Utter Confusion Reigns At Coventry City

By on Mar 23, 2013 in Finance, Latest | 4 comments

It has been a busy week for Coventry City Football Club. On the pitch the team itself remains just three points from the play-off places as the season ends its closing stages, but few eyes are concentrated on events on the pitch at present, as the breakdown in the relations between ACL, the company which manages The Ricoh Arena, and SISU, the hedge fund which owns the club, now threatens to spiral out of all control to the extent at which it ceases to become an overstatement to suggest that the very future of this football club is now at stake. The club moved into the Ricoh Arena in 2005 under a lease which had been agreed between ACL – a company which runs the stadium on behalf of its owners, Coventry City Council, and the Alan Higgs Trust – and the club’s then-owners, but since relegation to Football League One at the end of last season SISU have been arguing that their rent is too high for the division on which they play and, apparently, withholding it as some sort of “negotiating tactic” with ACL.

Relations between the two companies have deteriorated significantly over the last three months or so. It had been understood that a deal had been brokered between the two companies that would lead to the club paying a significantly lower rent – as with most other aspects of the management of this club over the last few months, exactly what this agreement now seems to be disputed – but this was, according to ACL, later reneged upon by SISU. With ACL’s future, which had been considered precarious due this non-payment of rent, secured through Coventry City Council agreeing to take on it’s mortgage two months ago, the stadium owners confirmed that negotiations were off, with the final offer that was put on the table being as follows:

  1. An annual rent reduction from £1.3m per year to £400,000 per year.
  2. Rent arrears to be reduced from £1.3m to £485,000.
  3. An Escrow account – which acts, effectively, as a rent deposit deed – to be reduced to £200,000, a write-off on ACL’s part of £313,000.
  4. Food and beverage turnover (which amounted to a turnover of just over £1m over the course of the season 2011/12 and returned a profit of £119,000), to be used by the club in future Financial Fair Play calculations.
  5. Lost income from its 900 parking spaces at the stadium, which resulted in the club having to buy a further 300 parking spaces elsewhere, being returned to the club.

Much of this, however, feels as though it has started become something of an irrelevance this week. Last week, ACL made an administration order last week against the club and a hearing at the High Court was due to take place in order to establish whether the club is insolvent and placed into administration yesterday. On Thursday night. however, SISU voluntarily put a non-operating subsidiary of the club, CCFC Ltd, into administration instead, which has led to an adjournment of the case until Tuesday. The difference appears to be that there is two companies with very similar names – Coventry City Football Club (Holdings) Ltd, which owns all the assets of the club, and a second company, Coventry City Football Club Ltd, which is claimed to be no more than a property subsidiary, with no assets of its own. The decision to put Coventry City Football Club Ltd into administration effectively ends the lease agreement with ACL, and the club has previously threatened to quit the stadium and play elsewhere, whilst it is also understood that the club has been involved in recent talks regarding a ground share with another Football League club.

The Football League stated last night that, “At its meeting this afternoon the board of the Football League received an update on the current situation at Coventry City. The Football League is now in the process of analysing information relating to the club’s corporate structure.” We have, in terms of the difference between holding companies and football clubs themselves, been here before. In 2009, Southampton FC’s parent company, Southampton Leisure Holdings, entered into administration and the club itself argued that it should not have been sanctioned over this matter. A subsequent Football League investigation by independent accountants, however, found that the football club and SLH were “inextricably linked as one economic entity,” and that, “The holding company has no income of its own; all revenue and expenditure is derived from the operation of Southampton Football Club and the associated stadium company,” before concluding that, “The holding company is solvent in its own right. It only becomes insolvent when account is taken of the position of Southampton football club and the other group companies.” The circumstances at Coventry City are the inverse to this in that it is the subsidiary company that has entered administration, so it is impossible to say whether the Football League ends up considering these two companies, one a subsidiary of the other, as being “inextricably linked as one economic entity.” What we know for certain, however, that is there is only one share in Coventry City FC Ltd, and that this is owned by Coventry City (Holdings) Ltd. We’ll return to the specific affairs of these two companies next week.

