October 21st, 2016

Coventry City F.C accounts show £60m debts converted to shares

Coventry City F.C accounts show £60m debts converted to shares Coventry City F.C accounts show £60m debts converted to shares
Updated: 4:48 pm, May 07, 2015

COVENTRY City’s latest accounts show operating losses of nearly £7million for the year they played ‘home’ matches in Northampton – with the club saying £61million of debt has now converted into shares.

The accounts for the year ending in May last year for two Coventry City Football Club companies – Sky Blue Sports & Leisure Limited and Otium Entertainment Group Limited – have been filed with Companies House.

Auditors have expressed concerns about the companies’ ability to continue as a going concern.

But the companies’ owners, the Sisu group of companies, which includes lenders Arvo Master Fund, have pledged to keep funding the club.

A report by auditors BDO in the group accounts states: “The company are reliant on group shareholders for ongoing financial support.

“The company have received written confirmations from group shareholders of their intention to continue to provide support to the company by not demanding repayment of debt for the foreseeable future and of their intention to provide or source funding if required by the company to enable the company to continue as a going concern.

“Notwithstanding this intention, there is no contractual certainty that such funding will be made available nor that loans will not be called for immediate repayment.”

It concludes there is “material uncertainty which may cast significant doubt over the company’s ability to continue as a going concern.”

The same conclusion was reached by auditors in previous years’ accounts when the parent companies honoured their commitments to keep the club alive.

The accounts cover a year of turbulence after the club’s non-payment of high Ricoh Arena rent the previous year and Ricoh firm Arena Coventry Limited – then jointly owned by Coventry City Council and the Alan Edward Higgs Charity – filing to the High Court to place the club in administration amid interest in a club takeover.

The club responded by placing one of its companies – Coventry City Football Club Limited – in administration, occurring a 10 point League penalty, followed by another when ACL refused to signed a Company Voluntary Arrangement (CVA) to bring the club out of administration in August 2013.

Despite club takeover attempts and even one failed potential bid from ACL, the administration resulted in the Sisu group of companies remaining owners, with Otium awarded the Football League’s golden share – the right to play in the league.

Otium was established as the club’s primary operating company, CCFC Ltd entered liquidation, Coventry City Holdings Limited was wound up, while Sky Blue Sports and Leisure remained as a parent company.

The accounts record operating losses of £6.87million, slightly down on the previous year of just under £7million, as the relegated club had cut its costs in line with reduced income and Football League financial fair play rules which required clubs to restrict the players’ budget to 60 per cent of turnover.

Tim Fisher, Coventry City Football Club chairman, released a statement today on the club’s website ahead of Companies House publishing the accounts.

He states: “Almost £61 million of loans from the owner has been converted from debt to equity, while a further £3 million was provided as equity, demonstrating a clear commitment from the owner – as funds provided after July 2013 were in the form of equity rather than additional debt.

“From a stability point of view, this is good for the club because we are bringing down the extent of the liabilities.”

He said it represented “almost 90 per cent of the overall amount put in over the course of seven years that the club no longer owes to the owner.”

He added: It’s only right that we recognise the distress and anxiety caused to our supporters by the move to groundshare so we are, by no means, trying to deflect from that.

“Moving forward, we are back at the Ricoh Arena – as tenants. The tenancy agreement has seen a slight increase in the revenue we can generate on match day. But, long term, this is not enough.

“We still need to be able to access all match day and non-match day revenue and that is why stadium ownership is absolutely essential.

“It is critical under the Salary Cost Management Protocol (SCMP) in League One and Financial Fair Play in the Championship that we can increase the number of revenue generating opportunities at our disposal.

“From the point of view of the current year’s accounts, we do forecast a much healthier set of numbers. We have not drawn down any funding from the owner/creditor for this season and are shifting the club into a position where it can be self-sustaining.

“That, in turn, will lead to long term success on the pitch and that is what we are all striving to see.”

ACL was sold last October to loss-making and indebted rugby club firm, London Wasps Holdings Limited, by the council and charity.

The price was £.5.5million for the shares and a massive 250-year extension on the lease, which was not offered to CCFC. Wasps also took on the council’s outstanding taxpayer loan to ACL, now reduced to £13.4million.

We reported yesterday London Wasps Holdings Limited has total liabilities of £22million in its newly published accounts, and it made an annual operating loss in 2013/4 of £4million before its move to the Ricoh when Wasps stated on their website: “We are at high risk of going bust.”

Council documents record council leader Ann Lucas had stated during the dispute that ‘hell freezes over’ before the council should do a stadium deal with the owners of the football club, upon which the Ricoh Arena always depended financially under successive owners.

Mr Justice Leggatt ruled last year that talks over stadium ownership in 2012 had collapsed as ultimately no side had wanted a deal including the council, which had a right to veto any deal with the football club for the charity’s shares.

Coventry City’s owners insist they are still working on plans to identify a site for a new stadium close to Coventry, while further legal action over the council’s Ricoh dealings remains outstanding.