Derby County

[Lanterne Rouge]

Surely if DCC buy Pride Park at, say, £20m then there have to be further EFL consequences over the £80m `sale` in the past?

[downendcity]

Just now, Lanterne Rouge said:

Surely if DCC buy Pride Park at, say, £20m then there have to be further EFL consequences over the £80m `sale` in the past?

Doubt it, because DCFC/MM will argue that this is a fire sale and therefore not a normal market transaction and this explains the disparity between valuation and sale price ( however see my comment below marked #). 

The thing is that you are right to question the validity of the original ffp “sale” valuation. At the time I mentioned that as no open market existed for sale of football club stadia, there were no market comparable available, as there would be with residential property sales, and that this left the door wide open to the valuations being manipulated to be just the figure the owner needed to avoid ffp sanctions. We now have the closest we are likely to see to an open market for the sale of Pride Park, as the prospective owner of DCFC needs to buy the stadium and MM owns the only stadium that is realistically available and suitable.  

You would think that this makes it a sellers market ( # bear in mind that it is not the owner of Pride Park (MM) that is in administration and on the verge of liquidation, so he does not have to sell) Despite this, if the best price MM can achieve is the rumoured £20m then it certainly calls into question the original valuation - and the valuations of all the stadiums that were sold to related 3rd party companies ( including Villa Park!).

This all relates back to the EFL being caught with their pants down regarding the sale of stadia to related third parties. When they realised the loophole that they themselves had created  their embarrassment resulted in the clubs running rings around them - especially so as far as the valuations were concerned. 

 

 

 

 

[Derby_Ram]

1 hour ago, Lanterne Rouge said:

Surely if DCC buy Pride Park at, say, £20m then there have to be further EFL consequences over the £80m `sale` in the past?

Am sure the value of the stadium has been done to death on more than one occasion in here .

However as a summary Derby valued it at £81.1m using a DRC model - how much it'd cost to build a replacement for the stadium. When the charge about the stadium was reviewed there was agreement by both sides that DRC was the right approach to take. The commission then determined the valuation should fall between £77.4m - £89.5m with a midpoint of £83.5m. Forgetting the rights and wrongs of clubs being able to sell their own grounds for the purpose of FFP Derby did not overvalue Pride Park here. Conceivably they could have put a few extra £m on it and it would have passed the case brought about it.

Over the last few years one area the EFL did get it wrong re Derby was the appointment of their expert on stadium valuation. His evidence was heavily criticised - in particular using new stadium with a mix of terracing and seats, and with inferior facilities as his comparison to Pride Park to reach his valuation - and he was just not experienced enough to do this (guessing the amount of experience one can get on stadium valuations has massively increased the last few years!!).

As for what the stadium is worth now - should it be £81.1m? No. If you haven't got a football team to play in it what are you going use it for? In 2018 when the case was judged land value was put between £3.2m - £4.1m so a relatively small amount in the scheme of things. If MM (MSD) sell the ground now then the valuation switches to what a buyer would pay not a DRC method, and for a one club city and a stadium with limited demand for other events its a much lower value.

Besides everyone else's understandable scorn and anger there should be no consequences to the club of the stadium being sold for significantly less than the £81.1m it was put on the books at.

The loophole should never of existed in the first place.

[chinapig]

1 hour ago, Derby_Ram said:

Am sure the value of the stadium has been done to death on more than one occasion in here .

However as a summary Derby valued it at £81.1m using a DRC model - how much it'd cost to build a replacement for the stadium. When the charge about the stadium was reviewed there was agreement by both sides that DRC was the right approach to take. The commission then determined the valuation should fall between £77.4m - £89.5m with a midpoint of £83.5m. Forgetting the rights and wrongs of clubs being able to sell their own grounds for the purpose of FFP Derby did not overvalue Pride Park here. Conceivably they could have put a few extra £m on it and it would have passed the case brought about it.

Over the last few years one area the EFL did get it wrong re Derby was the appointment of their expert on stadium valuation. His evidence was heavily criticised - in particular using new stadium with a mix of terracing and seats, and with inferior facilities as his comparison to Pride Park to reach his valuation - and he was just not experienced enough to do this (guessing the amount of experience one can get on stadium valuations has massively increased the last few years!!).

