From The Ricoh Arena To Nene Park: When Blue Sky Thinking & Sky Blue Thinking Shouldn’t Mix

By on Dec 12, 2012 in Finance, Latest | 2 comments

The announcement from its owners that Coventry City Football Club may consider moving forty-five miles from its home city to play its home matches at the currently vacant Nene Park in Irthlingborough may be considered the world’s spectacularly unsubtle act of brinkmanship, but it should probably be added that such madness shouldn’t be considered unexpected at a club that has been demonstrating considerable signs of instability for several seasons, now. Regular readers will already be aware of the statutory demand that was issued against the club last week by ACL, the company that manages its Ricoh Arena, over unpaid rent. This gives the club twenty-one days from its date of service – the fifth of December – to either pay its debt in full, reach agreement to the satisfaction of the creditor or apply to set the demand aside through the courts. If none of these options are taken, ACL have the right to petition Coventry’s insolvency, providing the club doesn’t take evasive action and place itself into administration prior to any future court hearing.

The club’s owners, the venture capitalists of SISU, claim to be in dispute over the level of rent that the club is paying for use of The Ricoh Arena, but it is difficult to see how this could be used as a full defence of any imminent winding up proceedings which may be issued. The demand issued last week relates to rent arrears rather than any future payments to be made, so the questions facing any court should be fairly straightforward. Is there a contract in place between Coventry City and ACL for use of The Ricoh Arena? Is that contract legally enforceable? Have ACL exhausted all other avenues to get these arrears paid? Have they been paid? If the answer to those questions are yes, yes, yes and no respectively, then the only argument that would be legally tenable would relate to the specifics of that contract. It’s not a strong position for a debtor company to be in, going into a court hearing regarding its very ongoing existence, especially when we consider that the club was taken to the High Court in Birmingham after stopping payments of £100,000 a month in rent to ACL. The club was ordered by the court to top up a deposit fund to cover ACL’s unpaid invoices.

ACL had already offered to cut the rent by two-thirds to £400,000 from £1.28m, as well as giving the club ten years to pay off what the debts that it has already accumulated as well as an opportunity to take matchday revenue from refreshments, and that this had been rejected by SISU, who claim that comparative rents for other clubs playing at their level are considerably lower than even the reduced amount that is being offered by ACL. This argument may seem attractive on the surface, but it is not one that seems likely to carry much legal weight. After all, the average League One club may well only pay £100,000 per year in rent for its ground, but it seems unlikely that there are many clubs playing at a 32,000-seater stadium built just seven years ago and with regaining a place in the Premier League in mind. And regardless of this, the club has a contract in place to pay a set amount of money in rent to ACL. If they’re paying too much, then that, it could be argued, is the fault of those who agreed it in the first place and that SISU should, perhaps, have seen this as part of their due diligence when buying the club in the first place.

If there is anything more to the Irthlingborough story than brinkmanship, then we can only pause to consider whether those running SISU have gone mad. Nene Park has a capacity of 6,441 people and is comfortably up to standard to host League football. Coventry City, however, have around 6,000 season ticket holders. Unless we are to believe that every single Coventry City season ticket holder will renew, even if they have to make a ninety mile round journey for every single home match, then the club would face a drop in revenue from season tickets sales, and there is little indicate to the club could attract that many supporters to make this sort of journey. Average attendances have already fallen from an average of 15,118 last season to 10,569 so far this time around. If Coventry City can barely attract a five figure crowd to see them play at home in Coventry at the moment, how many people are going to regularly make that sort of journey every other week?

Then there is the small matter of rent. It was confirmed in a CVA document filed during the summer that Kettering Town were paying an annual rent of £150,000 for the use of Nene Park. The question of which division they are or were in is largely irrelevant. Without knowing the extent to which – if any – negotiations have taken place between the club and its owners, Keith Cousins and Colin Hill, it doesn’t seem unreasonable to speculate that an amount in this region would be something approaching what the owners would be expecting from SISU. The club might well consider this sort of money to be more reasonable in terms of rent, but any savings would likely be eaten into by reduced ticket and season ticket sales. In addition to this, the Football League’s rules on security of tenure for clubs leasing grounds requires a ten year lease as the minimum for a club applying for entry. If Coventry City was to move to Irthlingborough, it is likely that the club would have to sign a lease of this length and even then it would have to explain to the Football League and the FA why it couldn’t use a closer venue (there are many in the West Midlands, of course) whilst attracting considerable (justified) criticism for leaving their historical home for a town in Northamptonshire which has no prior association to the club.

The more that emerges about Coventry City’s current financial position, the more intractable that position starts to sound. It could avoid the legal action by going into administration, getting its debts wiped and starting afresh – perhaps, under a pre-pack administration – with SISU still running the show, but any new owners of the club would still have to negotiate with ACL and this is a creditor which has been antagonised to breaking point by the venture capitalists already. Any new owners of the club, meanwhile, would have to address the ultimate question at the heart of Coventry City’s financial dilemma. How do you get a club promoted on a sustainable financial basis when crowds are plummeting? Perhaps SISU still believes that it can see a return on the money that it has thrown onto this particular, but it seems that chances of this happening are next to zero barring a miracle of some sort and this likelihood would surely become quite precisely zero if the club were to move to a non-league football ground – albeit a well-appointed, if small, one – forty-five miles away from its home city.

Perhaps SISU have a grand master-plan which will extract as much money from ACL as is humanly possible, turn around the fortunes of the club, attract large crowds back to the Ricoh Arena and get it back into the Premier League, whereupon they could sell up for a profit or reap the rewards from the commercial possibilities and plump television contracts which come with such involvement. It has to be said, however, that if there is much cunning going on behind the scenes amongst those that are running the club at the moment, it is well disguised. In recent weeks, SISU have snapped the patience of their landlords of their home (to whom they are in arrears with the rent), suggested that they might yet move the club to a town forty-five miles from home in order to play at a ground that is wholly unsuitable for them, and seem to be infuriating their own supporters with every announcement that they are making. And all the while, that debt to ACL remains unpaid and the possibility of a winding up order remains, for all of SISUs bluster, very much on the horizon – and until these matters are taken care of, even the issue of Coventry City leaving the Ricoh Arena for another town seems like something that should be put on the back burner for now.

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    2 Comments

  1. Great, in-depth article. I fear that this will be a recurring theme over the next decade or so.

    The town of Hinckley is my old-hometown, around 20 minutes from the Ricoh, and I have read reports today that Hinckley United’s 4000 capacity stadium is a serious contender to host future Sky Blue games.

    Whilst my initial thoughts are that this option is being floated as leverage, as someone who has attended the stadium a number of times, I cannot believe that a potential move from such a well equipped arena to this kind of stadia is a good business decision, nor even a good publicity decision! The car park could barely fit 200 cars!

    As with the option your article has focused on, the unsuitability of moving and potentially alienating its already dwindling support would be suicide for a business clearly already on the brink.

    Really enjoying the articles on the business side of football – great work Ian!

    Mike

    December 14, 2012

  2. Football is dead.

    The likes of Murdoch and Winkelman killed it.

    Why rack over the ashes like this?

    Nathan

    December 14, 2012

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