When is insolvency not insolvency (1 Viewer)

mattylad · Mar 5, 2013

Apparently when the thought is to dissolve Coventry City Football Club ltd and trade under the next step up the ladder as Coventry City Football Club Holdings.

Now I only have a one liner in the CT to interpret but it would seem the thinking of TF and you would have to presume the experts we are talking to on the matter, seem to believe we can by doing so negate the contract we have in place with ACL, avoid the court action (and the debt we owe them) but continue to trade without the need for administration and a penalty from the league.

Seems very far fetched however it is a first for football in this country as far as I am aware and as such their may be no rules in football to stop us doing so bit like the Licester admin set a precedent.

Bad news for the anti SISU brigade is that by doing this the overall monies owed to SISU would remain and of course we would most likely be playing somewhere else very soon as you could only see the council kicking us out the Ricoh.

Now there would be questions about existing directors being able to be part of the new company so if they are serious expect some board room shuffles before hand..........oh

ajsccfc · Mar 5, 2013

When it's ajar!

skyblueman · Mar 5, 2013

mattylad said:
Apparently when the thought is to dissolve Coventry City Football Club ltd and trade under the next step up the ladder as Coventry City Football Club Holdings.

Now I only have a one liner in the CT to interpret but it would seem the thinking of TF and you would have to presume the experts we are talking to on the matter, seem to believe we can by doing so negate the contract we have in place with ACL, avoid the court action (and the debt we owe them) but continue to trade without the need for administration and a penalty from the league.

Seems very far fetched however it is a first for football in this country as far as I am aware and as such their may be no rules in football to stop us doing so bit like the Licester admin set a precedent.

Bad news for the anti SISU brigade is that by doing this the overall monies owed to SISU would remain and of course we would most likely be playing somewhere else very soon as you could only see the council kicking us out the Ricoh.

Now there would be questions about existing directors being able to be part of the new company so if they are serious expect some board room shuffles before hand..........oh

I think the FA license is with the club and that's not transferable so no it wouldn't be possible to carry on

Ashdown1 · Mar 5, 2013

So by doing this the club is still saddled with debt, still saddled with the hedge fund, has no ground to play at......................I'd rather it just close down and be done with, it achieves nothing !!

rupert_bear · Mar 5, 2013

This constant reference to playing somewhere else should be binned. Where ? where ? where ? .What community in South Warwickshire or anywhere locally are going to allow a football stadium to appear on their doorstep, FA rules prevent a Wimbledon/ MK Dons situation to happen again and the chances of getting planning permission locally to build a new stadium is less than nil. Believing Tim Fisher's reteric on this is taking the piss out of yourself.

oldskyblue58 · Mar 5, 2013

Got to assume the CT got it from somewhere .......... so say it is possible (there is nothing I know of that says it can be done, the League share is not transferrable to my knowledge for starters)

so CCFC close down trade transfers to CCFC H ....... it breaks the lease .......... so club homeless but saves the rent and the rental debt...... may well break the player contracts but not the football creditors. BUT it also loses any of the incomes it does have, has to pay rent to ground share and most probably will not get the matchday incomes at the ground share it is so desperate to get back off ACl..... also crowd income likely to be smaller too. Will get a 10 point minimum deduction I would guess (what is the cut off date for it to be this season btw ? ) plus potential for the embago to be transferred. Also potential legal cases for prejudicing the rights of creditors etc

Not really sure how transferring to CCFC H actually achieves much other than keeps the SISU debt live. Surely it would be a further down sizing to make it viable

May well be missing something ....... but i just dont see how or why it works

CCFCSteve · Mar 5, 2013

I'm pretty sure Leeds did something similar a while back. As above, struggle to see the benefit other than getting out of the arrears due to ACL (and if they have been incraesing other external creditors)

ashbyjan · Mar 5, 2013

I think when Southampton were going through there crisis they were playing fast and lose with companies and moving assets around. The FA or FL stamped down on it and basically said they didnt care as all the companies were associated and closing one and opening another was immaterial. Not sure if this was post or pre Dulieu at Soton.

