Derby County

[chinapig]

9 minutes ago, Davefevs said:

Seen some stuff on twitter today that Wycombe’s claim is being settled and it’s less than 6 figures.  Surely that can’t be right?

Well, the BBC reported last week that the total cost of meeting the claims from Boro and Wycombe was thought to be £7m so that may be right.

Which suggests that the two clubs had decided to compromise their claims, possibly based on legal advice.

[Davefevs]

15 minutes ago, chinapig said:

Well, the BBC reported last week that the total cost of meeting the claims from Boro and Wycombe was thought to be £7m so that may be right.

Which suggests that the two clubs had decided to compromise their claims, possibly based on legal advice.

But less than 6 figure, means less than £100k???

[BTRFTG]

3 hours ago, Hxj said:

However legally MSD have claimed in the Administration as they are entitled to do as their debt is secured by the charge on the lease between the football club and the stadium club.

From memory the initial MSD loan yet to be satisfied is against the freehold title of a number of properties, Pride Park included. I don't believe it's against a lease. I think there were 5 or 6 titles listed in the schedule.

There is a secondary and more recent charge MSD hold against the lease held by the football club buts that's for use of the training ground, not stadium. One assumes this was for further monies loaned to keep the club afloat which, of course, couldn't involve the stadium as that had already been 'sold' (sic).

[BTRFTG]

In respect of P/S & FFP perhaps somebody might explain the following:

Derby went to very great pains to argue the valuation of Pride Park for purposes of disposal as included within their accounts was £81m (though as I wrote elsewhere this might only ever be an insurance value, not market value.) Derby successfully argued that it was market value and one presumes that sum appears within their accounts now submitted (though presumably unseen by any save the EFL.)

Now if a new buyer of the club acquires (or is given) the stadium as part of the deal it won't transfer at £81m, yet nothing significant has moved in the property market.

In which case might the EFL revisit their initial argument that the stadium value appearing in the accounts was over-inflated, else if Derby maintain the stadium was worth that yet it now transfers at a significant discount, is that counted as a gift to the club?

[Davefevs]

7 minutes ago, BTRFTG said:

In respect of P/S & FFP perhaps somebody might explain the following:

Derby went to very great pains to argue the valuation of Pride Park for purposes of disposal as included within their accounts was £81m (though as I wrote elsewhere this might only ever be an insurance value, not market value.) Derby successfully argued that it was market value and one presumes that sum appears within their accounts now submitted (though presumably unseen by any save the EFL.)

Now if a new buyer of the club acquires (or is given) the stadium as part of the deal it won't transfer at £81m, yet nothing significant has moved in the property market.

In which case might the EFL revisit their initial argument that the stadium value appearing in the accounts was over-inflated, else if Derby maintain the stadium was worth that yet it now transfers at a significant discount, is that counted as a gift to the club?

Isn’t one of the fundamentals of accounting that you should keep your policies the sane, so year on year evaluation can be done in a consistent manner?  Only changing them for very good reasons.

I’ve wondered about exactly the same point as you.

[chinapig]

40 minutes ago, Davefevs said:

But less than 6 figure, means less than £100k???

Ah, yes. I suspect the lion's share of the alleged £7m would go to Boro but less than 6 figures to Wycombe does look odd. Perhaps they meant less than £1m so 6 zeros?

[BTRFTG]

5 minutes ago, Davefevs said:

Isn’t one of the fundamentals of accounting that you should keep your policies the sane, so year on year evaluation can be done in a consistent manner?  Only changing them for very good reasons.

I’ve wondered about exactly the same point as you.

Indeed it is, though with amortization Derby clearly thought otherwise.

So if any deal has to be conditional on the new buyer getting their hands on the stadium might it be the case Derby would incur further penalties for understating the quantum of their losses for which they've already been punished?

Edited February 14, 2022 by BTRFTG

[chinapig]

2 minutes ago, BTRFTG said:

Indeed it is, though with amortization Derby clearly thought otherwise.

So if any deal has to be conditional on the new buyer getting their hands on the stadium might it be the case Derby would incur further penalties for understating the quantum of their losses for which they've already been punished?

It's hard to see how they can claim the stadium was worth £81m but is now only worth say £20m. Or at least they can claim it but there should be consequences.

