.  It involves unlocking a significant amount of your pension fund (2) – a high risk strategy for the fans who choose to do this – but then what are the bounds of committment?  News of developments will presumably appear on the Supporters Trust website.

The Supporters Trust model undoubtedly has a future, but I think we can expect to see more examples of a hybrid model – benefactor-backed Supporters Trusts.  Let’s hope they prove to be the best of both models rather than the worst of the two models.

Inherited debt and fit-and-proper persons

Bournemouth (see previous posting) is far from alone in suffering from debt inherited from previous owners/boards.  As Eddie Mitchell has just pointed out “The previous history is complicating the club going forward. If you do the crime, you’ve got to do the time and it’s no good whingeing about it” (1), the problem being that predecessors have ‘done the crime’ while it is the current board that has to ‘do the time’.

It strikes me that due diligence before buying the club should reveal the extent of the ‘crime’, and the new owner should vector in the requirement to ‘do the time’.  Sometimes, of course, it’s not quite as simple as that.

At Weymouth, for example, the club is in danger of implosion over inherited debt.  Barclays are looking for the immediate repayment of a reported £25,000 overdraft (2).  The overdraft is guaranteed by former Chairman and ex-majority shareholder Malcolm Curtis.  If the club does not clear the overdraft, there is talk of Curtis calling in a loan of £220,000 which he had made to the club.

Meanwhile, Chairman Ian Ridley has stood down because of serious health problems, and Acting Chairman Dave Higson has also stood down because of his other business commitments (3).  Remaining directors Shaun Hennessy and Paul Cocks, left with a can of worms, have announced that “the club has instructed lawyers to investigate the urgent commencement of legal proceedings against former chairman Malcolm Curtis on the grounds of gross negligence and misfeasance during his time at the Wessex Stadium“.

Only the lawyers will be rubbing their hands.

Over at Boston United, who famously entered a CVA during the final game of the 2006/07 season when relegation to the Conference was confirmed, only to be punished for this with a further demotion to the Conference North, the club, under new ownership, managed to exit the CVA, but were demoted to the Northern Premier league.  Chairman David Newton said yesterday that he almost quit the club when a loan of almost £200,000 (taken out by the previous owners) was called in.

Two lessons are clear from these examples (and there are many more).  New owners need to take on running a club with sufficient funding to withstand the servicing at least of inherited debt, and so-called ‘soft’ debt’ can rapidly become hard debt with a change of circumstances.

In overly simplistic terms, the ‘bad guys’ create the financial mayhem (and I emphasise that I’m referring to clubs in general rather than the clubs I’ve mentioned or indeed any specific clubs), and those trying to pick up the pieces (‘good’ or ‘bad’) are left on a hiding to nothing.

The only way these problems can be addressed is through an effective Fit and Proper Person test to ensure that ‘bad guys’ are not in a position to create financial time-bombs then cut and run.  The weakness of the present tests (the PL one, the FL one, and the FA one) is that they rely on a ‘tick box’ approach ensuring that directors have not been guilty of any of a long list of mainly UK offences.  They are the equivalent of the forms you have to fill in when taking out medical insurance, confirming that you haven’t suffered from a list of ailments.  The consequence of the ‘tick box’ approach is that it is very undiscriminatory and almost everybody passes – I would argue that there is a wealth of evidence is that this should not be the case.

Much more effective would be the equivalent of a medical.  In other sectors, Fit and Proper Person tests assess things like ability, honesty, integrity and appropriate knowledge of the particular sector.  Why not in football?  I accept that devising such a test would not be an easy task, but there are plenty of other such tests that could be drawn from – it’ s hardly a case of inventing the wheel.

Bournemouth’s predicament

Bournemouth is a club which is, in the words of Ron Pickering, ‘really quite remarkable’ (1).

Last season they manged a remarkable run, avoiding relegation in spite of starting with a 17 points penalty.  Without that penalty, they would have been nudging the play-off positions.  As I write, they are sitting at the top of the table, in spite of a transfer embargo and injury problems – a fortnight ago they were down to a 14 man squad, and given special dispensation for an emergency loan (2).  In short, players and manager are doing an amazing job.

Off the pitch, things are not so bright.  The club has had ongoing financial problems for over a decade.  In January 1997, following a period of rather too light a touch management, they went into Administration with debts of £4m, including a debt to Lloyds Bank of £2.3m.  They managed to repay these debts while in a CVA, but it can be argued that this financial burden is still being felt today.

By 2003 the club was having to borrow from the PFA in order to pay wages (3).  Serious attempts were made to sort out the club’s financial position (e.g. [4]), but in February 2008 the club was back in Administration, with debts of £5.8m, including £1m to HMRC.  It is worth recalling that a High Court judge at the time of the 1997 problems said, in adjourning a winding-up order brought by the Inland Revenue, “The Inland Revenue have waited long enough for their money,and this has to be the last chance” (The Guardian, 21 March 1997).  It had already been forced into a sell-and-lease-back deal on the stadium (5) in late 2005.

Ownership of the club has been a story in itself.  Jeff Mostyn and Steve Sly took over in March 2007 (6) from a supporters-based group, but by December that year were considering the need to put the club into Administration (7), and two months later they did (8).  One Eddie Mitchell lined up a bid for the club (9), but in April the Administrators accepted a bid from Marc Jackson over one from Jeff Mostyn (10).  The bid however collapsed (11).  Two new bids were announced, but by the end of April Mostyn was announced as the preferred bidder (12).  In July another bidder appeared – Alan Pither (13) – but the club was sold to Sport-6, a consortium involving Jeff Mostyn, Steve Sly, Paul Baker, and Alastair Saverimutto (14), who promised a seven-figue investment.  Baker provided the Bournemouth Echo with an interesting interview (15).

As the players began the battle to overcome the 17 points deduction, events off the pitch accelerated at an unnerving pace.  Mostyn resigned in October (16), Baker became Chairman and Adam Murry joined the board (17), and Saverimutto was interviewed by the Bournemouth Echo (18), asserting that Baker had put “billions” into the club, or at another point in the interview “not far off that seven figure sum“ [Well, which?  One million is a seven figure sum! JB], which was rather surprising as on the same day a notice that liquidators had been appointed appeared in the London Gazette (19)!

In November Pither re-emerged as a wannabe owner (20), then Saverimutto insisted the club was not for sale (21) and again tried, with perhaps a hint of desparation, to set the record straight in the Bournemouth Echo (22).

At the end of December, Baker announced that he had sold his shares (50%) to a Murry-led consortium (23 and 24), but at the beginning of February it emerged that the consortium had not materialised (25).  Meantime the creditors were circling (26) and the club had to defer rent payments on the stadium (27).

Later in the month Pither tabled a £1 bid for the club (28), shortly followed by Saverimutto announcing that a Middle East consortium was negotiating to buy the club (29) (could it have been Munto?), and then the sale would be to a Murry-led consortium which includes Mostyn and Sly(30).  Saverimutto then departs (31), stating “For the record, both the HMRC / VAT and the Football League both received direct contact from the Middle East consortium’s UK-authorised representative, detailing and confirming their principal intent to invest several million pounds of liquid cash into the club in April, and an immediate intent to re-purchase the stadium“.

By the end of March the creditors are again circling (32 and 33).  Bidders come and go, and only on 20 June is it finally announced that the Murry consortium has actually bought the club (34).  Now included in the consortium is Eddie Mitchell (see postings passim), who is appointed Chairman.  Almost four months on, the club is still under a transfer embargo and still fighting off an HMRC winding-up order.

As I said, really quite remarkable.  A microcosm of all that is good about players,and much of what is wrong with football management.  The big question is why is Bournemouth apparently so sought after by investors who turn out be unable and/or unwilling to invest significant levels of money in the club?

Particularly worrying to me is the possibility that the club does gain promotion at the end of the season.  The players and the fans would undoubtedly deserve it, but without a sustainable business model and appropriate investment the likelihood is that the club would simply yo-yo back, and enter another downward spiral into Administration.  Just how much can a club suffer?

Stephen Vaughan on Management

Last season Stephen Vaughan of Chester City won my Most Ludicrous Statement of the Year Award (1) and he is making the early running this season.  In an interview with the Chester Chronicle (2), in which the interviewer ‘put Vaughan on the spot‘, apparently over a pub lunch the accompanying photo would suggest, the ‘City supremo’ came up with a couple of gems:

“The club went into administration to safeguard its future and because the club could not pay its debts. The fact that the club has been accused of being mismanaged… you tell me a club in this country that isn’t managed in the same way. It’s speculating to accumulate.”