SkyBlueWomble · Mar 5, 2013

ashbyjan said:
I think when Southampton were going through there crisis they were playing fast and lose with companies and moving assets around. The FA or FL stamped down on it and basically said they didnt care as all the companies were associated and closing one and opening another was immaterial. Not sure if this was post or pre Dulieu at Soton.

Are you saying that so long as the football creditors are met the football authorities will be ok with the a transfer of assets and liabilities to another company? If SISU transfer football assets and liabilities to Sky Blue Sports & Leisure Ltd (which won't be party to the lease agreement) and wind up the CCFC entities that are party to the lease, there is still a football club... albeit a homeless football club.

mattylad · Mar 5, 2013

SkyBlueWomble said:
Are you saying that so long as the football creditors are met the football authorities will be ok with the a transfer of assets and liabilities to another company? If SISU transfer football assets and liabilities to Sky Blue Sports & Leisure Ltd (which won't be party to the lease agreement) and wind up the CCFC entities that are party to the lease, there is still a football club... albeit a homeless football club.

That is how it reads to me but my guess is any amount of legal interpretation would be involved.

GaryJones · Mar 5, 2013

The thing is that the NEWCO company (Coventry Holdings) could be issued with a "right to occupy licence" to remain in the Stadium by the Insolvency Practioner (IP) whilst the IP negoitiates with any prospective buyers who might like to buy the old companies assets for a price "free of debt". In this instance it usually makes sense that Coventry Holdings would be the prefered buyer as they would normally be able to offer the best and more importantly the quickest take it or leave it offer to the creditors. This would need to be accepted by a % majority (cant remember the % at moment).
This also gives Coventry Holding the opputunity via the IP to renegoiate any new terms and conditions rents etc etc while being under the protection of the IP. This would then be offered as a Pre-Pack Administration deal to the creditors if succesful.
The IPs job is to secure the best price they can for the creditors. The only fly in the ointment for Coventry Holding would be if some new 3rd party was to appear and offer the IP a better deal for the creditors.
All of the above would result in a 10 point deduction this season if done now - this could be carried over to next season if its left to the point where no disadvantage would be gained by losing the points this season (ie with 2 games to go we are safe from relegation if we lost the points etc)

This is a very rough and simplistic idea of the possible outcome but is near enough what could and I think WILL happen.

oldskyblue58 · Mar 5, 2013

during the right to occupy what would be the rent liability ? ............. the existing rent or would it become part of a settlement ? ACL could still say thats the deal on offer take it or leave it

All of the assets are charged to ARVO so i assume they get first call on those ...... only things they do not have charge over are the players, the league share and the option to buy the Charity shares.

Effectively as SISU are by far the biggest creditor so control the process

ashbyjan · Mar 5, 2013

SkyBlueWomble said:
Are you saying that so long as the football creditors are met the football authorities will be ok with the a transfer of assets and liabilities to another company? If SISU transfer football assets and liabilities to Sky Blue Sports & Leisure Ltd (which won't be party to the lease agreement) and wind up the CCFC entities that are party to the lease, there is still a football club... albeit a homeless football club.

Sorry no my poor grammar - what I meant was that it didn't make a diffrence to the football league what the club tried, as far as they were concerned the entity was still Southampton Football Club, didn't matter what holding company they attempted to move the assets to and therefore whatever the company was called it still had all the responsibilities and liabilities of the original. In other words wriggling about changing corporate identities would not be tolerated by the FL. Hope that clears it up.

Diehard Si · Mar 5, 2013

I think if SISU tried this the legal ramifications would tear the club apart.