[BTRFTG]

If only there were accounts to review.

This might be an oversimplification but wasn't the essence of the stadium deal this:

Derby County FC sold the freehold title of Pride Park to Gellaw Newco 202 for £81.1m.

The purchase was funded by around £20m in the form of a cash loan from MSD (secured by charge against Gellaw/Pride Park) and £61m in loans from Derby County FC to Gellaw Newco 202.

Derby County FC recorded a profit on the deal of £39.9m, presumably the book value of Pride Park previously was around £41m.

So whilst Morris might argue he owns the stadium and that has nothing to do with the football club, surely the administrators are looking to have Gellaw repay the loans they undertook? Unlike MSD is the suggestion the Gellaw loans were all unsecured?  How possibly could the EFL sanction a disposal in this form without any underpinning guarantee that asset values might, to the most part, be recoverable by those issuing the loan?

 

[Hxj]

1 hour ago, BTRFTG said:

From memory the initial MSD loan yet to be satisfied is against the freehold title of a number of properties, Pride Park included.

This is Schedule 2 from the August 2020 charge:

 

[Hxj]

1 hour ago, BTRFTG said:

In which case might the EFL revisit their initial argument that the stadium value appearing in the accounts was over-inflated, else if Derby maintain the stadium was worth that yet it now transfers at a significant discount, is that counted as a gift to the club?

It is too late now,  The debate on the stadium valuation at the date of sale has long gone.  As the stadium group is no longer part of the FFP group then any change in valuation for say 2021 accounts would have no impact on the FFP position.

 

56 minutes ago, Davefevs said:

Isn’t one of the fundamentals of accounting that you should keep your policies the sane, so year on year evaluation can be done in a consistent manner?  Only changing them for very good reasons.

It is.  The stadium was valued using Depreciated Replacement Cost and should be continued to be valued in the same way.  However in preparing the accounts for the Stadium Group companies for say 2021 the valuer and auditor may decide that there is sufficient evidence to use a different method.

[BTRFTG]

28 minutes ago, Hxj said:

This is Schedule 2 from the August 2020 charge:

 

Ah. Was it structured that way such if they so wanted the football club could satisfy the charge via their lease, whilst MSD retained the ultimate backstop via the freehold being sold?

Is it Morris is looking for the new buyer of the club to pay off the MSD loan such the charge is removed that way? Presumably, if he wished to be as helpful as he suggests he himself could satisfy the charge and give the new owner necessary protection by issuing a new long-term lease for the stadium perhaps with buy-out options?

[Hxj]

57 minutes ago, BTRFTG said:

Derby County FC sold the freehold title of Pride Park to Gellaw Newco 202 for £81.1m.

Agreed.

57 minutes ago, BTRFTG said:

The purchase was funded by around £20m in the form of a cash loan from MSD (secured by charge against Gellaw/Pride Park) and £61m in loans from Derby County FC to Gellaw Newco 202.

Not my understanding.  The stadium was sold by DCFC in the June 2018 accounting period.  The accounts for that period show intra-group debtors of £75 million or so, which I understand relate to the Stadium sale.

The accounts for Gellaw Newco 202 (the company acquiring the stadium show the property costing £81 million and an intra-group loan covering the entire cost in the 2019 accounts.  The company was incorporated in June 2018, so these cover the first 54 weeks or so.

The accounts for Gellaw Newco 204 Limited (the new parent of the Stadium group) show that it is owed £74 million by the subsidiary and in turn owes £74 million elsewhere in the 2019 accounts.

By the time DCFC enters Administration the debtors (an asset) no longer existed.   I suspect that cash passed around the circle from Morris to Gellaw 202 to Gellaw 204 to DCFC and back up the Football Club Group to Morris shortly after June 2020.

My guess is that the £20 million from MSD received in August 2020 was used to fund the running costs of the DCFC.

Edited February 14, 2022 by Hxj

[BTRFTG]

22 minutes ago, Hxj said:

It is too late now,  The debate on the stadium valuation at the date of sale has long gone

Sounds like double jeopardy but I still can't get my head around somebody arguing the value of an asset and shortly after having disposed of it it bring established the valuation was wholly contrived. The value is immaterial but what isn't is Derby's insistence their accounts were an accurate record when demonstrably they were not.