As for what the stadium is worth now - should it be £81.1m? No. If you haven't got a football team to play in it what are you going use it for? In 2018 when the case was judged land value was put between £3.2m - £4.1m so a relatively small amount in the scheme of things. If MM (MSD) sell the ground now then the valuation switches to what a buyer would pay not a DRC method, and for a one club city and a stadium with limited demand for other events its a much lower value.

Besides everyone else's understandable scorn and anger there should be no consequences to the club of the stadium being sold for significantly less than the £81.1m it was put on the books at.

The loophole should never of existed in the first place.

I accept that is accurate but how much of the £81.1m did the football club receive for the "sale" of it's stadium?

Did Derby fans object at the time or did they think it a clever wheeze?

[PHILINFRANCE]

11 minutes ago, chinapig said:

I accept that is accurate but how much of the £81.1m did the football club receive for the "sale" of it's stadium?

Did Derby fans object at the time or did they think it a clever wheeze?

I have seen this question raised before, but can’t recall ever seeing a credible answer, save for the oft-mentioned suggestion it was simply a paper transaction for FFP purposes.

Which, of course, begs the question, if true, as to why MM is the owner.

[REDOXO]

2 minutes ago, PHILINFRANCE said:

I have seen this question raised before, but can’t recall ever seeing a credible answer, save for the oft-mentioned suggestion it was simply a paper transaction for FFP purposes.

Which, of course, begs the question, if true, as to why MM is the owner.

I guess at least part of the answer is money to Derby via Morris predicated on the collateral of the stadium, which if I am correct is 20-25 m worth of personal borrowing by Morris....which was flushed down the toilet by the FC. A long way from the stadium valuation of 81M isn't it!

I guess Morris is paying the interest to the finance company or is on the hook at some finite date for the borrowed money plus interest

[Hxj]

29 minutes ago, chinapig said:

I accept that is accurate but how much of the £81.1m did the football club receive for the "sale" of it's stadium?

Absolutely every penny.  It then of course paid the funds received up through the ownership chain to Morris repaying some of the money lent down through the ownership chain.

Edited April 13, 2022 by Hxj

[chinapig]

31 minutes ago, Hxj said:

Absolutely every penny.  It then of course paid the funds received up through the ownership chain to Morris repaying some of the money lent down through the ownership chain.

So not a penny then?

[chinapig]

37 minutes ago, REDOXO said:

I guess at least part of the answer is money to Derby via Morris predicated on the collateral of the stadium, which if I am correct is 20-25 m worth of personal borrowing by Morris....which was flushed down the toilet by the FC. A long way from the stadium valuation of 81M isn't it!

I guess Morris is paying the interest to the finance company or is on the hook at some finite date for the borrowed money plus interest

So we may find in due course that DCC pays off the loan straight to the lender. Let's face it if it was paid to Morris who knows what he would do with it?

[REDOXO]

1 hour ago, chinapig said:

So we may find in due course that DCC pays off the loan straight to the lender. Let's face it if it was paid to Morris who knows what he would do with it?

I guess in theory the club takes on the loan debt and pays it off and Morris hands the ground back. But we don’t know if Morris wants more than the loans secured on the stadium. 
 

However the new owner will be taking on a huge amount of debt that will take years to overcome. The idea of a cram down is out of the question as that will ensure Derby are playing non league next season is my understanding so I don’t see a way out unless the purchaser is super wealthy and doesn’t care about money

[Hxj]

2 hours ago, chinapig said:

So not a penny then?

From a legal standpoint - every penny.

From a reality standpoint it was wasted before it was received.

[Hxj]

3 hours ago, REDOXO said:

I guess Morris is paying the interest to the finance company or is on the hook at some finite date for the borrowed money plus interest

There is no real evidence that he actually is, no one has actually seen the full paperwork.

If there was any hint of a default by the stadium owning company or group company then I am sure that MSD would now put the company in Administration.

[REDOXO]

12 minutes ago, Hxj said:

There is no real evidence that he actually is, no one has actually seen the full paperwork.

If there was any hint of a default by the stadium owning company or group company then I am sure that MSD would now put the company in Administration.

All of this is utterly nuts. It’s at times/comments like this you do feel for Quantuma and particularly The EFL. 
 