We'd never hear the end of the legal proceedings, a constant shadow of doubt hanging over the club. I've heard of legal actions such as 'lifting the veil ( of incorporation ) to take actions against directors hiding behindthe legal entity status. I can imagine a similar approach taken by any of the CCFC stakeholders, of which ACL would be at the front of the queue.

ashbyjan · Mar 5, 2013

Wonder if this is why the SISU debt has suddenly increased to £45million. ACL could argue that they are a creditor - 42 years signed agreement at £1,25m per year = £52.5m. Bow to others greater accounting knowledge on that one.

rupert_bear · Mar 5, 2013

I thought and i might be wrong that when sisu took over the football club the said football club joined the sisu empire and the Coventry City Holdings stayed as it was and debts stayed there. Thought the Holdings company was wound up but obviously not. Certain and concerned SISU have weighed their options up and will attempt to move as and when it suits, just hope others have done so too.

Diehard Si · Mar 5, 2013

ashbyjan said:
Wonder if this is why the SISU debt has suddenly increased to £45million. ACL could argue that they are a creditor - 42 years signed agreement at £1,25m per year = £52.5m. Bow to others greater accounting knowledge on that one.

That's classed as a commitment, not a creditor as such under normal accounting principles.

The creditor element is the unpaid amount of what has been incurred to date.

GaryJones · Mar 5, 2013

Usually the Licence to occupy is issued as a temporary measure to protect the company (ccfc) whilst the IP is trying to find the best deal for the creditors. I would imagine that the rent level would remain at the same level that is currently being PAID rather that what is being demanded by ACL.
ACL could say no but why would they? The deal would be put to every creditor not just ACL. One option of course is that ACL themselves bid for the assets available from CCFC and lose their debt in the mix.
You are quite right that secured creditors get first call on the money paid BUT only that money paid. If company A has a charge for £1 million pounds and Company B also has a charge againt CCFC for £2 million pounds and the IP recovers £1 million - the IP takes his charges first then HMRC 2nd then the bank 3rd then secured creditors 4th if any funds remain they then get disributed among non-secured creditors (who usually get nothing).

ashbyjan · Mar 5, 2013

Only caveat there Gary is Football Creditors take preference so if there are any outstanding payments to ex-managers or other clubs they would come into play before HMRC etc.

oldskyblue58 · Mar 5, 2013

I thought that HMRC were no longer classed as preferential creditors and were now classed as unsecured so will not come second?

fernandopartridge · Mar 5, 2013

oldskyblue58 said:
I thought that HMRC were no longer classed as preferential creditors and were now classed as unsecured so will not come second?

It's always been the way hasn't it? Didn't HMRC challenge that ruling in court and lose?

GaryJones · Mar 5, 2013

ashbyjan said:
Only caveat there Gary is Football Creditors take preference so if there are any outstanding payments to ex-managers or other clubs they would come into play before HMRC etc.

Thats very true BUT I think the important point is this - Getting the IP involved is not much different to appointing a mediator (which is what Sisu have been calling for all along) this gives the parties the chance to thrash out new deals going forward and giving the IP the power to say "well this is the best deal available and its my duty to recommend on behalf the creditors that you take it" with the ultimate threat that if no compromise can be reached other external bids are considered or the IP decides the company has no viable future and liquidates it completely.

oldskyblue58 · Mar 5, 2013

fernandopartridge said:
It's always been the way hasn't it? Didn't HMRC challenge that ruling in court and lose?

no HMRC used to have preferential status but I thought they had lost that some years ago

GaryJones · Mar 5, 2013

oldskyblue58 said:
I thought that HMRC were no longer classed as preferential creditors and were now classed as unsecured so will not come second?

Sorry yes you are right - however if the liquidated company goes down owing HMRC then the new (and connected) holding company starts to trade effectively as the old company did HMRC have the power to place restrictions on the new company ie payment of a deposit in advance against future taxes and VAT payments etc

oldskyblue58 · Mar 5, 2013

Not sure ACL are in a position to offer a better deal than they have. So what an IP could achieve would seem to be a break in the lease and a reduction in the rental arrears liability.

The directors of ACL have a duty to do what is best for their company (same for all directors). It could be now they have reduced the rent to £400k there is no more to give and that other options look more attractive, (we dont actually know there isnt) that on the balance of things ACL feel they are better going in a different direction.

If other parties interested then that could create problems in the process certainly.

