Sunday, 12 July 2009

Charlton face Administration?

I don't get hangovers but I am sitting at my keyboard before 8am on a Sunday morning feeling very tired. Yesterday was a long day (more about that later) but I managed to come home and go to bed unware of the story circulating on the net about Charlton's worse-than-suspected financial position and it being an insurmountable barrier to the proposed takeover. The Mail on Sunday leads with the story today and tells us that Administration is the most likely outcome.

This sounds like very bad news and I suspect it may turn out to be true. The Mail has a good track record of breaking Charlton news e.g. the Zabeel non-deal and I believe is the Board's preferred route to the press. Bottom-line is that they are saying we have total debts of c £40m and that the takeover consortium don't have sufficient funds. This would explain the inordinate delay in completing the takeover and the twice postponed Q& A with Murray and Chapple.

The Board have previously confirmed debts of c £20m but have always been quick to point out that all bar£6m of that was friendly debt, i.e. Director loans which would never be enforced in terms of pushing the club into Administration. More recently, Murray has said he would be prepared to waive his loan to the club in order to sell it on. This was a significant step when less than a year ago he stood to recoup the millions he has "invested" in the club if the Zabeel deal had gone through. The alarm bells should have been ringing at this point, especially considering the length of time the takeover negotiations have taken.

If our true debt position is closer to £40m, then it looks like the club would cost in excess of £26m to acquire assuming the current Board waived all of their loans. That might simply be too much and there is the added suspicion that some of them might not be willing or able to forego their money. Derek Chappell is a relatively recent and heavy investor. You have to wonder how he feels about suddenly taking a hefty loss after such an short and dismal involvement. We have to question, too, whether a takeover now would simply install a new Board with no money to develop the club and effectively leave us no better off than we are today.

This news may put the current Board under more pressure to conclude a deal now or even alert some angel investor like Marcus Liebherr. In the meantime it looks like our preparations for League One will be seriously disrupted and we look likely to start the season still in turmoil. Morale amongst the playing staff and management team can't be anything other than bad and I really fear we could face another nightmarish season on the pitch, particularly if the club actually goes into Administration. What a fucking mess.


Anonymous said...

The £40m debt story doesn't really make sense based on the last set of accounts and a reasonable view of what might have happened since. I'm inclined to think (perhaps a better word is hope) that what is going on is a combination of confusion on the part of the Mail and tactical leakage of information by someone at Charlton, perhaps Richard Murray.

As I recall, Zabeel offered £20m for the club's equity and were going to write off the debt. Let's assume that the latter applied only to money lent by the directors (i.e. excluded the mortgage, but included the convertible bond) so that the total value of Zabeel's investment was circa £40m. The club today is worth nothing so that a buyer may, at best be able to take on the mortgage leaving the directors/investors down circa £40m. A big hit and hence the headline.

The problem then may be as follows. Richard Murray understands that investing in football clubs makes no sense from a financial perspective, especially for those outside of the elite, and has concluded that if Charlton are to move forwards from here (or to avoid moving backwards) the club needs a new benevolent investor who has to be able to start from scratch; its bad enough to be asked to spend money to take a club forward, but even worse to be expected to have to pay serious money upfront for the priviledge. No doubt with heavy heart, he has decided that he has no choice but to write off the money he has invested; i.e. equity and any monies lent, though he may have protected himself a little with the "clever" way he invested his last £1.5m (the purchase and leaseback of the training ground). The next piece of the "story" is pure speculation on my part, but it may be that Murray has become increasingly frustrated by (some of) his fellow directors who may be holding out for more money. Perhaps at his wits end, he has decided to leak so that the "Catch 22" is understood by all; if the club isn't "given away" it is going under because the existing owners have no more money to invest, but some of the existing owners won't agree to give it away because they don't want to lose money or because they just don't get it. Letting it be known in public that the prospective buyers have been "shocked" by the state of the club's finances (which is hard to believe really) may be designed to address one or both of those sticking points.

Let's hope that the entire story is bunkum or if not, and if there are directors "holding out", that they now back down. I don't lack sympathy for their plight (especially the more recent investors) but Murray is almost certainly right. We are going nowhere until this gets resolved. The good news, of course, is that if Murray's colleagues do follow his lead the future looks bright. The club secures the benefits of administration (i.e. a fresh start) without the constraints and an enthusiastic new owner with a willingness to take the cost/risks associated with new investment. If Murray is frustrated, it is understandable.

Dave said...

Anon - I suspect you may be on the money here. The size of the debt would appear to be speculative based on previous accounts and the known cost-base which has been falling as the big money earners have been weeded out. As you say, let's hope this is a worst case scenario, although we seem to have been going down the worst case route for three years.

Anon again said...

There is an important aspect of the Mail's story that completely lacks credibility. They say that "A group of local businessmen who had been in talks about a £30m buy-out....". Nobody in their right mind would spend such a sum to buy Charlton and certainly not if advised by Peter Varney who we have to assume understands football economics and Charlton's situation. Indeed, if someone spent this sum it would be a disaster because as and when they understood what a mistake they'd made they be angry and regretful. The last thing we want.