Ah, yes.  I had wondered what it was.  I’d always understood speculating to be taking a risk with your own money rather than putting creditors’ money at certain risk.  Vaughan proposed paying them off at a reported 15p in the pound (3) – in their case speculating clearly wasn’t going to lead to accumulation if Vaughan had his way.

And that’s every club in this country except Leeds United, isn’t it, that’s not managed by being put into Administration to be bought back again?

“We’ve got a ridiculous offer on the table from Mr Batchelor – £1.5m isn’t it? But where is it? Sky Sports told me about it but I’ve haven’t had a call. The minute you give these people the time of day they end up in your papers and then we’re getting accused of wanting to sell the club.”

£1.5m is certainly ridiculous, but perhaps not for the reasons you find it so, Stephen.  With projected ‘worst case’ losses of £660,000, buying the club for £1.5m would not really constitute speculating to accumulate either, would it?

Mind you, fortunately for the club’s fans, who are already suffering enough, Vaughan doesn’t appear to have John Batchelor’s phone number.  Which is odd, as Vaughan admitted speaking to Batchelor about the sale of the club only last November (4).

Pompey: out of Al Frying Pan and into Al Fire?

The collective sigh of relief from Portsmouth fans at last night’s announcement of the sale of the majority shareholding in the club to Ali Al Faraj was almost audible, even in Coventry.  It was only slightly tempered by the recollection that we had been through the same process just 41 days ago when Sulaiman Al Fahim had finally bought the club.

The remaining worry for me is that we know even less about Ali Al Faraj than the little we knew about Al Fahim – even Al Fahim admits to never having met Al Faraj (1).  Apparently Al Faraj has passed the Premier League’s fit and proper person’s test, but that has a pass rate similar to that of O Grade Breathing – not exactly a fine discriminator.

We are told that Al Faraj is a Saudi property developer (although the BBC’s Today Programme had elevated him from that status to Saudi property tycoon in the space of an hour this morning), and much has already been made, and doubtless will be made, of his nationality.  It’s the fact that he’s a property developer that intrigues me.

Let’s set aside any base thoughts that he might be after the club merely for the ground it stands on – Fratton, after all, is not the most ‘des res’ of places.  Let’s also make a massive assumption – that he successfully fights the more serious fires at the club – paying last month’s wages, paying bank loans which are about to be called in, settling HMRC’s bill, and drawing up plans for the January transfer window.  Facing him then will be a long smoldering ember – Fratton Park.

The stadium is a complete anachronism in the Premier League.  Frankly I’m surprised that no mischievous Southampton fan has tried to get English Heritage to list it.  Almost nothing has changed there since I stood on the terraces in the sixties.  The away fans section, the Milton End, has recently acquired a roof, but that is hardly state-of-the-art in stadium design.

For over forty years, at the hint of financial problems, the successive boards have trotted out plans for a new stadium to keep the fans happy.  Way back in the Deacon era, the plan was for the club to move to Farlington Marshes.  Next came a long-running saga of a move down the road to the disused BR depot, abandoned with the demise of steam.  More recently we have seen grandiose designs for an iconic stadium next to the Dockyard, and then at Horsea Island.  The latter 36,000-seater plan was being seriously peddled, replete with 1500 houses, less than two years ago (2).  More recently reality made a marginal appearance, and latest plans (last March) have been to resurrect yet another plan, and redevelop Fratton Park in stages, while rotating it through 90 degrees (3).

The urge to redevelop his property may not strike Al Faraj however.  Peter Storrie, the club’s Chief Executive, is already beginning to paint a picture of him as a reclusive and hands-off owner, mindful perhaps of Markus Liebherr just down the road at Southampton.

The stadium is not a problem that can be ignored.  Whether it’s the tattiest in the Premier League is open to debate (well, at least in theory).  It is certainly the smallest, and that seriously inhibits any strategy to turn the club into a success off the pitch.  Much turns on what Al Faraj’s motives are in buying the club.

Surely he can’t be naive enough to think that he has bought into a goldmine – it will be more like a moneypit.  How strong will his commitment to Portsmouth be when the profits fail to materialise.  In June I questioned whether Al Fahim had “fond memories of seaside holidays in Southsea, or good friends in Copnor, Paulsgrove or Leigh Park?” (4), and it would be safe to assume that Al Faraj’s answer would be the same.

It is of course early days yet, but the cloud of uncertainty hanging over Portsmouth may well have grown smaller, but how long for?  The club has won a battle for survival, but it is far from clear that it has won the war.