All of this ended in the somewhat distressing sight of removal vans turning up at The Ricoh Arena yesterday afternoon to remove stock from the club shop. In front of the statue of Jimmy Hill, the man who did so much to lift Coventry City Football Club and place it on the footings from which it enjoyed three and a half consecutive decades of top flight football in England, the impression being given was that Coventry City Football Club was leaving its home of seven and a half years for the last time. But had the club been evicted from The Ricoh Arena, was this a voluntary decision or was there something else at play? ACL told the club’s supporters trust, the Sky Blue Trust, that the club emphatically had not been evicted from the stadium and that, “ACL would welcome CCFC playing their remaining fixtures at the Ricoh Arena. Coventry is the home of CCFC and any move to play games in another city is purely a voluntary decision taken by CCFC,” whilst this morning ACL released a further statement regarding the administration of Coventry City Football Club Ltd which noted that:

While publically available sources of information including the Football League Handbook and the annual return made by the Football League to Companies House (dated 23 June 2012) state that CCFC’s Football League share rests with Coventry City Football Club Ltd; the statement issued by CCFC suggests that all assets and liabilities relevant to this application have been moved to CCFC (Holdings) Ltd.

The club, for its part, issued a statement of its own this morning, in which it stated that, “The Club is currently in talks with the Football League over a number of issues, one being a location where the Club can fulfill its three remaining home fixtures,” and that, “ACL told the appointed administrators they would require the full rent and licence fee on the stadium to be paid. To reach an agreement with ACL to allow the Club to move back and fulfil its fixtures at the Ricoh Arena, we would hope and expect ACL would extend the same terms to the Club.” The club’s next home match is due to be played against Crewe Alexandra on Good Friday, but at the moment no-one knows exactly where this match is going to be played. It is likely that the next seven days will be amongst the most important in the entire history of Coventry City Football Club. All that exists this afternoon is absolute, utter confusion about where the future of Coventry City Football Club lays.

The questions that need to be answered over the next few days are questions that will determine the very future of this club. What were the motives behind leaving The Ricoh Arena when its owners had specifically not evicted them? Where will future matches be played away from the city of Coventry itself? Who will go and watch them? And until we get to the bottom of what is actually going on at Coventry City Football Club… does this club actually have a future or not? At the moment, under SISU, it is very difficult to give an affirmative to that final question. We have long argued on this site that this hedge fund is giving every impression of playing a long game, and that they will ultimately be judged by the condition of the club when they shift their attention elsewhere. With no Coventry City supporters even knowing for certain where their team is to play its next home match, it’s becoming increasingly difficult to view the way in which they are running the club as anything other than ruinous.

The Coventry City situation seems to be developing on a minute-by-minute basis – we will update again next week.

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    4 Comments

  1. We are playing Doncaster Rovers on Good Friday, not Crewe Alexandra.

    Graham Paine

    March 23, 2013

  2. One of the most concerning things about Coventry’s financial affairs this season for other League One clubs is the suspicion that by withholding their rent they are artificially staying within the Financial Fair Play ceiling. This means they have an unfair advantage over those clubs who stay within the turnover/wages ratio. An extra £100,000 per month goes an awfully long way when you take it off your outgoings. If they were paying their rent it seems unlikely that they would have been able to afford Leon Clarke in January while staying within FFP, for instance.

    Tom

    March 24, 2013

  3. So the usual see-who-blinks-first crap.

    The speculators will win as usual as they couldn’t care less about Coventry or football.

    More public money down the drain of over-paid footballers and their agents.

    And still the ownership rules don’t change.

    Nathan

    March 24, 2013

  4. What did the owners say to Pressley when they hired him? Surely there must have been a discussion about future plans. Pressley has a reputation for being a bit thick, but he’s not that daft. He must have been given some kind of assurance.

    Sergeant Wilson

    March 25, 2013

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