The Administration Thread

[Ghost of Clough]

2 hours ago, Ghost of Clough said:

I believe GN 202 would only have to add a note if there was a risk to the amount of money the company would receive over the following accounting period. As far as I can tell, rent has never been paid (but may still have been included within P&S calculations). As such, there may not have actually been a risk to GN 202 revenue, and therefore no need to state the PBSE.

I may just be talking a load of bs though.

@The Baron Genuinely interested in your thoughts on this.

[The Baron]

5 minutes ago, Ghost of Clough said:

@The Baron Genuinely interested in your thoughts on this.

Hi GoC,

Agree with you on loss of revenue, but as the company is treating PP as investment asset you would look at two issues, revenue generation/yield (which even when the rent starts looks low for an £81m property) and evidence of changes in market value/conditions for a potential writedown/impairment. 

In relation to the latter, combination of Covid/administration of the tenant, in a single use piece of real estate, would suggest that the asset is potentially overvalued. Ultimately it makes no difference from a cash flow perspective as the write down is a paper loss until sold, but if I was auditing the accounts (which, remember, are unaudited and the company is perfectly entitled to waive an audit) then I would have a discussion with the directors in relation to how they would justify the investment property value. 

[PistoldPete]

39 minutes ago, RadioactiveWaste said:

Even then, "extended period of blah blah blah" may well be the only update come 31st may.

I think May 31st really is the final deadline so far as the Ck deal is concerned. After that we are into Ashley time if it’s not done by then.

[MackworthRamIsGod]

1 minute ago, PistoldPete said:

I think May 31st really is the final deadline so far as the Ck deal is concerned. After that we are into Ashley time if it’s not done by then.

Ashley is most probably ready and waiting.

Mel probably knows that too, meaning ball is firmly in his court.

 

[sage]

On 16/05/2022 at 06:56, MackworthRamIsGod said:

So exciting, what time  announced?

I'm going for 5pm.

I'm outside Pride Park. 

No sign of Morris, Kirchener, Ashley or a local businessman with a large bag of fivers. 

 

[The Baron]

55 minutes ago, hintonsboots said:

Kieran. Thanks for taking the time to respond to points raised on the forum. What I would like to know, in your personal opinion do you think the EFL have treated Derby County football club in a fair and proportionate way ? What is the point of IDC’s if their decisions aren’t upheld. Do you feel that pressure was applied to the EFL board by other parties to punish the club in a way above and beyond the recommendations of the independent panels ? 

Hi HB

I will try and unpick the different elements.

In respect of the 12 point deduction for going into administration, it seems fair, Wigan were subject to a similar deduction when they went into admin themselves. The claim that Covid was the sole reason for administration is a weak one as (a) why did it not happen to other clubs? and (b) there were already significant sums owed to HMRC prior to Covid. 

For the stadium issue, whilst the rules seem daft, they were still the rules. I'm not qualified to value stadiums, but have spoken to people who are, and so think the club was correctly found not guilty on this issue.  

As far as amortisation is concerned, it's a tricky one. Neither Mel Morris nor Stephen Pearce were the architects of the change to the accounting policy, but they were happy to utilise it and the short term benefits it gave to the club's P&S calculations. 

IMO, I think the new policy was in breach of FRS 102 and reduced losses by about £30m. I have had a discussion with Stephen Pearce in relation to this, and we professionally agreed to disagree. 

It is then the responsibility of those prosecuting to put the case put forward for the EFL at the IDC. The case presented was weak, their expert witness put forward a muddled explanation, and if you lose, as they did, then they should have accepted it with good grace, and not appealed the first ruling. 

As for having an agenda against Derby, I would defend myself on this. I monitor and comment on social media in relation to all clubs in England and Scotland (and Wales) because I'm very boring and have no friends. The aim is to be objective and non-partisan, I have even been known to say positive things about Crystal Palace, who as a Brighton fan, I loathe. I've provided assistance (unpaid) to staff members affected by the administration, contributed £92 to the 'buy a ticket' crowdfunder for DCFC fans, and whilst I fully understand that some people are sick and tired of hearing my voice on t'radio and comments in the written press, the media contact me, not the other way round. More than happy to take on board criticism, although the death threats on social media (not this forum) are not pleasant to receive. 

