Imminent Concerns For Coventry City

By on Feb 15, 2013 in Finance, Latest | 4 comments

Loyalty and football have seldom been happy bedfellows, but supporters of League One club Coventry City could well be wondering this morning who is fighting their corner after a week of extremely bad news, with the departure of Mark Robins, a manager who had transformed their season from what was starting to look like another dour fight against relegation into one which might yet end with a push for a promotion place, to join Championship club Huddersfield Town, and confirmation of another breakdown in talks regarding the club’s future at The Ricoh Arena between ACL, the company which operates the stadium, and the club’s owners, the increasingly unpopular hedge fund SISU.

The departure of the club’s previous manager, Andy Thorn, in September was no great surprise. Thorn had overseen the club’s relegation from the Football League Championship at the end of last season and it was somewhat surprising to see him last through the summer in the position. It seems likely, however, that there was a condition – whether unspoken or not – that if Thorn was to hold onto his job, Coventry would have to have a strong start to the season. A failure to win any of his first four league matches of the season, however, told its own story and in September he was replaced by the former Rotherham United and Barnsley manager Mark Robins. Robins got the team winning again, and Coventry City have, since his appointment, risen up the League One table, now sitting in eighth place, two places and seven points off a play-off place and ten points off one of the division’s automatic promotion places. In addition to this, Robins took the team to the Northern Area final of the Football League Trophy. Supporters’ hopes of a first trip to Wembley in a quarter of a century were punctured by a three-nil home defeat at the hands of Crewe Alexandra in the first leg of this tie but, if nothing else, there was at least a demonstration of the latent support of which the club may be capable in a crowd of over 31,000 people – the second highest ever to have turned out for a Coventry match there – which turned out for it.

The team’s rapid turnaround has, of course, meant that the sight of vultures circling around The Ricoh Arena has become a familiar one because, as we all know, there is nothing about a football club’s problems that can’t be solved by sacking the manager and poaching a new one from another club. This week’s vultures were Huddersfield Town, who dismissed the man who took the team back into the Championship, Simon Grayson, after a recent run of twelve matches without a win. Huddersfield Town currently sit in eighteenth place in the Championship table, four places above the relegation places, although a decent run in the FA Cup so far sees them still in that competition, with a home match against Wigan Athletic in the Fifth Round of that competition at the weekend. Coventry expressed their disappointment with the way in which Robins had been poached, but there was little that they could do to stop him leaving if he wished to.

We have written on these pages before about the pitfalls of valuing loyalty as a currency in modern football, and as such Huddersfield’s behaviour was utterly predictable. What, though, of Robins himself? His first press conference as the manager of Huddersfield Town found him with little to say about Coventry City, with the manager preferring to deal in the sort of platitudes towards supporters of his new club – “I want to give you a winning team you can be really proud of,” for example – that have become traditional on such occasions. It is difficult, however, not to wonder whether his decision to leave Coventry might have been partly motivated by the continuing off-pitch difficulties which continue to give his former club such an uncertain future despite its recent improvement on the pitch.

The extent of the problems concerning the club’s continuing stay at The Ricoh Arena were thrown into sharp focus in December, when ACL, the company equally owned by Coventry City Council and the Alan Edward Higgs Trust which runs the stadium on behalf of its owners, were forced to issue a Statutory Demand against the club over non-payment of rent for use of facility. SISU, the owners of the club, have refused to pay any rent at all for the use of the stadium over the last few months, a situation which forced the hand of ACL because this company itself was starting to run into financial difficulty because of this source of income being cut off. Negotiations had been taking place at which it was thought that agreement had been reached for the club’s rent to be reduced from £1.29million per year to £400,000 per year while it remained in League One, with more than £300,000 of the £1.347 million rent arrears owed by the club’s owners being waived at the same time, all of which was agreed after Coventry City Council agreed last month to take over ACL’s mortgage on more favourable terms with the lender, Yorkshire Bank. However, after having believed that terms had been agreed with the club, ACL were somewhat surprised to receive a revised proposal from the club:

Instead of confirming its written acceptance, CCFC then proposed an alternative Heads of Terms, which bore no relation to that agreed. It demanded the waiver by ACL of all rent arrears claims pre-dating 1 January 2013. It demanded also the withdrawal of the statutory demand for the payment of rent arrears issued by ACL against CCFC on 5 December 2012. It was accompanied by an emailed statement from Tim Fisher declaring that CCFC has `no option but to build a new venue’ and that CCFC’s proposals were predicated on playing at the Ricoh Arena for a ‘run-off period of three years.’

Now, we don’t know the specifics of what was said, implied or interpreted during this meeting, but we do know several things for certain. We know, for example, that new football grounds don’t just spring up overnight. If SISU were to head off to Ikea with the intention of buying a flat-pack one that they can assemble in a couple of hours, they’re likely to return disappointed and empty-handed. New stadia take months – often years – of planning, with the involvement of many different groups and bodies including, in this case, Coventry City Council, the very body that they have spent the last few months not paying and generally antagonising. How urgently, one can only wonder, might the council’s planning department take over any application that hits their desk with SISU’s name on it? And then there is the small matter of the Statutory Demand, the non-payment of rent and the rent arrears. Do SISU expect ACL to continue to allow the club to use this facility for an indefinite period of time given the ill will they’ve caused over the last few months? If the money owed isn’t paid, then ACL may yet have to act upon the demand issued, and even if they don’t eviction for non-payment of rent is surely an eventuality.

