Coventry City: Questions & Deductive Reasoning

By on Jul 31, 2013 in Finance, Latest | 5 comments

There are now just three days left until the start of the new season, but still the future of Coventry City Football Club remains in the balance. After the end of talks yesterday which were aimed at getting Ricoh Arena owners ACL to agree to the CVA which will allow the club to exit from administration and secure the transfer of ownership of the club from, well, one part of the same body of companies to another, the standard response has been to suggest that this Friday is a deadline that absolutely, completely, utterly, must be met if the club is not leap headlong into the abyss. Quite why this should be is a little bit of a mystery when we consider that Football League rules seem to indicate that any further points deduction for remaining in administration would not be applied until the end of this season rather than as soon as a ball is kicked on Saturday afternoon.

More brinkmanship from SISU? Quite possibly. Such hard-ball tactics have long been a modus operandum for SISU, but a time has come when other interested parties are starting to push back against them, and chief amongst these of late has been the Member of Parliament for Coventry North East, Bob Ainsworth, who has been tabling Early Day Motions with regularity of late, presumably with the intention of seeking to bring the situation at the club to a wider audience. We’re not going to reproduce those EDMs in full here, but Ainsworth’s public pronouncements on the subject can broadly be boiled down to a handful of key questions which seek to shine a light upon the murky corporate waters in which SISU operate and how these square on what is supposed to be the governance of the professional game that the Football League is supposed to be responsible:

  • Just what is Joy Seppala’s role at Coventry City? She’s not on the list of directors, yet she appears to be taking the decisions. Is that compatible with her role as a member of the Takeover Panel (a body whose main functions are to issue and administer the City Code on Takeovers and Mergers and to supervise and regulate takeovers and other matters to which the Code applies in accordance with the rules)?
  • How does this apparent role as a “shadow director” square with the Football League’s Owners and Directors Test? Did she undergo one? If not, why not?
  • If she is not a director of the football club, why was she (as has been reported) at the meeting with ACL directors?
  • Is it true that the Football League were subjected to legal threats if they did not approve the ground-share? Have there been any other threats of legal action since then? And who were they made against?
  • We know that Sky Blue Sports and Leisure, (the company that not only owns Coventry City FC Limited, now in administration, but also Otium, the proposed owners of CCFC Limited) is so late in filing its accounts that Companies House is investigating whether they should be prosecuted. Why is that? What could be stopping Ms Seppala from insisting that the accounts are filed?

Ainsworth, however, is not the only person who is expressing an interest in these matters, and interest in them is starting to spread beyond merely Coventry City Football Club itself. We have had sight of a twelve page dossier which fleshes out Ainsworth’s questions regarding two matters: firstly, a set of representations, backed-up with documentary evidence, which the Football League is being urged to take into account when considering the outcome of the administration of Coventry City Football Club Limited and the Administrator’s proposal to sell the club to Otium Entertainments Limited, and secondly serious concerns which are shared widely amongst football supporters up and down the country, at the need for radical change in the way football is regulated in England which highlights in particular the viewpoint that the way in which the Football League has so far dealt with the issues facing Coventry City confirms an increasingly widely-held view that legislation is required with respect to the governance of the game in this country.

This dossier highlights the corporate structure of SISU, including the relationships between such companies as Sky Blue Sports & Leisure, ARVO Master Fund, CCFC Limited and CCFC (Holdings) Limited, examines in detail the nature of shadow directorship and why it is believed that Joy Seppala should be subject to Football League’s Owners and Directors Test, questions related to the club’s business plan and a failure on the part of Coventry City Football Club Limited, Coventry City Football Club (Holdings) Limited and Sky Blue Sports & Leisure Limited to file company accounts on time. It then goes on to question matters disclosed in the accounts of Sky Blue Sport & Leisure Limited going back to the 2008 take-over of the club, concluding that “these serious discrepancies cast doubt on the way in which the original purchase by SISU was accounted for”, before going on to look at the published accounts for Coventry City Football Club Limited for the year ending 31st May 2011.

There then follows a section about significant losses throughout the four years’ worth of accounts spanning SISU’s ownership of the club, a failure to deliver promises on the part of Joy Seppala, and the small matter that even after any proposed CVA, the club would not be debt-free. Another SISU-related company, ARVO Master Fund, continues to hold a £10.25 million claim against CCFC Limited which is based on a charge over assets. It is not a loan to CCFC Limited and it means that ARVO Master Fund still holds a charge over all assets of CCFC (Holdings) Limited. The dossier then finishes off by touching on broader issues of regulation within the game. It has been sent to Greg Clarke, the Chairman of the Football League, Greg Dyke, the Chairman of the Football Association, Hugh Robertson MP, the Minister for Sport, and Vince Cable MP, the Secretary of State for Business.