[hintonsboots]

2 minutes ago, The Baron said:

Hi HB

I will try and unpick the different elements.

In respect of the 12 point deduction for going into administration, it seems fair, Wigan were subject to a similar deduction when they went into admin themselves. The claim that Covid was the sole reason for administration is a weak one as (a) why did it not happen to other clubs? and (b) there were already significant sums owed to HMRC prior to Covid. 

For the stadium issue, whilst the rules seem daft, they were still the rules. I'm not qualified to value stadiums, but have spoken to people who are, and so think the club was correctly found not guilty on this issue.  

As far as amortisation is concerned, it's a tricky one. Neither Mel Morris nor Stephen Pearce were the architects of the change to the accounting policy, but they were happy to utilise it and the short term benefits it gave to the club's P&S calculations. 

IMO, I think the new policy was in breach of FRS 102 and reduced losses by about £30m. I have had a discussion with Stephen Pearce in relation to this, and we professionally agreed to disagree. 

It is then the responsibility of those prosecuting to put the case put forward for the EFL at the IDC. The case presented was weak, their expert witness put forward a muddled explanation, and if you lose, as they did, then they should have accepted it with good grace, and not appealed the first ruling. 

As for having an agenda against Derby, I would defend myself on this. I monitor and comment on social media in relation to all clubs in England and Scotland (and Wales) because I'm very boring and have no friends. The aim is to be objective and non-partisan, I have even been known to say positive things about Crystal Palace, who as a Brighton fan, I loathe. I've provided assistance (unpaid) to staff members affected by the administration, contributed £92 to the 'buy a ticket' crowdfunder for DCFC fans, and whilst I fully understand that some people are sick and tired of hearing my voice on t'radio and comments in the written press, the media contact me, not the other way round. More than happy to take on board criticism, although the death threats on social media (not this forum) are not pleasant to receive. 

Thanks Kieran. I would still be interested to find out more on the alleged “interference” by Middlesbrough FC, but due to FOI requests not being applicable to our esteemed regulator, perhaps we will never know the full story. It would be a great investigation for the Sunday Times insight team though.

[ollycutts1982]

@The Baron

 

Hi Kieran. I find it refreshing you coming on here and fielding questions. Thank you. 
 

Can I ask your opinion on individuals owning number ours clubs and using hefty, often unjustified, transfer fees to move players from clubs under the same umbrella? Watford and        F?rest seem to use it amongst others to manipulate the books to show them in a more positive light. 
 

I’m not going tit for tat just genuinely untested in it though I appreciate until the relevant organisations put rules in place it is a loop hole there to be exploited. 

[The Baron]

6 minutes ago, ollycutts1982 said:

@The Baron

 

Hi Kieran. I find it refreshing you coming on here and fielding questions. Thank you. 
 

Can I ask your opinion on individuals owning number ours clubs and using hefty, often unjustified, transfer fees to move players from clubs under the same umbrella? Watford and        F?rest seem to use it amongst others to manipulate the books to show them in a more positive light. 
 

I’m not going tit for tat just genuinely untested in it though I appreciate until the relevant organisations put rules in place it is a loop hole there to be exploited. 

From a business point of view, MCO's are a good idea, de-risk the financial impact of relegation, spread fixed costs over a broader area, allow for global relationships with commercial partners/sponsors to have a local face too. 

From a financial point of view, especially P&S, the situation is open to manipulation. If take the case of Aaron Mooy, who went from Melbourne City (owned by City Football Group) to Manchester City (also owned by CFG) on a free transfer. Mooy was then loaned and sold at the end of the season by MCFC to Huddersfield for about £10m, and so City booked this as pure profit and it went into their P&S calculations. 

Whilst I'm not in favour of overregulation of any industry, there is scope for a 'light touch' regime of valuation of such transactions (as well as all player swaps), to stop profits being 'parked' in the accounts of the club who needs them the most. 

[Shipley Ram]

11 minutes ago, The Baron said:

IMO, I think the new policy was in breach of FRS 102 and reduced losses by about £30m. I have had a discussion with Stephen Pearce in relation to this, and we professionally agreed to disagree. 