[Hxj]

13 minutes ago, BTRFTG said:

Ah. Was it structured that way such if they so wanted the football club could satisfy the charge via their lease, whilst MSD retained the ultimate backstop via the freehold being sold?

I suspect that it was more along the lines of getting all the security they could.

 

13 minutes ago, BTRFTG said:

Is it Morris is looking for the new buyer of the club to pay off the MSD loan such the charge is removed that way?

That has always been my suspicion.

 

13 minutes ago, BTRFTG said:

Presumably, if he wished to be as helpful as he suggests he himself could satisfy the charge and give the new owner necessary protection by issuing a new long-term lease for the stadium perhaps with buy-out options?

Yep.  He could do any number of things to make life easier for anyone buying the club,  No evidence that he is doing anything.

Edited February 14, 2022 by Hxj

[BTRFTG]

5 minutes ago, Hxj said:

Agreed.

Not my understanding.  The stadium was sold by DCFC in the June 2018 accounting period.  The accounts for that period show intra-group debtors of £75 million or so, which I understand relate to the Stadium sale.

The accounts for Gellaw Newco 202 (the company acquiring the stadium show the property costing £81 million and an intra-group loan covering the entire cost in the 2019 accounts.  The company was incorporated in June 2018, so these cover the first 54 weeks or so.

The accounts for Gellaw Newco 204 Limited (the new parent of the Stadium group) show that it is owed £74 million by the subsidiary and in turn owes £74 million elsewhere in the 2019 accounts.

By the time DCFC enters Administration the debtors (an asset) no longer existed.   I suspect that cash passed around the circle from Morris to Gellaw 202 to Gellaw 204 to DCFC and back up the Football Club Group to Morris shortly after June 2020. 2021.

My guess is that the £20 million from MSD received in August 2020 was used to fund the running costs of the DCFC.

Wow, in which case it's worse than I thought, but I am totally befuddled.

I get the principle of the various holding companies having effectively nil circulating debt, but they've also minor, negative assets. Pride Park must have had a book value when owned by DCFC (I naively assumed that was the sell price minus the banked profit.) DCFC may have had equivalent debt on its books against that asset but they're separate items so where's the stadium asset value (as reflected pre sale) now held?

 

[Hxj]

23 minutes ago, BTRFTG said:

Derby's insistence their accounts were an accurate record when demonstrably they were not.

Depreciated Replacement Cost valuations can be problematic which is why they are the method of last resort.  If DRC is used correctly then the accounts are entirely correct from an Accounting Standards perspective.

Whether or not in the 'real world' the accounts are as meaningful as they might be is an entirely different debate.

Edited February 14, 2022 by Hxj

[BTRFTG]

10 minutes ago, Hxj said:

Depreciated Replacement Cost valuations can be problematic which is why they are the method of last resort.  If DRC is used correctly then the accounts are entirely correct from an Accounting Standards perspective.

Whether or not in the 'real world' the accounts are as meaningful as they might be is an entirely different debate.

Fully appreciate that but during my time in dealing with such matters I never once experienced somebody banking profit (sic) from a bespoke asset by suggesting it changed hands at market value at or near DRC value. Bespoke assets necessarily come with discounted impairment, it's usually how much that is that's open to debate.

As you highlight this is only material to P&S / FFP and it makes no sense if theoretical (not realisable) profits are permitted to be included. One might as well not bother with the whole charade of supposed regulation.

[Mr Popodopolous]

A couple of observations, thoughts etc.

@Hxj

1) Could a drastically cheaper return of the stadium to Derby not constitute new evidence for the EFL. Derby defended the valuation in September 2019, at the IDC and indeed in the accounts for Gellaw Newco 202 to June 2020.

The period that this could most easily materially change would be the 3 years to 2018 (principle of reset, presumably included the Stadium sale, £28.12m 3 year loss means pass).

2) Failing that, the small matter of a Fair Rent applicable to a Fair Value. £4.16m per season/year as per the company who did the valuation- which leads me to my 3rd and final point...

