Date: 7th June 2008 at 9:24am
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Fact: The 24 Championship clubs had net debt at the end of the 2006/07 season of £289m, a figure one tenth the size of the 20 above them. Ten of them filed accounts showing net debt in excess of £10m. Realistically they can only hope to significantly reduce this via either promotion to the Premiership, or a cash injection from its owner. If the previous one hasn`t carpet bagged the ground you might of course be up for a new owner, or should we say Uncle the traditional term for the pawnbroker. lets be polite though and say ‘Cheers for the millions mate here`s your coat’.

The Problem’s not enticing the new one, for ‘Promotion to the Premiership’, will appeal to the greed and gullibility of plenty of Eastern European wannabees and super rich assylum seakers. ‘It’s a steel, it’s a deal, it’s the sale of the century guv’. A ready made super brand in the hand! Get on the gravy train and have consumers as far as the eye can see literally queuing to get in. Local friendly folk with a brand loyalty second to none. In fact it’s such a good deal we should really be keeping it to ourselves shouldn’t we?

Lincoln incidentally did and we are just about to reep the rewards.

Now herein lies the problem for a gambler. For every gambler who walks out of the front door smiling, a lot more are thrown out of the back, the worst for drink. He goes from hero to villain, angel to asset stripper. The club meanwhile is to an extent let off by footballs curious ‘administration` circus.

Over the past decade nearly 40 professional football clubs have entered administration. It is rarer than a working chocolate teapot or a Mazza clean sheet, for there not be to at least a couple of clubs each year opting for ‘Admin (currently Bournemouth, Gretna, Luton and Rotherham). The special nature of football as a business means that club administration is far from routine for insolvency practitioners. For a start you cant just put a sign up telling creditors to come back on a certain date. The Local media after all have a right to know on the fans behalf. Perhaps this is why their fees are so obscene, and though many moan, few administrators go bust or lose on the deal.

Nevertheless some fees are well earned due to the particular challenges that football clubs present. Anyone remember Union`s? Well in football the PFA is both strong and thriving, and has to be dealt with for starters. The Football League’s insistence that football-related debts such as outstanding player transfer fees and wage arrears are paid in full, meaning that so-called ‘football creditors’ invariably get the best deal going, especially if the club is sold as a going concern. The league will decide whether the club can carry on in the competition it was in, or be kicked down a league or two. Player redundancies are also surprisingly rare. Pruning the workforce normally means having the assets cherry picked. A final constraint is that because of the ‘transfer windows’ it is difficult to realise the full value of players. Realising that a ‘fire sale’ is on, purchasers will ask for a bargain price.

Footballers are not the only creditors with bargaining power. Service providers such as the police and the long-suffering St John Ambulance (who are generally owed quite large outstanding bills by clubs in trouble) also have influence since most clubs could not operate without them. There is generally little interchangeability in a football club’s main suppliers, and so have to be given a fair meal deal.

Football clubs are also unlike other businesses in that they cannot be sold to a direct competitor. They are in effect Franchises. Fortunately there will always be another bus along in a minute, though and piled full of cash. The administrator will of course have negotiated with the poor unprotected sods outside of the circle of trust, and made the deal all the easier, including their wedge on one simple invoice. White Knights, who hale from the area, migrants in need of friends, some good PR and a tax haven; have less debt to deal with and more cash to create the dream. Turning a large fortune into a small one is not a bad exchange for many of the dubious suspectsI guess?

Finding a buyer is not the end of the story for the administrator of course. It can take a long time to secure regulatory approval for the change of ownership in terms of the ‘fit and proper person test’. Now that sounds an opportunity for some extra fees if you ask me given some recent characters up and down the league ladder. Some clubs of course use the trust model. The first was Lincoln. We had no huge benefactor (though a big cheers to the Council) we had to pay our way out and work within budgets. Whilst others around us overspent we stuck in there. Our finances are sound, we are community owned. We are a shining light in so many ways; even if the success off the field has not matched the efforts off it. Rob Bradley, the commercial deals struck by Keith Roe and others, not to mention the clever stewardship of Steff Wright; all now see the Imp ready to pounce. We can honestltly say we played life with a straight bat, through our own devices. Perhaps that is why we own our stadium.

Perhaps this is why in our 125th year it is The Mighty Imps deserve the success that is coming. The swank of the Championship that we hope to join and its debt of £289 million is a lesson we have already learned the hard way. How many of them can say they own a stadium worth almost 10 percent of their entire divisions debt?