(Mostly) Good News For Dundee

By on Dec 22, 2010 in Finance, Latest, Scottish Football | 2 comments

Dundee’s administrator Bryan Jackson issued a statement last week, of which this was the most important bit:

With our original deadline of Christmas approaching I am pleased to announce that I have received a letter of intent from the Dundee FC Supporters Society Ltd (pending formal ratification at their AGM tomorrow) to fund a Creditors Voluntary Arrangement (CVA). I have not, to date, received any other formal notes of interest from anyone else and unless I hear to the contrary by 5pm on Thursday 23rd December then I will propose the offer from the Supporters Society to the creditors. The timescale for this would involve a creditors meeting on the 7th January and then a CVA creditors meeting on the 28th January at which point I would make an offer to the creditors based on the funds available.

This reflects a good deal of hard work that has been going on amongst Dundee supporters over the past couple of months. Exact details of the proposal remain to be seen but the fans alone have raised something approaching £200,000. This is expected to be combined with money raised from the local business community, whose efforts are being spearheaded by Peter Marr. This part of it got off to a later start and is not as far advanced, but they seem to be confident of a further six figure sum. Along with some cash they will receive from Sky for the televising of their cup game against Motherwell, and the expected sale of prize asset Leigh Griffiths in the transfer window, this should raise enough to fund a CVA – currently anticipated to be 6p in the pound – as well as funding the club through to the end of the season when they can review player contracts and start afresh.

We can’t be sure at this stage that creditors will vote to accept, but at this stage Jackson is optimistic – some loose ends still have to be tied up but it seems that the soft loans owed to Bob Brannan, Calum Melville and John Bennett amount to around 75% of the approx £2 million debt, which would thus be enough by itself to pass a CVA. All of these three are expected to be co-operative. The involvement of Marr is controversial – the Marr brothers were in charge when the club went into their first administration in 2003 (and lost a good deal of their own money in the process). However, that their affection for the club is genuine has never been in doubt, and Marr has stated that he is simply providing the focus for fundraising efforts and will not seek a place on the board.

It remains to be seen what the make-up of that board would be, and the split of shareholding. (An even split is the proposal I’ve heard mentioned.) But, such details pending, and notwithstanding of course the regrettability of needing a CVA in the first place, things are looking much brighter. I never really thought there would be a serious prospect of the club going under, but there wasn’t (and still isn’t) any room for complacency. Excellent effort from the fans so far then, and it’s to be hoped they will make a rather better effort of running the club from here. They were given one last reminder of the perils of relying on sugar daddies when the final sum of cash promised by Melville initially failed to appear. I understand it has now turned up, but long gone are the days of “What I say I’ll do, I do“; meanwhile investigations continue into business activities at Melville’s former company, Cosalt, who announced – shortly after suspending him and his brother – that £4 million worth of their stock had gone missing.

Back at Dundee, it hasn’t all been good news the last few days – at least, not as Dundee fans see it. The appeal against their 25 point deduction was heard on Friday and failed, as everyone knew it would – including them, or at least they’re saying so now and pinning their hopes on a subsequent appeal to the SFA, which will be lodged this week. With four abstentions, the EGM voted 22-3 that Dundee were in breach of the rules (I’m curious about the three here, since this seems pretty clear cut) and 21-4 to uphold the punishment, not just the 25 point deduction but also the transfer embargo. The second bit is effectively redundant though – with the punishment being held off while the appeal was pending, Dundee have signed two players on loan during that period, and may well be out of administration by the time the full appeal process is through. This is something that needs to be looked at – it has effectively allowed that part of the sanction to be removed even if the appeal ultimately fails. (Which it will, incidentally. The SFA are concerned only with whether or not the SFL have applied their rules correctly. There seems little doubt that they have, and having failed to intervene in Livingston’s much harsher sanction – double relegation – last year, it would be extraordinary were they to do so here.)