3)...As we have discussed before, the importance of keeping the Stadium Group and the FFP/Club Group separate for FFP purposes- do that and a Fair Value Rent can be thrashed out. Benchmark using other clubs and their % yield etc.

A reconsolidation is not acceptable so soon.

[REDOXO]

On 13/02/2022 at 05:30, sh1t_ref_again said:

Its MM that anoys me the most, my understanding is, Morris sells the ground to himself on paper to try and fudge FFP, does not pay funds due to HMRC therefore having to put less money into Derby to prop them up and cover losses, then when it starts getting messy puts club into admin so does not have to put any more money in. Now owns the ground and will use a tool to get money back out of new owner to again reduce his own losses that he built up for his failed gamble.

Correct me if I am wrong.

The best summary yet!

[REDOXO]

On 13/02/2022 at 06:15, BTRFTG said:

My point being there's no reason one CAN'T have disclosure (full or partial.) For reasons unknown they agreed to keep things confidential. It's said there are 'interested parties' - who they and how would they know whether or not they should have been provided access to the detail?

I sued a former employer who decided to settle on the steps of the High Court and I told them where to stick the few additional grand offered for me to sign the confidentiality agreement they demanded,  in addition to the actual settlement (forget the technical name it takes.) That allowed me to continue to tell the truth about them to all and sundry. They could threaten all they liked but truth would have outed either way, in Court and in the papers or with much lesser publicity.

No one in their right mind would buy this shit show without access to the agreement between Morris and Gibson! But this whole affair is without right mindedness!

[Mr Popodopolous]

@sh1t_ref_again

Largely agree with your post although one set of people run him close.

A good chunk of Derby fans. Not sure I've seen such an arrogant, entitled, whiny, conspiracy claiming group at our level. Objectionable in many ways.

[ExiledAjax]

Hadn't realised that when they get relegated it will be only the third time in their history they've been in the third tier.

[Mr Popodopolous]

A few Derby fans unless there have been new reports that I have not yet seen have been getting quite excited about Gould's comments a few weeks ago. My take...

1) We have not failed to 2021, so the point about Martin one or two make is suspect.

2) The chances are that we will not fail to 2022. Even my most pessimistic modelling discounts that. Remember to 2021 that and 2020 are added and halved for ALL clubs.

3) The problem comes to 2023.

4) The claim by Gould about £30m of lost player sales- it is nonsense, for the birds, it will not stack up. If we do not fill the shortfall probably mainly through player sales then we will be docked points in line with that breach with a Business Plan for 2 years- feels a bad idea to breach!

5) The £5m in Covid losses- well we would be in trouble but a few would join us in the dock. I question whether how it fits with the EFL's own guidance and I might add that Derby's administrators claimed £20m in Covid losses, as did Mr. Pearce, can't have it both ways.

I actually do believe £20m is in the right ballpark for Derby, but if the EFL HAVE put a cap of £5m, well we'll likely still be okay to 2021 and 2022, but Derby surely not to 2021.

Edited February 14, 2022 by Mr Popodopolous

[chinapig]

18 minutes ago, Mr Popodopolous said:

A few Derby fans unless there have been new reports that I have not yet seen have been getting quite excited about Gould's comments a few weeks ago. My take...

1) We have not failed to 2021, so the point about Martin one or two make is suspect.

2) The chances are that we will not fail to 2022. Even my most pessimistic modelling discounts that. Remember to 2021 that and 2020 are added and halved for ALL clubs.

3) The problem comes to 2023.

4) The claim by Gould about £30m of lost player sales- it is nonsense, for the birds, it will not stack up. If we do not fill the shortfall probably mainly through player sales then we will be docked points in line with that breach with a Business Plan for 2 years- feels a bad idea to breach!

5) The £5m in Covid losses- well we would be in trouble but a few would join us in the dock. I question whether how it fits with the EFL's own guidance and I might add that Derby's administrators claimed £20m in Covid losses, as did Mr. Pearce, can't have it both ways. 

I expect our cost base to be reduced further next summer in any event. If push comes to shove we have sellable players. We could also receive a windfall from either Webster or Kelly, though we should not assume that of course.

But if we breach then we will deservedly get a points deduction. Gould has acknowledged that we will take the hit as required. We won't attempt to drag it out for years either.

