oldskyblue58
CCFC Finance Director
Lot of differing information floating about but here are some of the nuts and bolts of it
1) Decide what it is that you are buying. This falls in to a couple of sections
- Do you buy the SBS&L Group by buying the ordinary shares of that company. It is not necessary to do so, surely a purchasers worst option but this would be SISU's best option. Buy those shares and you take on all the assets of the group together with all the liabilities. Because SBS&L owns otium then this option means you take on the SISU loans £28m, The ARVO loans 13m inc interest, the preference shares. It is SISU's best option because £28m of loans has become disassociated with the football club due to the restructuring over the years. The only thing it negates for the deal is the preference shares held by SBS&L in Otium (not the ARVO ones) are taken out of play. What it means is that the original SISU investor loans £28m remain payable by the new owners unless the deal discounts them. I doubt this is the option being considered, which immediately puts SISU on the defensive because of the £28m potential loss. Value of the Group is very little, the deal is in how the loans are settled
- Do you buy Otium by acquiring the ordinary shares of that company - ie removing that company alone from the SBS&L group? Well Otium is effectively CCFC, it holds the golden share and therefore the right to trade/play in the EFL. The only loans that Otium have are the ARVO ones £13m but there are £65m of preference shares (pseudo loans created from historic debt and how group accounts are put together). The preference shares are a barrier against new owners and were created from historical losses not money actually put in, it is also a way of trying to re-associate the £28m of debt sitting in SBS&L that became disconnected in the administration process. Sale of Otium alone would be SISU's second best option, but a purchaser would seek to negotiate down the loan settlement and to acquire the preference shares for nothing (remember these cover the SISU £28m so not so straight forward). In any case the value of acquiring Otium is very little, the deal is in the settlement of the ARVO loans primarily.
Acquiring SBS&L Group or simply Otium probably means acquiring debt that burdens the club going forward even before the payment of performance payments. Performance payments can create more debt if the club is not profitable with a cash flow surplus at least equivalent to the performance payment
Do you acquire the football assets. This would be a purchasers preferred option I would have thought, certainly the one I would advise. It is however SISU's least preferred option for the reasons above. You would do this by forming a new company say CCFC 2017 Ltd, the new proposed owners put their money in to it, no doubt as loans (really think the FA & FL should insist on it being ordinary share capital in these situations). The new company then purchases the football assets from Otium and takes on the golden share (likely to create a value to goodwill that will need to be paid for). In addition to taking on assets like Ryton, playing squad including past & present contract income rights, the trademark etc the purchaser takes on the football debts ie player contract rights, ground & academy contracts, monies due to HMRC etc. What they do not take on are the loans or shares that are outstanding in Otium. What you pay for is likely to be more than in the previous two options.
2) All this before deciding on what the value to bid is.
If the latest bid of £500k is for Otium then it could be seen as fair value depending on how much of the loans or preference shares are taken on. If they are bidding for Otium (let alone SBS&L Group) then to be honest I think that is repeating the mistakes of the past and burdening the future of the club. But that's just my opinion without having seen the details.
If they are bidding for the football assets less the football liabilities then I would think that £500k is 2m or 3m short of the value. Players are viewed as stock and a value placed on them. If club has turned down bids for certain players then that gives an indication of value, plus the FA rules provide a method to value younger player compensation. Against those values you would deduct the football liabilities.