In other words, questions are starting be asked at a more fundamental level than even those relating to the club’s move to Northampton – although it should be pointed out that questions relating to this are still repeatedly and pointedly being asked as well – and the more that these questions are being asked, the more we might expect these questions to lead to further questions in turn. Here, for example, are a few that we may choose to posit to the Football League:

  • When did they first register players to CCFC Holdings Limited?
  • Has there been a break down in their verification procedures for registering players? Or are they complicit in splitting contracts from registrations?
  • Have all CCFC directors, including shadow directors taken and passed the Owners and Directors test?
  • How can they promote a bond as a safeguard to returning to Coventry when it is nothing more than a promise?
  • How can they accept plans to build a new ground when in reality none can be produced because no site has been secured? Is this just another promise?
  • Have they audited the budgets and forecasts for the next five years of CCFC operation and do they show viable trading? Have they matched that to fan responses to the planned move?
  • Do they feel that they have complied with their own regulations in this matter or is it all based on at the discretion of the Board?
  • Did they receive threats of legal action on the eve of deciding the ground share at Northampton?
  • Do they feel that they have served the fans of CCFC well in this matter or is the preservation of the competition more important?
  • What powers would they suggest they should have to prevent any similar situation arising again?

All of this comes against the background of yet another offer made to keep Coventry City at The Ricoh Arena. ACL have offered SISU a new rental agreement with terms which offer a further substantial reduction from previous terms. These terms would be structured so that the amount of rent paid is dependent upon which division the club is playing in, with the price set at £150,000 per year while the club is on League One, £100,000 in League Two and £400,000 in the Championship. When likely ticket sales are factored into the equation (and season ticket sales at Northampton seem unlikely to reach four figures, if current indications are to be believed), it is now clear that it no longer makes financial sense for the club to play in Northampton. If this offer is rejected, then any logical process of deductive reasoning can only lead us one conclusion as to the motives with regards to SISU and Coventry City Football Club. And conspiracy theories are only theories if there’s no truth in them.

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    5 Comments

  1. It seems pretty obvious that sisu have never been interedtedbin football. The Ricoh wss and remains their goal. Buy low sell high. Isnt that the philosophy of share portfolios? After all, sisu are part of a hedge fund, powered by INVESTORS money. To keep ivestors on board, and for fund managers to get rich, investments need to reap returns that offer a significant gain on original cash invested. So who with any sense would choose a football club with few tangible assets as a worthy investment vehicle? With the exception of a poorly run scottish bank perhaps? The writing was on the wall when sisu ignored the advice of ray ranson and turned down the chance to buy andy carrol for half a million. He was later sold for 35 million. Clueless

    steve allen

    August 1, 2013

  2. Ian, great summary of the key points hiding behind the smoke and mirrors of the move to Sixfields (Six referring to the number of season tickets sold). Sadly, the problem for us City fans is that our wants don’t line up with any of the interested parties (SISU, ACL/CCC, Football League, even Higgs).

    SISU – quick profit via return to premiership seems to have been replaced with dump debts into failing company to offset tax on other more profitable parts of their group and distress CCC (and the Higgs Charity) to get the stadium (with land) at a fire-sale price.
    CCC – support development of North Coventry and ensure value for money on funds already invested on behalf of the populace. Ideally the tenant is CCFC (as many involved are fans) but ultimately they are not in the stadium donation business so will have to consider alternative uses of the Ricoh.
    Higgs – to fund charity work in the Coventry area (can we have some cash flow so we can do charitable things).
    Football league – simply to have fixtures fulfilled (also to put fingers in ears and say lalalalalaI’mnotlisteninglalalalala repeatedly).
    City Fans – (currently but I might be overambitious here) to have some hope that a decent standard of football is played within the city and maybe have a modicum of success along the way (team sheets not balance sheets).

    MB

    August 1, 2013

  3. These are the same questions the Sky Blue Trust have published (on their website)! Who’s copying who?!

    Simon

    August 1, 2013

  4. It makes my blood boil reading this, I am livid!! I’m off to support Villa I reckon, least they are a good example to the youth of today!! Bye!!

    Tony Radford

    August 1, 2013

  5. I fully understand how the liquidators operate and how they should operate (miles apart). I reckon that if I was given two hours with all involved and a further four hours to unfold all the untruths that I would be given I could have the liquidators licence withdrawn and several court cases pending. They all claim to be operating within the law but they are not and this matter should be brought before the courts without delay.

    Steak

    August 6, 2013

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