The points deduction doesn’t look as hefty as it seemed at the time either, and this is where I differ from Dundee fans. They believe it to be severe, while many others consider it, if anything, pretty lenient. As noted in previous articles, the team they have kept on the pitch is a pretty good one, and still among the best-paid in the division, and this has been borne out by recent form. They are unbeaten since administration, and currently on a run of five straight wins, putting them only eight points adrift at the bottom even after the deduction, and well on course to avoid relegation – probably at the expense of a Stirling Albion side who are still paying far less than them in wages, even after Dundee’s recent round of redundancies. If that is how it pans out, then by the start of next season they’ll have wiped the slate clean and will be seen to have got off pretty lightly in comparison to others. (The best point of comparison here, to my mind, is not so much Livingston, whose sanction was applied for different if related reasons, but against clubs who haven’t gone into administration but have instead taken drastic steps to avoid defaulting on debt – specifically I’m thinking of Clyde, whose plight I highlighted on this site the other week.)

For those reasons and others, and even if the form tails off and they are relegated to the Second, I don’t believe Dundee have anything to complain about here, and I don’t see any prospect of success should they challenge it through the courts as they have threatened to do. Their rationale is that the administration process is intended to help companies survive, while the 25 point penalty actively hindered their chances of doing so. If they were to get a court to accept this argument it would prevent any league from issuing any penalties for administration, but I don’t see there would be any trouble justifying such deductions in the context of a closed shop where this has to be balanced against the need to be fair to other clubs. In fact, I doubt Dundee see much value in this themselves and are simply hoping to strengthen their SFA appeal with a bit of legal bluff. That’s what law is for, after all.

Still, at the moment Dundee are crying foul and promising to pursue it as far as they can – we’ll just have to await developments. In the meantime, the sense of grievance it has fostered seems to have helped to galvanise the team, the club and the fans. Anger that was previously being directed at their own board is now mostly being turned on the SFL, and this may ultimately have helped them to get co-ordinate their efforts to save the club. (Perhaps the SFL even anticipated that effect, though I suspect that would be giving them rather too much credit.)

Most importantly, it’s now looking increasingly likely that these efforts will be successful. That’s good news that far outweighs Friday’s setback.

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    2 Comments

  1. It seem’s Calum Melville donated his cash to the club and it’s therefore not a loan (todays P&J). This makes it significantly more difficult for the club to get the the 75% creditors approval in order to secure a CVA. It’s ironic that CM ‘donated’ his cash… a gift no less, because had he simply provided a loan it would have worked in favour of the club getting the CVA. It strikes me that regardless of CM’s involvement, he gets bad press for what was previously believed to be loans that he made to the club… like, he should write it off… and now, I suspect, should the 75% creditor threshold not be acheived, he’ll get stick for that too. We’ll have to wait and see.

    I remember Alan Sugar, on a much larger scale of course, getting very similiar bad press for investing, and losing, millions into Spurs FC…

    Justin Newman

    December 23, 2010

  2. It does seem to be the case as mentioned above that Melville’s money was indeed ‘gifts’ and this could make any cva very difficult as the inland revenue will now be a major creditor. I imagine they will want all of the tax money back and not just some of it. With regard to the SFL sanctions, as I have said before the club should be punished but the danger is punishing so hard you drive a member club out of existance. The 25 points is harsh and while the appeal process goes on this has been lifted. However the transfer embargo actually remains and means the club cannot really sell any more than 1 player as they are unable to bring in cheaper replacements to an already thin squad since administration. This means a possible financial injection from this source may not happen or if they do then there is the possibility of being unable to field a team if there is an injury crisis(and a punishment for that!). The SFL really need to think seriously about what is suitable punishment and what would actually help any club in this situation in future. Perhaps having a set points penalty and allowing a club to directly replace players that are actually sold(not those made redundant/released) would be more positive in future. That way there is punishment but also the help needed to survive. Yes, the club/directors brought this all on themselves but does that mean we drive clubs out of business or do we punish sufficiently as a detterent to others but also try to help them survive?

    dan

    January 4, 2011

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