September 26th, 2016

Coventry council Ricoh deal questioned after Wasps reveal £22m debt

Coventry council Ricoh deal questioned after Wasps reveal £22m debt Coventry council Ricoh deal questioned after Wasps reveal £22m debt
Updated: 4:31 pm, May 07, 2015

COVENTRY council faces more questions over its Ricoh Arena deal with Wasps after the rugby club’s accounts revealed debts of £22million and the Sky Blues’ latest accounts highlighted its perilous position without a stadium.

As we reported on our website last week, the newly published football club’s accounts for 2013/4 revealed £61million debts have now been converted into shares, leaving debt in the club’s trading company Otium of £9.6million.

London Wasps Holdings Limited’s £22million of reported outstanding loans include to a Maltese parent company and owner Derek Richardson.

The debt is on top of the £13.4million owed to the council by the now Wasps owned Arena Coventry Limited.

Further questions have now been raised about ACL’s ability to pay back the capital plus interest on the taxpayer loan over a reported 20 years at around a current £1.3million a year.

ACL recorded £400,000 losses last year, when Wasps were losing £4million.

The Wasps company has also borrowed against future income, while its Ricoh attendances are being bolstered by free ticket deals.

Football finance expert and accountant Kieran Maguire, of Liverpool University’s management school, said “everything depends on Derek Richardson”, including the council’s ability to recoup the ACL taxpayer loan.

He said: “Sports companies get money from three areas – TV, money from fans, and commercial income.

“Commercial income is being effectively taken over by Wasps.

“There’s an analogy with Stockport County Football Club which rented its stadium from Sale Sharks (rugby). Stockport County have dropped to one league below the conference. There is no way up for them.

“This is what I fear for Coventry City. Unless you have a benefactor or you get lucky with a squad of players which I don’t think Coventry currently has, there is no way up.”

“Wasps are dependent on Derek Richardson for their existence. The move to the Ricoh is a means for Mr Richardson to reduce his subsidy to Wasps.”

Mr Maguire and Alan Limb, insolvency expert from BRI and a Sky Blues fan, said the potential revenue from TV money was far less in rugby than in football.

Mr Limb said the council and Alan Edward Higgs Charity’s sale last October of ACL to Wasps for £5.5million, plus the taxpayer loan, only made more commercial sense in relation to the respective rugby and football teams’ current league positions.

He suggested the financial implications for the Sky Blues and the potential loss of the club to the city had not been fully considered.

He called into question whether the sale to Wasps was out of “bloody mindedness to prevent Sky Blues owners Sisu having control of the stadium, given it appears they were not given the chance to bid on the same basis as Wasps.”

Mr Limb added Wasps’ losses, debts and out-of-town and offshore business structures were similar to the council’s objections to Sisu. Council documents revealed a ‘hell freezes over’ mentality concerning any deal with the football club’s owners.

He added: “Both sets of accounts show how hard it is to make money out of sport without revenues from the ground you’re playing in. That’s why Wasps have come to Coventry, and Coventry City will not get all the seven days a week revenue while at the Ricoh, including from conferences and hotels.

“I don’t think trading performance by ACL has been significantly greater since May than these accounts show. I haven’t seen too much evidence of that.”

Mr Limb is among 25 professionals and prominent Sky Blues fans who signed an open letter to the council, Wasps and government calling for an independent inquiry into the private Wasps deal and use of taxpayers’ money, including misleading council public claims about it.

The Open Letter also calls for a fairer deal from the stadium for the football club whoever owns the club in future.

Coventry City’s latest accounts show operating losses of nearly £7million for the year they played ‘home’ matches in Northampton following a dispute with the council and charity over stadium rent, revenues and ownership.

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

But owners, the Sisu group of companies, have pledged to keep funding the club for the next 12 months.

The conversion of debt into shares has been welcomed by some observers. It means the Sisu companies can no longer call in 90 per cent of the debt, and would only see a return on the loans if and when the club becomes profitable.

Mr Maguire said it essentially converted worthless unrecoverable debt into worthless 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.

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