I guess the Corporate Veil at Derby County was pierced the day they went into administration….But Mel Morris and his corporations not so much. One of the reasons he did what he did I suppose. But still, how on earth have no crimes been committed? (I guess we don’t know they haven’t yet)

[Mr Popodopolous]

12 hours ago, Hxj said:

From a legal standpoint - every penny.

From a reality standpoint it was wasted before it was received.

The accounts for Derby to June 2018 do show £81.1m in the cash flow but the accounts for Gellaw Newco 202 in 2019 and 2020 seem to show a lot of cash due.

Never could square that circle.

[Davefevs]

3 minutes ago, Mr Popodopolous said:

The accounts for Derby to June 2018 do show £81.1m in the cash flow but the accounts for Gellaw Newco 202 in 2019 and 2020 seem to show a lot of cash due.

Never could square that circle.

Makes you wonder doesn’t it?

[Mr Popodopolous]

17 hours ago, Derby_Ram said:

Am sure the value of the stadium has been done to death on more than one occasion in here .

However as a summary Derby valued it at £81.1m using a DRC model - how much it'd cost to build a replacement for the stadium. When the charge about the stadium was reviewed there was agreement by both sides that DRC was the right approach to take. The commission then determined the valuation should fall between £77.4m - £89.5m with a midpoint of £83.5m. Forgetting the rights and wrongs of clubs being able to sell their own grounds for the purpose of FFP Derby did not overvalue Pride Park here. Conceivably they could have put a few extra £m on it and it would have passed the case brought about it.

Over the last few years one area the EFL did get it wrong re Derby was the appointment of their expert on stadium valuation. His evidence was heavily criticised - in particular using new stadium with a mix of terracing and seats, and with inferior facilities as his comparison to Pride Park to reach his valuation - and he was just not experienced enough to do this (guessing the amount of experience one can get on stadium valuations has massively increased the last few years!!).

As for what the stadium is worth now - should it be £81.1m? No. If you haven't got a football team to play in it what are you going use it for? In 2018 when the case was judged land value was put between £3.2m - £4.1m so a relatively small amount in the scheme of things. If MM (MSD) sell the ground now then the valuation switches to what a buyer would pay not a DRC method, and for a one club city and a stadium with limited demand for other events its a much lower value.

Besides everyone else's understandable scorn and anger there should be no consequences to the club of the stadium being sold for significantly less than the £81.1m it was put on the books at.

The loophole should never of existed in the first place.

In which case, insist on a paper rent equal to the Fair Rent as per the valuer who did so well for Derby for FFP purposes. Plus the EFL insist that stadium stays out of the club FFP group ie reconsolidation any time soon is a no.

The bit of the Agreed Decision that would support this is the part pertaining to no change to Reporting Entity for P&S purposes without EFL consent in writing.

Was £4.16m per year. To be clear the club would pay say £1-1.6m per year to the Council in actual cash,but the EFL FFP numbers would reflect the 2018 consolidated Fair Rent in paper terms.

Edited April 14, 2022 by Mr Popodopolous

[Waconda]

 

Derby will start next season in League One with a new owner and no points deduction.

Let it go !!!

[Mr Popodopolous]

1 hour ago, Waconda said:

 

Derby will start next season in League One with a new owner and no points deduction.

Let it go !!!

If you think other clubs will let it go then you are mistaken especially if there is a major tax reduction- can see significant pressure by other clubs on the EFL to put them under a strict business plan and yes if one bit of the Insolvency is out of place then -15 is a must.

The Agreed Decision I would suggest the EFL can use to tighten those strings.

I'd sooner Derby went bust than the EFL's Insolvency and out of administration requirements were compromised in all honesty. If things get complex and Kirchner doesn't like the requirements, tough.

It's not a personal dig at Derby, more a longstanding view that the EFL's requirements are more important than any one club. No club has a right, or an automatic right to League membership.

There is reference to a cross-class cram down. That would 100% bring about a further deduction.

I'm being a bit deliberately inflammatory but the point is the EFL need to apply without fear or favour in full force. The EFL have a lot of leverage at their disposal, for the integrity of the game it is imperative that they don't waver.

Edited April 14, 2022 by Mr Popodopolous

[Davefevs]

Mr P, from Athletic. Reference to CCCD.

 

 

[Mr Popodopolous]

6 minutes ago, Davefevs said:

Mr P, from Athletic. Reference to CCCD.

 

 

Thanks Dave- will just read it now. Just saw headline snippets.