Progress at Crawley Town

In another unusual case of transparency, Crawley Town have released an insightful interview on the club website with Bruce Winfield, ‘major shareholder’ (1).  This comes in the context of the dropping of proceedings by HMRC to wind the club up, which prompted the Crawley Observer to announce a ‘Fresh Start for Crawley Town‘.

To understand this optimism needs an understanding of not just the recent history of the club, and its mismanagement by the Majeed brothers, but also a little further back.

Crawley certainly ‘has history’ with the tax authorities.  The Inland Revenue sought winding-up orders in July 1973, May 1974 and May 1977, when the club was in the Southern League Division 1, having turned professional in 1962.  By 1984 the club had not only achieved some form of financial stability, but had been promoted to the Southern league premier Division.  In 1997 they moved to the new 5,000-capacity Broadfield Stadium, built at a cost of £5m by Crawley Borough Council.

Off the pitch, matters were taking a different turn.  The Inland Revenue (one of HMRC’s two predecessors) sought another winding-up order in April 1998, and the club went into Administration with debts of £400k.  They were rescued by local businessman John Duly, who turned the club into a mini-family business.

Promotion to the Conference prompted a new strategy – going full-time.  In the summer of 2005 Duly sold the club to brothers Azwar and Shafqat ‘Chas’ Majeed, operating as the SA Group, and the club entered the worst period in its history.

By March 2006 the entire squad was up for sale, employees were told they would have to take a 50% pay cut, and it had emerged that Chas Majeed was an undischarged bankrupt, thus geing ineligible as a director under FA rules.

A period of mayhem followed.  Board members shuffled round, and Steve Evans was appointed manager.  Evans ‘had history’ with Boston United, and with the FA, who had previously banned him for paying a witness to mislead an FA enquiry.  Points deductions for financial irregularities, a transfer embargo, wages slashed, and the entire squad up for sale (2) were a prelude to the club entering Administration again in June 2006 (3), with debts of over £1m, a very high figure for clubs at this level in the pyramid.  This figure included a debt of £400k to HMRC.  The Majeed brothers were claiming over £750k owed to them by the club.  In August they tried, unsuccessfully, to buy the club back from the Administrators (4).

Somehow the club lurched on until August 2007, when a CVA was finally accepted (5).  All was far from well financially, and in March 2008 another winding-up order from HMRC, by now presumably tearing their hair out at the mere mention of Crawley or the Majeeds, was served (6).

This proved the lever that finally shifted the Majeeds. Within a week, Prospect Estate Holdings had bought the majority shareholding, and a consortium led by John Duly (with Phil Jarman) was in control (7) and the Majeeds had severed all links with the club (8).  To achieve this, Duly wrote off £200k still owed to him from when he had previously sold the club to the Majeeds (9).

Phil Jarman stepped down last November (10), and subsequently Bruce Winfield has become a major shar-holder.  Apart from the predictable wobble generated by the collapse of Setanta, the club’s affairs have taken a very significant turn for the better, and this last week has seen the announcement that the outstanding winding-up order has been formally dismissed (11) as noted above.

Bruce Winfield’s interview on the club website is at the same time upbeat and realistic, and hence a tad cautious.  Undoubtedly Crawley Town fans should be sleeping much sounder in their beds than they were under the Majeed era.  There is just one thing that would worry me slightly in their position.  Winfield talks, on the one hand, of the club being debt free “apart from the Directors loans [my emphasis]“, and, on the other hand, as part of the club’s core strategy, to “attract additional shareholders and investors“.  Put these two together and you get a picture of the current shareholders being perhaps reluctant to convert their loans into shares.  I am wondering then a) just how ‘soft’ these directors loans are as club debt and b) just how big they are.

Latest insolvency news

• Accrington Stanley
  The Supporters Fund is in a stand-off with the club (1).  It seems to have a position of strength and seems well placed to take over.

• Bromsgrove Rovers
  The club is planning to go into Administration (2 and 3).  It seems there is a hidden struggle over future ownership of the club.

• Hyde United
  The club hopes to hear this week if its appeal against the HMRC winding-up order will be successful (4).

• Portsmouth
  The continuing delay in getting new funding is creating major cashflow problems for the club (5), with the result that the players have not yet been paid this month.  And neither has the executive board either.

But some good news too:

• Crawley Town
  The club has settled with HMRC and the winding-up proceedings have been dropped (6).  [More on this soon]