Money, it’s a gas, Grab that cash with both hands, And make a stash
New car, caviar, four star daydream, Think I’ll buy me a football team
Pink Floyd – Money.
There is a groundswell of opposition from sky blues fans towards the owners of Coventry City Football Club. Throughout message boards, forums and comments on press reports, the on-line voices regularly suggest ‘its time to go, SISU’; these far outweigh those that support the club and whoever owns them through thick and thin. The Protest songs that can be heard inside stadiums have volume, but it is always difficult to measure just how many are actually joining in, and the reasons behind those that choose not to. The dispute over the non-payment of rent to the stadiums owners has only increased ill-feeling. It is on the pitch where most frustration has been vented towards the owners, with SISU taking the brunt of criticism for allowing the club to fall into the third tier, rather then the playing or coaching staff. Communications by the club, on matters both on and off the field, have been repeatedly unclear. Claims that SISU have invested £60 million into the club are regularly reported, yet fans cannot see where this money has actually been spent. Exactly how much has been invested?
The size of SISU’s cash Investment.
The accounts appear to show that SISU and their associated companies have invested around £29.5 million in the form of loans via the parent company of Sky Blue Sports & Leisure Ltd (SBSL Ltd) up to the end of May 2011. This can be assessed by looking at both the cashflow statements for how the losses have been financed during the years of ownership and on the Balance Sheet for the liabilities at the end of that year. The figures are very similar and have accumulated since being rescued from administration in 2007.
When purchasing the club, SISU immediately reassigned debts from CCFC Holdings Ltd to SBSL Ltd, that were restructured from a liability of £43,530,668 to £8,600,589, immediately saving the investors £34,930,079. The shares in CCFC Holdings Ltd were purchased for eleven pounds. In the first three months, SBSL Ltd accrued losses of £3,949,389 and SISU injected a net cashflow before investments of £9,119,523. By the end of May 2008, the accounts show that SISU had invested £11 million pounds, listed under other liabilities totalling £11,039,686 that relate to amounts advanced ‘under a loan facility controlled by investment funds managed by SISU Capital Ltd’, with no interest accruing. These had increased to £23,399,055 by May 2009, by the end of May 2010 had only marginally increased to £24,099,055. The last submitted accounts show that the amount outstanding had increased to £29,679,942 and noted that £2 million was owed to ARVO Master Fund, the investment vehicle controlled by SISU.
The cashflow statements show that new loans introduced to SBSL Ltd up to end of May 2011 total around £38.5 million. Not all of that will have come from SISU and its subsidiaries. Shortly after the takeover in 2008, loans were injected of £11,039,686 which is exactly the figure mentioned above as owing to SISU. By May 2009, the accounts show that cashflow was assisted by a further injection of £12,862,269 and in the year to May 2010, an additional £3,526,120 was loaned. The following year to May 2011, the cash flowing into SBSL Ltd had risen again, this time totalling £11,080,888. These added together come to £38,508,963. During these periods, the cashflow statements also show loans repaid that total around £5 million. In 2009, £2,594,038 was repaid, the accounts to May 2010 show £864,641 and in the final year we have records for an additional £1,563,141. Reports in the press have suggested that future ticket sales have been subjected to financing deals over several seasons, where the club receive a cash advance on next season’s sales to assist with cashflow into the club prior to receiving the sales, so both these injections of cash and repayments are included in the figures flowing in and out. The difference between cash flowing in and out of SBSL Ltd is around £33 million, so this is relatively consistent with the amounts outstanding of £29.6 million, when factoring in the loans granted against ticket sales.
The focus on the value of the club has been taken from records submitted by SBSL Ltd, as they own CCFC Holdings Ltd who in turn own CCFC Ltd. SBSL Ltd publish consolidated accounts that include all of the transactions of the subsidiaries. CCFC Ltd, the company currently in administration owed £54,930,977 by the end of May 2011 and it is certainly conceivable that this has increased by around £5 million to £60 million in the subsequent two years, as stated in the High Court. CCFC Ltd is under no obligation under the Companies Act to publish cash flow statements as a subsidiary and choose not to, so cannot be analysed in any detail.
If we consider the accounts submitted by CCFC Ltd for the year to May 2008, the period in which investors in SISU’s funds acquired control of the club, the debts owed to former backers do not appear to have been reconfigured in the same way that debts were in SBSL Ltd. SBSL Ltd accounts show a saving of £35 million when liabilities were renegotiated from £43.5 million to just £8.6 million. However in records submitted for CCFC Ltd, the debts continue to increase, with no provision made for the deal struck at takeover. The accounts to May 2007 show liabilities to all parties totalling £32,945,074 whilst a year later, the liabilities at the end of May 2008 have increased to £41,803,666. These continue to grow and totaled £57,277,071 by May 2011. It does not appear from these figures that the restructuring has been applied evenly throughout the group of companies. Similarly, CCFC Holdings Ltd liabilities as a trading company are shown to have increased from £23 million to £33.4 between May 2007 and May 2008. Does this go some way to explaining why CCFC Ltd are in such a perilous financial situation in contrast to SBSL Ltd?
Adam Goodison, the lawyer representing the administrator at the High Court declared that the liabilities due for CCFC Ltd made it a case of ‘catastrophic insolvency’, by incurring debts of £60 million. This is for the subsidiary, not for the group as a whole. The club was purchased for £11 pounds on the understanding that new owners would take on current and future liabilities. If the discount had been applied to CCFC Ltd in the same manner as it appears to have been applied to SBSL Ltd, then this figure would be likely to be much lower. £34 Million lower, judging by the accounts. In any case, a purchase price of around £25 Million for a club that used to be in the Championship with high hopes of returning to the Premiership would be a bargain in my book. I may have had the £11 to buy the club back in 2008, shame I didn’t have the stash to back it up.