[Waconda]

27 minutes ago, Mr Popodopolous said:

If you think other clubs will let it go then you are mistaken especially if there is a major tax reduction- can see significant pressure by other clubs on the EFL to put them under a strict business plan and yes if one bit of the Insolvency is out of place then -15 is a must.

The Agreed Decision I would suggest the EFL can use to tighten those strings.

I'd sooner Derby went bust than the EFL's Insolvency and out of administration requirements were compromised in all honesty. If things get complex and Kirchner doesn't like the requirements, tough.

It's not a personal dig at Derby, more a longstanding view that the EFL's requirements are more important than any one club. No club has a right, or an automatic right to League membership.

There is reference to a cross-class cram down. That would 100% bring about a further deduction.

I'm being a bit deliberately inflammatory but the point is the EFL need to apply without fear or favour in full force. The EFL have a lot of leverage at their disposal, for the integrity of the game it is imperative that they don't waver.

Think you are going to be surprised and disappointed.

[Mr Popodopolous]

The rent bit is interesting because there is devil in the detail there.

1. The company who valued the ground initially said £4.16m per season/year. Presumably this is for the consolidator.
2. However the club got £1.1m per year owing to an arrangement to have it for 100 days use only.
3. The consolidated might/perhaps should show something different though. The 1st Independent Disciplinary Commission referenced rental payments from Club DCFC and Stadia DCFC. Of course none of the companies, holding companies or subsidaries have released accounts for 3 years now!
4. Usually with a company who purchases a stadium it will show rental paid- if you look at both Birmingham clubs stadium companies- that is the company who purchased the ground but is separately owned- and Sheffield 3 Limited ie the one who purchased Hillsborough- plus of course Reading in year 1 when they initially 'sold' to Renhe it will show the receivable but certainly the 1st 3. Gellaw Newco 202 shows nothing of the kind in either 2019 or 2020. Something for the EFL to continue to press on with.

5 minutes ago, Waconda said:

Think you are going to be surprised and disappointed.

Nixon has already said that there is a lot of anger among other EFL clubs about the tax thing.

The EFL is a members club- why would other clubs permit the EFL to give them some kind of sweetheart deal. I am sure Mr. Couhig is still willing and able to pursue his claim and should be encouraged to do so. He's on Twitter so it would be easy to encourage him to do so if one so desired.

Have you read the Agreed Decision? The EFL have judgements very much on their side.

Edited April 14, 2022 by Mr Popodopolous

[Mr Popodopolous]

Wondered when this would come up again.

Last time they wanted to impose a cross-class cramdown this was deemed unacceptable by the EFL. Has something changed? If not, the EFL should take the same stance as before...you can do it but you can't play in the EFL, if the circumstances are the same.

At the very least, this approach should significantly increase the chances of a -15 next season as it is not in keeping with CVAs although a CVA is no longer a must in terms of EFL Insolvency requirements.

Edited April 14, 2022 by Mr Popodopolous

[Davefevs]

25 minutes ago, Mr Popodopolous said:

Wondered when this would come up again.

Last time they wanted to impose a cross-class cramdown this was deemed unacceptable by the EFL. Has something changed? If not, the EFL should take the same stance as before...you can do it but you can't play in the EFL, if the circumstances are the same.

At the very least, this approach should significantly increase the chances of a -15 next season as it is not in keeping with CVAs although a CVA is no longer a must in terms of EFL Insolvency requirements.

I guess the EFL can say “fill your boots”….Derby County the business can continue….but not in the EFL.

[Mr Popodopolous]

10 minutes ago, billywedlock said:

All of which takes time . When May 8 th comes , who is going fund the club ( even with few players to pay ) ? Will Kirchener start paying out ? He has got some serious due diligence to cover yet . Plus it relies on the council buying the stadium . Have they agreed a price yet ?  How deep are those pockets too ?  Is this M Knighton mk 2 ? 
 

CCCD in court , that’s going to take time to resolve . Months , more so if it goes to appeal . HMRC will want to argue this one long and hard as it will create precedence . They will not be rolling over . 

Kirchener is not a multi billionaire , able to take some financial risks .  
 

There are  still no published accounts . EFL will need those before agreeing next steps if they are going to exit administration , as those numbers impact further breaches of conduct . The stadium sale and leaseback will need covering too . If council do not pay 80 m , and it would be strange if they did , many questions still open in the accounts EFL use to establish breach . 
 