Still looks like a risky strategy for CCFC. Time will tell I guess but I am pretty sure SISU will have something up their sleeve

GaryJones · Mar 5, 2013

My view is that ACL are playing a very dangerous game here and all parties should go to "relate" and try and sort themselves out. In my experience any top name IP will charge around £1 million in the end to sort this out - somebody remind me what the ACL debt is again? Oh somewhere close to £1million!

What happened to the football club being part of the community?

GaryJones · Mar 5, 2013

oldskyblue58 said:
Not sure ACL are in a position to offer a better deal than they have. So what an IP could achieve would seem to be a break in the lease and a reduction in the rental arrears liability.

The directors of ACL have a duty to do what is best for their company (same for all directors). It could be now they have reduced the rent to £400k there is no more to give and that other options look more attractive, (we dont actually know there isnt) that on the balance of things ACL feel they are better going in a different direction.

If other parties interested then that could create problems in the process certainly.

Still looks like a risky strategy for CCFC. Time will tell I guess but I am pretty sure SISU will have something up their sleeve

Maybe ACL could simply declare the catering figures to SISU as requested for starters!
Thing is that if the old company goes down the debt owed to ACL goes with it - they then have to find new tenants that will only start paying from that day (and not back-dated) - ACL could be backed into a corner in that they HAVE to deal with Sisu because Sisu are the ONLY other player left in the game!

oldskyblue58 · Mar 5, 2013

GaryJones said:
My view is that ACL are playing a very dangerous game here and all parties should go to "relate" and try and sort themselves out. In my experience any top name IP will charge around £1 million in the end to sort this out - somebody remind me what the ACL debt is again? Oh somewhere close to £1million!

What happened to the football club being part of the community?

but if they have already written that debt down, made plans to do business differently then they have in effect already taken the loss. Not to mention that the Escrow of £500k and match day expenses £300k already drawn. So the cash loss isnt over £1m

I agree both parties need to get this settled ....... but sometimes divorce is the only option left. Football should be part of the community but the driving force is money and how to get it.

Just thinking out loud in the above if you like, not taking a side .......... but just because this might suit CCFC or CCFC new co that doesnt mean it suits ACL. Both sides are gambling with their futures

oldskyblue58 · Mar 5, 2013

GaryJones said:
Maybe ACL could simply declare the catering figures to SISU as requested for starters!
Thing is that if the old company goes down the debt owed to ACL goes with it - they then have to find new tenants that will only start paying from that day (and not back-dated) - ACL could be backed into a corner in that they HAVE to deal with Sisu because Sisu are the ONLY other player left in the game!

on the declaring F&B details

SISU have already done some sort of due diligence when getting to heads of agreement on shares
the deal was not to give the turnover to CCFC but to give CCFC the right to include it in their accounts whatever the figure was ....... it would have been cross invoiced at 100% of the take by LEC ...... there was no right to profit offered
the only profit they were getting was the estimated £100K ACL profit share on the match day F&B's
All transactions were going to be on an open book basis going forward

opening the books as it has been put really isnt that much of a reason for saying a deal couldnt be done

We dont actually know SISU are the only game in town we just assume it and it gets stated as fact

CCFCSteve · Mar 5, 2013

oldskyblue58 said:
Not sure ACL are in a position to offer a better deal than they have. So what an IP could achieve would seem to be a break in the lease and a reduction in the rental arrears liability.

The directors of ACL have a duty to do what is best for their company (same for all directors). It could be now they have reduced the rent to £400k there is no more to give and that other options look more attractive, (we dont actually know there isnt) that on the balance of things ACL feel they are better going in a different direction.

If other parties interested then that could create problems in the process certainly.

Still looks like a risky strategy for CCFC. Time will tell I guess but I am pretty sure SISU will have something up their sleeve

Agreed, a very risky strategy and I'm still struggling to see what the benefit will be to the owners. I believe they will only do this if they have run out of cash, otherwise it doesnt make sense. They would have to potentially pay more to buy the club back than they owe to ACL...it just doesnt add up.

HMRC are just unsecured, lost pref status in 2003.