If the club was to find itself leaving The Ricoh Arena (either voluntarily or against its will), it would have to ground-share for some period of time, and the question marks over this are many and varied. Which clubs near Coventry with a facility that could accommodate their support would be prepared to allow them to lodge for a while? Might they end up miles from home, in, say, Birmingham or Milton Keynes? How much might their viability be affected by those who couldn’t or wouldn’t – for whatever reason – make that journey every couple of weeks? And what business would allow them to share their facilities without payment being made upfront if they leave their current home with enormous rent arrears still hanging over them? Considering the extent to which SISU seem to be burning their bridges with just about everybody at the moment, the likelihood of the club being allowed to continue to play at the Ricoh Arena while they get a new ground built seems slim, and it surely will not be long before the Football League and the Football Association start asking serious questions with regard to what on earth is going on at the club as well, especially when we consider the latest twist in this story, which became public knowledge earlier this afternoon.

Earlier today, the club’s position was weakened still further will the issuance of a third party debt order on the club for the unpaid rent, with ACL, now carrying a familiar tone of resignation, making a statement which advised that, “The Orders have been served in respect of the club’s bank account, its card payment acceptance service account, its Business Rates Account with Coventry City Council and Huddersfield Town Football Club.” A third party debt order is usually made to stop a defendant in legal proceedings taking money out of their bank or building society account, with the money owed then being paid to the creditor from the account. If the club cannot subsequently afford to meet its ongoing financial obligations as and when they fall due, the question has to be asked of whether it can actually be considered solvent or not. If it can’t, then administration starts to become the most likely outcome for the club. Trading whilst insolvent, of course, could have serious ramifications for the directors of the club personally. It has been subsequently been confirmed this afternoon that the club’s bank account has already been frozen.

This, it could be argued, was an inevitable end result of SISU’s attempts at brinkmanship over the unpaid rent for The Ricoh Arena. They may well regard the future of this football club as just another business deal from which they hoped to make a considerable amount of money and which has turned sour. The truth of the matter is, however, that Coventry City Football Club is much more than that. It means the world, as all clubs do, to thousands of people and as this dispute starts to turn into something which could threaten the very existence of the club itself, this attempt at harx-headed ‘negotiation’ could well become something that the owners come to repent over at leisure. It is starting to look as if the only solution for Coventry City Football Club is for SISU to make their excuses and leave. What sort of position the club finds itself in should this come to pass is, however, a question for another day and all we know with any certainty is that there is likely trouble ahead for club itself. We will see over the next few days and weeks whose loyalties lay where at the Ricoh Arena.

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    4 Comments

  1. Thanks Ian for a good article.

    I have to point out that Thorne was sacked after only four games (one win and three draws) begging the question why he wasn’t sacked at the end of last season and crucial games were wasted until a new manager was brought in.

    Secondly Robins did not receive the assurances (presumably financial) from Joy Seppala about the future that he would have liked so convincing him he should take the Huddersfield job.

    On the rent situation SISU have been hard headed and arrogant seemingly refusing to countenance any ideas of compromise despite ACL bending over backwards to accommodate SISU’s rather spurious claims of a fair rent. At last ACL seem to have had enough of SISU’s bullying and ineptitude with the final straw being the reneging on a verbal agreement with the Coventry board presumably after consultation with SISU. The board consists of people with good reputations in the world of football – so how do they feel about this humiliation. No doubt some weasel words and red herrings will be issued in due course.

    The sooner SISU leave CCFC and take their bullying and incompetence with them the better. They have no inherent feeling for the club and simply saw it as a quick opportunity to make money for their secret and no doubt chastened investors who must be getting very fidgety as SISU continue to pour their money down the drain.

    Let us hope we are in the end game now and ACL can run Joy Seppala, SISU and their cronies out of town never to darken the world of football with their money grabbing antics ever again.

    Anyway rant over – and by gum I feel better for it!

    Mike A

    February 15, 2013

  2. Cheers Mike, was a bit pushed for time on checking the Thorne timings and I’m not surprised I got the dates wrong. Will amend it presently.

    Will continue to monitor this closely, best of luck.

    Ian

    February 15, 2013

  3. Thanks Ian, a well written and structured piece that highlights the current plight we find ourselves in and also serves to remind me how much I utterly hate SISU at the moment – to be honest I knew that Robin’s leaving MUST have had something to do with the rent saga (which had gone quiet whilst we were doing well in the league and on a little cup run) and then, suddenly, BOOM it’s back on the front page. SISU want to get their hands on the Ricoh as a financial entity, as an entertainment venue – CCFC as a football club, the fans and the history etc, is a bridge, a stepping stone, for them to try and get what they want. But surely now, with the Council taking over ACL’s loan, and ACL/the council stating quite clearly they will never allow SISU to own the stadium / buy a stake in it etc, I just can’t see what options SISU have left now – what else is there left for them to do at CCFC? They are not going to get hold of the stadium so surely they’ll need to leave – they’ll spin a lovely yarn about how they’ve done all they can and they’ve been halted along the way at every opportunity etc and blame the Council and ACL and oooh boo hiss aren’t SISU the victim – but however the spin in, they need to leave. Please, SISU, leave/

    Simon

    February 16, 2013

  4. Excellent and informative, as always.

    Just a few brief questions on the bit towards the end, for Ian or anyone else who’s been following the story and has a better head for this advanced financial stuff than me.

    With the ‘Orders’ served against various Coventry accounts, as well as Huddersfield, am I right in reading that as an attempt to legally block the compensation for Robins from being transferred to Coventry, being sent to ACL as a part payment for
    money owed instead?
    If this is successful, could similar payments into the club – transfer fees, TV/advertising money – also be diverted in the same way?

    Sorry if I’m asking overly basic financial questions here, but this whole story really is hard to believe from an outsider’s perspective!

    David Stringer

    February 16, 2013

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