Summer of Discontent, Part 4: Bury – Race To The Bottom
With a week and a half to go before the start of the new EFL season, things are looking pretty grim at the foot of League One. A division which starts a week on Saturday already has two teams twelve points adrift of the rest, with Bolton Wanderers and Bury paying the price for having surrendered to inevitable insolvency this summer. We covered Bolton Wanderers on here the night before last, but the position at Gigg Lane is just as severe. The circumstances are a little different to those at The University of Bolton Stadium, but there is a definite irony to the fact that this should be happening to these two old rivals at the same time, one a founder member of the Football League, the other which joined six years after its formation.
Barely had the bunting been taken down and the “We’re Going Up” flags been tucked into a cupboard in deepest, darkest Gigg Lane, though, that the players issued another stinging rebuke of the club’s owner, Steve Dale, over the non-payment of wages. The players at that time had not been paid for twelve weeks. Dale then won an adjournment against a winding up petition at the High Court by claiming that he had “expressions of interest” from third parties regarding buying the club. It was adjourned for six weeks on the 19th of June. At the end of last week, though, a CVA was agreed between all creditors. As the biggest holder of unsecured debt at a little short of 72% of the total amount of £6m, Dale only needed to get a couple of smaller creditors onboard to agree 25p in the pound, with football creditors getting paid in full. HMRC are owed £1m. Well, they were. From April next year, they will take regain their preferential creditor status in insolvency cases. In this respect at least Bury, it might be argued, have been lucky.
This has proved to be a gossamer-thin silver lining, though, as the club’s problems continued to mount and mount. The pressure has been growing over repayment of £4.2m in loans from their former owner Stewart Day’s property company Mederco, which collapsed into administration earlier this year owing a similar sum to creditors, for some time. And the trail gets murkier still. The Financial Times reported this morning that questions are now being asked about the links between Day and the P2P lending company Lendy, which itself collapsed into administration at the end of May after the Financial Conduct Authority blocked payments into and out of their accounts over serious concerns regarding their business model. Lendy is understood to have lent £27m to Day’s companies, a very large amount of money to lend, with investors complaining that they had little visibility of who was being lent money by the company. For a company the size of Lendy that was massive exposure to one person.
One of those companies had in turn lent £4.2m in to Bury, and it is likely that there be a number of people who invested in Lendy or who signed contracts with Mederco who will consider that money to be rightfully theirs. It is not, of course, included in the CVA that has been issued for the approval of the Football League. Bury have a series of loans from a company, Capital Bridging Finance Solutions, taken out during Day’s tenure at the club, which Dale says now total £3.7m and carry interest of almost £1,500 a day. They’re bad but they’re secured against Gigg Lane, hence their non-inclusion in the CVA. Football creditors are preferred creditors by the agreement of a majority rather than by insolvency law, of course.
Almost buried in this slew of bad news upon bad news, however, has been an astonishing oversight from the EFL with regard to the takeover of the club by Steve Dale in December of last year. A week ago on Thursday they admitted that the takeover of the club was completed without having been approved by the EFL under its own regulations, and that seven months on he has still not provided the League with information confirming that he satisfies their requirements with regard to funding the club. This is despite the fact that the former owner, Stewart Day, was already known to be in significant financial difficulty and was selling the club for £1. And it’s despite Bury’s existing financial issues, which were already well-known. Seven months. And the club is now entering a CVA with a ton of other debt also hanging over its head, a lot of it secured against the ground.
The EFL has placed Bury under a transfer embargo as they cannot guarantee that any signings will be paid, whilst players from last year’s promotion-winning team have, quite understandably, started to ebb away from the club. It’s not clear how many players manager Paul Wilkinson will have at his disposal in a week and half’s time for the start of the league season because the ban is on registering new players. Presumably, they’ll be able to cobble together some sort of team. Whilst understandable in its own way, though, there is an extent to which the EFL could be seen to be punishing the club for their own prevarication. How on earth has this been allowed to rumble on for seven months with no firm, decisive action having been taken? What, exactly, is the point of the Owners & Directors Test in its current form if this happens?
What this story has in common with the unravelling of Bolton Wanderers is that these are institutional failures. Where’s the oversight over a company exposing itself in the way that Lendy did against Stewart Day (it’s reasonable to say that the FCA has acted as quickly as it could), and where’s the oversight of a takeover at a club already known to have been in significant financial difficulty over a signficant period of time? Who’s overseeing loans worth millions of pounds being channeled into a lower division football club which cannot afford to take out this sort of loan and then having them secured against their home? There’s no question that Steve Dale was dealt a bad hand when he arrived at Gigg Lane, but there’s little doubt of his failure now. The CVA applies a sticking plaster to one problem and staves off the specific threat of liquidation that was in the club’s immediate line of fire, but Dale hasn’t proved that he can fund the club to the EFL in seven months, so when is that getting done? And how did the EFL allowed this to happen? Coming on top of the similar farce at Bolton Wanderers, it starts to feel as though the one thing that Bolton Wanderers and Bury have got it common is… the EFL.
All this and minus twelve points to start the season, should they get there.