Other EFL members agitated too and will be looking over the detail . 

This looks far from over or concluded , at least in the short term . 
 

 

Largely agree with your post. Yep a CCCD should take a very long time I'd have thought- there is also the small matter of the Wycombe claim, CCCD proved a stumbling block in January with Middlesbrough and Wycombe- the first of those two claims might have been resolved but no word on the 2nd.

Quote

There are  still no published accounts . EFL will need those before agreeing next steps if they are going to exit administration , as those numbers impact further breaches of conduct . The stadium sale and leaseback will need covering too . If council do not pay 80 m , and it would be strange if they did , many questions still open in the accounts EFL use to establish breach . 

Agreed most certainly, although the consensus from the Derby end is that they can't be affected by the stadium sale and leaseback- I think one scenario is that it'd be the case that the council pay the amount equal to MSD security and the stadium goes to them- that'd be in the £20-25m bracket.

[Mr Popodopolous]

Anyway I've said it since Day One, Derby going bust? Nah don't see it.

What is important for the integrity of the game though is that the EFL don't give them any shortcuts or special treatment- favours etc.

[Hxj]

How to make a burke of yourself in one easy step.  Write nonsense without doing your research.

The Derby County Football Club Limited do not owe Morris a single bean.  They do owe Sevco 5112 Ltd £8.2 million and they do owe Club DCFC Limited £4.1 million.  Those are all the connected party debts I can see.  By way of contrast HMRC are owed £26.6 million.

In a CVA 75% of creditors have to vote for it.  HMRC have more than 25% of the total debt of the company so can simply say no.

As I, and others, have already said, a Cross Class Cram Down is not simply a question of coming up with a plan.  It takes time and lots of cash, neither of which the company has.  Other cases have taken almost a year from starting the process to getting the court sanction.  As far as I am aware none of the cases so far sanctioned involve stripping a preferential creditor of their rights.

 

Edited April 14, 2022 by Hxj

[ExiledAjax]

1 minute ago, Hxj said:

How to make a burke of yourself in one easy step.  Write nonsense without doing your research.

The Derby County Football Club Limited do not owe Morris a single bean.  They do owe Sevco 5112 Ltd £8.2 million and they do owe Club DCFC Limited £4.1 million.  Those are all the connected party debts I can see.  By way of contrast HMRC are owed £26.6 million.

In a CVA 75% of creditors have to vote for it.  HMRC have more than 25% of the total debt of the company so can simply say no.

As I, and others, have already said, a Cross Class Cram Down is not simply a question of coming up with a plan.  It takes time and lots of cash, neither of which the company has.  Other cases have taken almost a year from starting the process to getting the court sanction.  As far as I am aware none of the cases so far sanctioned involve stripping a preferential creditor of their rights/

 

Which means that even if the admin/CK/some magic money fairy can fund a CCCD, and can fund the continued administration, the time it will take to process a CCCD (or any other court proceeding) would mean starting next season in admin, which IIRC brings a further points deduction (-12 by default I think). So off you pop to League 2 for 2023/24. Even Kirchner isn't going to spunk 30m on a League 2 club. Ultimately if they string this out long enough they may end up out of the EFL anyway.

I'd probably be counseling to swallow your medicine, cough up a little more cash now, pay off your creditors, and give the club a small hope of survival.

[Hxj]

41 minutes ago, billywedlock said:

Or who pays the running costs after the last game of this season ( although with vastly reduced player costs ) 

I'm still led to believe that there will be no money on Monday 9 May, that is 25 days away.  The clubs biggest problem is that from that date onwards no real cash is received until August.  Thye have to pay the wages until July from existing cash resources.  I also understand that any central funds will be witheld until all Football Creditors are paid in full.

[Mr Popodopolous]

2 minutes ago, Hxj said:

I'm still led to believe that there will be no money on Monday 9 May, that is 25 days away.  The clubs biggest problem is that from that date onwards no real cash is received until August.  Thye have to pay the wages until July from existing cash resources.  I also understand that any central funds will be witheld until all Football Creditors are paid in full.

There have been suggestions that season ticket revenue kicks in of course, and the central funds thing too absolutely- good point- although saw it suggested on their forum a few weeks back that these would be received at the end of the season.