I would question how much of the £45m would be secured, only new monies can be secured against a debenture ie since it was registered. Im not sure how much has been "invested" since then.

I may have missed this on a previous thread but is the FFP just 65% of the turnover ? If so, why dont the club just offer ACL a bit more to get the beenfit of burger sales as turnover ?!

GaryJones · Mar 5, 2013

In the end ALL sides end up losing something - It has been recognised that the deal on rent etc that is in force now is a bad one (for Sisu and for the football Club) and thats why ACL have agreed to negoiate it down to a more sustainable level so we are half way to getting a settlement. If all the press is acurate the final problem was simply getting the revenue streams agreed around the match day catering etc so the club could "make a fist" of getting it right on the pitch in light of the financial fair play rules.
I cant for the life of me see why they dont give the financial information to Sisu thats been requested? They might feel they have gone far enough with the "deal" that hey have offered but they need to understand that if we cant get it right on the pitch financially we will be back in this very same spot again in 2 years time.

BTW My experience of the food at the Ricoh is that its not that great! You queue for 20 times longer than it takes you to eat what youve queued for and its normally "horse in a pie".
The drinks are in squashy glasses so you spill half of it before you get your lips to the glass!

The Directors box food is good but you normally dont pay for that!

I feel a seperate thread coming on about the food! In fact I might just start one now!

Sky Blues · Mar 5, 2013

GaryJones said:
The thing is that the NEWCO company (Coventry Holdings) could be issued with a "right to occupy licence" to remain in the Stadium by the Insolvency Practioner (IP) whilst the IP negoitiates with any prospective buyers who might like to buy the old companies assets for a price "free of debt". In this instance it usually makes sense that Coventry Holdings would be the prefered buyer as they would normally be able to offer the best and more importantly the quickest take it or leave it offer to the creditors. This would need to be accepted by a % majority (cant remember the % at moment).
This also gives Coventry Holding the opputunity via the IP to renegoiate any new terms and conditions rents etc etc while being under the protection of the IP. This would then be offered as a Pre-Pack Administration deal to the creditors if succesful.
The IPs job is to secure the best price they can for the creditors. The only fly in the ointment for Coventry Holding would be if some new 3rd party was to appear and offer the IP a better deal for the creditors.
All of the above would result in a 10 point deduction this season if done now - this could be carried over to next season if its left to the point where no disadvantage would be gained by losing the points this season (ie with 2 games to go we are safe from relegation if we lost the points etc)

This is a very rough and simplistic idea of the possible outcome but is near enough what could and I think WILL happen.

For the sake of argument, if a third party did appear, offered the IP a better deal and it is accepted, does that mean they buy CCFC? If so, which company is then the real CCFC? The now third-party owned CCFC or the Sisu owned CCFC Holdings?

mattylad · Mar 5, 2013

Sky Blues said:
For the sake of argument, if a third party did appear, offered the IP a better deal and it is accepted, does that mean they buy CCFC? If so, which company is then the real CCFC? The now third-party owned CCFC or the Sisu owned CCFC Holdings?

The third party would most likely have its own new company in place under this scenario....Coventry City Football Holdings encompassing Sky Blue entertainment venture ltd has a nice ring to it.

Sky Blues · Mar 5, 2013

mattylad said:
The third party would most likely have its own new company in place under this scenario....Coventry City Football Holdings encompassing Sky Blue entertainment venture ltd has a nice ring to it.

Gets confusing doesn't it? Would we support CCFC (part of New CCFC Company Ltd) or CCFC Holdings (part of Sky Blue Entertainment Ventures Ltd, which is part of Sky Blues Sports and Leisure etc)?

sky blue john · Mar 5, 2013

GaryJones said:
My view is that ACL are playing a very dangerous game here and all parties should go to "relate" and try and sort themselves out. In my experience any top name IP will charge around £1 million in the end to sort this out - somebody remind me what the ACL debt is again? Oh somewhere close to £1million!

What happened to the football club being part of the community?

Maybe get them all on jeremy kyle then we can all watch and have a laugh

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