Guilty of poor financial management? Yes, thanks to Steve giving Ashton control without oversight. The difference compared to Derby is that we won't have attempted to cheat the system and we won't be in administration.

[Davefevs]

29 minutes ago, Mr Popodopolous said:

A few Derby fans unless there have been new reports that I have not yet seen have been getting quite excited about Gould's comments a few weeks ago. My take...

1) We have not failed to 2021, so the point about Martin one or two make is suspect.

2) The chances are that we will not fail to 2022. Even my most pessimistic modelling discounts that. Remember to 2021 that and 2020 are added and halved for ALL clubs.

3) The problem comes to 2023.

4) The claim by Gould about £30m of lost player sales- it is nonsense, for the birds, it will not stack up. If we do not fill the shortfall probably mainly through player sales then we will be docked points in line with that breach with a Business Plan for 2 years- feels a bad idea to breach!

5) The £5m in Covid losses- well we would be in trouble but a few would join us in the dock. I question whether how it fits with the EFL's own guidance and I might add that Derby's administrators claimed £20m in Covid losses, as did Mr. Pearce, can't have it both ways. 

1. 
2. miles inside, because of 18/19’s profit
3. agree, but I don’t think we will be too badly over, and we’ve 15 months to sort it, including two transfer windows, with sellable assets.
4. yes, a nonsense…but let’s see what the likes of Stoke and Forest and Boro put in their 20/21 accounts, let alone this seasons!
5. it doesn’t fit, it was an arbitrary figure plucked out of the ether and latched onto.

Back to 3.  We need to be smart, but not care-free.  If someone genuinely wants Palmer (for example) then there needs to be give and take.  As it stands his amortisation will be £0.875m next year and his wages £1.200m (allegedly).  Let’s not forget the “buying” club will be spreading any fee over the term and that might be the way to cover a bit more in wages.  We have to recoup (avoid spending) as much of that £2.075m as possible.  Similar debate with Wells, lesser extent with Moore and whoever else.

[chinapig]

In the latest Price of Football podcast Kieran Maguire reckons Boro settled for a sum equal to the insurance value. Those on here with expertise may be able to explain exactly what this means.

He also says that Wycombe's claim is more complicated as it involves the difference in TV money between the Championship and League 1, though it is not a big amount.

He implies that Morris and Couhig have not spoken and has a dig at the Administrators for doing nothing and hoping it will just go away - while their people pick up £600 a day.

Finally, he has spoken to people at Board level at EFL clubs who, unsurprisingly, won't be happy if Derby don't pay the full amount to HMRC when other clubs have taken out loans to pay their dues.

We must be due another press release saying a preferred bidder will be named imminently surely?.

[Monkeh]

1 hour ago, chinapig said:

In the latest Price of Football podcast Kieran Maguire reckons Boro settled for a sum equal to the insurance value. Those on here with expertise may be able to explain exactly what this means.

He also says that Wycombe's claim is more complicated as it involves the difference in TV money between the Championship and League 1, though it is not a big amount.

He implies that Morris and Couhig have not spoken and has a dig at the Administrators for doing nothing and hoping it will just go away - while their people pick up £600 a day.

Finally, he has spoken to people at Board level at EFL clubs who, unsurprisingly, won't be happy if Derby don't pay the full amount to HMRC when other clubs have taken out loans to pay their dues.

We must be due another press release saying a preferred bidder will be named imminently surely?.

We had one yesterday,

The boy who cried wolf applies here,

I dont believe it until its actually happened now

[chinapig]

38 minutes ago, Monkeh said:

We had one yesterday,

The boy who cried wolf applies here,

I dont believe it until its actually happened now

Thanks I obviously missed it.

[AnotherDerbyFan]

On 14/02/2022 at 15:03, sh1t_ref_again said:

If MM is going to exit with nothing back from the stadium, why does not not come out now and say, that he is giving the stadium back as part of the deal. Or maybe he is still hoping to generate some income back from it, although I guess by having a lone secured against it that he / Derby have pocketed, as the loan will have to be paid off by the new owners to be able to gain access to the ground

If he wanted money for it he'd be charging rent. £0 paid or requested since entering admin...