Be it £500k or £3.5m then to be honest I think that is still below the SISU need or valuation. Could the sale of Ryton come in to play, only if it hasn't been sold, if disposed of funds probably already extracted by ARVO, or it has planning consent. Otherwise its value is at current use
In addition to the purchase the new owners are going to need to provide working capital. A key area and a dangerous one because it is creating more debt burden. The temptation is so often in football clubs to match it to fan expectation not sensible business practice
There is no quick or easy solution to this. Any bid must (a) tempt SISU, (b) not burden the club future (c) not be do a deal at any cost (d) not be a repeat of past mistakes (e) only be in the best interests of the club......... going to be very hard to balance all that, especially if SISU playing hard ball and doesn't need to sell
Anyway that's just my thoughts
1) Decide what it is that you are buying. This falls in to a couple of sections
- Do you buy the SBS&L Group by buying the ordinary shares of that company. It is not necessary to do so, surely a purchasers worst option but this would be SISU's best option. Buy those shares and you take on all the assets of the group together with all the liabilities. Because SBS&L owns otium then this option means you take on the SISU loans £28m, The ARVO loans 13m inc interest, the preference shares. It is SISU's best option because £28m of loans has become disassociated with the football club due to the restructuring over the years. The only thing it negates for the deal is the preference shares held by SBS&L in Otium (not the ARVO ones) are taken out of play. What it means is that the original SISU investor loans £28m remain payable by the new owners unless the deal discounts them. I doubt this is the option being considered, which immediately puts SISU on the defensive because of the £28m potential loss. Value of the Group is very little, the deal is in how the loans are settled
- Do you buy Otium by acquiring the ordinary shares of that company - ie removing that company alone from the SBS&L group? Well Otium is effectively CCFC, it holds the golden share and therefore the right to trade/play in the EFL. The only loans that Otium have are the ARVO ones £13m but there are £65m of preference shares (pseudo loans created from historic debt and how group accounts are put together). The preference shares are a barrier against new owners and were created from historical losses not money actually put in, it is also a way of trying to re-associate the £28m of debt sitting in SBS&L that became disconnected in the administration process. Sale of Otium alone would be SISU's second best option, but a purchaser would seek to negotiate down the loan settlement and to acquire the preference shares for nothing (remember these cover the SISU £28m so not so straight forward). In any case the value of acquiring Otium is very little, the deal is in the settlement of the ARVO loans primarily.
Acquiring SBS&L Group or simply Otium probably means acquiring debt that burdens the club going forward even before the payment of performance payments. Performance payments can create more debt if the club is not profitable with a cash flow surplus at least equivalent to the performance payment
Do you acquire the football assets. This would be a purchasers preferred option I would have thought, certainly the one I would advise. It is however SISU's least preferred option for the reasons above. You would do this by forming a new company say CCFC 2017 Ltd, the new proposed owners put their money in to it, no doubt as loans (really think the FA & FL should insist on it being ordinary share capital in these situations). The new company then purchases the football assets from Otium and takes on the golden share (likely to create a value to goodwill that will need to be paid for). In addition to taking on assets like Ryton, playing squad including past & present contract income rights, the trademark etc the purchaser takes on the football debts ie player contract rights, ground & academy contracts, monies due to HMRC etc. What they do not take on are the loans or shares that are outstanding in Otium. What you pay for is likely to be more than in the previous two options.
2) All this before deciding on what the value to bid is.
If the latest bid of £500k is for Otium then it could be seen as fair value depending on how much of the loans or preference shares are taken on. If they are bidding for Otium (let alone SBS&L Group) then to be honest I think that is repeating the mistakes of the past and burdening the future of the club. But that's just my opinion without having seen the details.
If they are bidding for the football assets less the football liabilities then I would think that £500k is 2m or 3m short of the value. Players are viewed as stock and a value placed on them. If club has turned down bids for certain players then that gives an indication of value, plus the FA rules provide a method to value younger player compensation. Against those values you would deduct the football liabilities.
Be it £500k or £3.5m then to be honest I think that is still below the SISU need or valuation. Could the sale of Ryton come in to play, only if it hasn't been sold, if disposed of funds probably already extracted by ARVO, or it has planning consent. Otherwise its value is at current use
In addition to the purchase the new owners are going to need to provide working capital. A key area and a dangerous one because it is creating more debt burden. The temptation is so often in football clubs to match it to fan expectation not sensible business practice
There is no quick or easy solution to this. Any bid must (a) tempt SISU, (b) not burden the club future (c) not be do a deal at any cost (d) not be a repeat of past mistakes (e) only be in the best interests of the club......... going to be very hard to balance all that, especially if SISU playing hard ball and doesn't need to sell
Anyway that's just my thoughts
Last edited:
