Experienced football administrator Paul Appleton of Begbies Traynor discusses the challenges facing Derby County's administrators with The Athletic.
'The key discussions this week between the administrators,
the club’s owner and the secured creditor will have been over who is going to
fund the club while it’s in administration.
It is hard to see how there will be enough money coming
through the turnstiles, merchandise sales and sponsorship deals to fund the
club, and any central funds from the EFL or Premier League, who provide
solidarity funds, are withheld if there are any football creditors.
The likelihood is that the club will not be generating
anywhere near enough money to meet the club’s ongoing liabilities. So the
administrators will be looking at what they can do, for example, in terms of
selling players but some may have clauses in their contracts that say they can
walk away for nothing.
The administrators will also look at the manager’s wages and
his assistants. It is unlikely to be a small amount — can they afford to keep
them? What can we do with the academy?
Fulfilling the fixtures will be the priority but there are
so many things you have to do to put matches on. For example, you have to talk
to the local Safety Advisory Group, you have to make sure there’s a crowd
doctor, a St John’s Ambulance, stewards, fire safety officers, ticketing staff.
That’s all got to be put in place and it’s all got to be
paid for — and they will all want paying in advance. And if you’re running a
club in administration, you have to have enough money to pay the wages and tax
bill.
Administrators are not allowed to run up any new debts.
There is something else to be aware of: if the administrators haven’t made the
staff redundant within 14 days of taking over, they automatically adopt their
contracts, which means they become liable for their wages, holiday pay and so
on, and you have to pay that first as an expense of the administration.
Derby are like Coventry and Bolton, the last two big
football administrations I did, in that they are a big, traditional club. I
remember being at the Baseball Ground as an away fan when they won the league
in 1972. They have a big fanbase and community.
On the face of it, they are very attractive but how much are
you going to pay for them in administration? Because, as mentioned, there are
creditors you have to pay before you even get started: the football creditors,
the staff, HMRC.
Then, you have the ground. Remember the trouble Coventry had
because they didn’t own their stadium. They still don’t. Derby will have to pay
off the secured creditor.
Then you have the unsecured creditors and the EFL insists
you pay them a minimum of 25p in the pound or face further sanctions.
Altogether, that’s tens of millions.
But then you have to pass the EFL’s fit and proper test,
which means you have to show them proof you can fund the club for the next
three seasons.
What does it cost to run Derby annually? £15-20 million, at
least — and anyone buying the club will know they need to invest in the team.
If you think about it, you’re looking at tens of millions of
pounds just to pay off creditors and tens of millions of pounds to run the
club. That’s an enormous amount of money. There is also the likelihood they are
going to be relegated this season, especially if they are hit with the second
penalty for the historic profitability and sustainability charges.'
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