Although I don't have an issue with most of your work I do have an issue with the language you use. As I understand it the change in policy didn't reduce overall losses but moved them to a later accounting period. The way you worded your statement encouraged people to think the losses had been magically disaapeared rather than kicked down the road. This has provided ammunition to those who accuse Derby of systematically cheating, which deeply pi**es me off.

As far as I can see Mel saw a grey area he could take advantage of and recklessly steamed into it. The EFL just shugged their shoulders and ignored the matter, despite getting your letter informing of the impications, untill they were threatened with legal action.   Then then went back and charged us for the whole period, their cheer leaders from Middlesbrough and Wycome then weighed in with their systematically cheating alligations, which I think were against EFL rules and they should have been charged for.

We were found guilty of being in breach of FRS 102 due to professor Pops evidence which atated there was not a sufficient resale market for our system to work and that the amortorisation represented there value on the field and should be a straight line. This appear to be at odds with the policy of Stoke and others to reduce the values below a straight line and attribute the losses to Covid. Surley if you rely of professors Popes evidence that their values should be on a stright line reduction this policy is also against FRS 102? 

I'm happy to be corrected if I have misinterpreted anything.

 

[ollycutts1982]

15 minutes ago, The Baron said:

From a business point of view, MCO's are a good idea, de-risk the financial impact of relegation, spread fixed costs over a broader area, allow for global relationships with commercial partners/sponsors to have a local face too. 

From a financial point of view, especially P&S, the situation is open to manipulation. If take the case of Aaron Mooy, who went from Melbourne City (owned by City Football Group) to Manchester City (also owned by CFG) on a free transfer. Mooy was then loaned and sold at the end of the season by MCFC to Huddersfield for about £10m, and so City booked this as pure profit and it went into their P&S calculations. 

Whilst I'm not in favour of overregulation of any industry, there is scope for a 'light touch' regime of valuation of such transactions (as well as all player swaps), to stop profits being 'parked' in the accounts of the club who needs them the most. 

Thanks for the reply @The Baron, pretty much echoed my thoughts. 
 

Apologies, one more thing. Do you think punishments for breaching FFP/P&S so be rolled over if a club is promoted while in breach? Many of the clubs who have been promoted out the FL would have failed FFP had they not been promoted. Many clubs go all in to reach the promised land as the PL is where the money is. At the very least it would act as a deterrent to club owners such as ours who go for boom or bust. Just because they reach the Premiership they shouldn’t beyond punishment from the FL. 

[LeedsCityRam]

2 hours ago, The Baron said:

Fair enough, one person’s snitch is another’s whistle blower. Can understand you being hacked off with anyone who you thought has it in for the club. 

Hi Kieran,

I do understand the point about whistleblowing - I don't think most Derby fans would relish attempts to gain an unfair advantage if it was prescribed in the rules (which of course neither charge was)

Unfortunately your actions set in place a domino effect which was exploited to the maximum by the EFL & Steve Gibson for their own personal interests - EFL to avoid legal action from Gibson and punish Morris & Gibson to engineer a pay out & get one over Morris. Not your intention I'm sure but the effects have been catastrophic.

Hindsight is a wonderful thing but would you have handled it all differently knowing what you know now? And has it influenced your subsequent reporting of other clubs?

[Crewton]

34 minutes ago, The Baron said:

It is then the responsibility of those prosecuting to put the case put forward for the EFL at the IDC. The case presented was weak, their expert witness put forward a muddled explanation, and if you lose, as they did, then they should have accepted it with good grace, and not appealed the first ruling. 

I think this is the aspect that most rankles with Derby fans, and fuels the conspiracy theories about the EFL running scared of Steve Gibson and therefore doing a deal to pursue DCFC to the maximum possible in order to avoid Gibson suing them. Their pronouncements have often been disingenuously timed and grudging, or even bitter, in their tone. When you factor in how Derby were robbed by the FFP cheating of both Leicester and QPR in 2013/2014 (which you've covered very equitably in the past) but received zero compensation, anyone who doesn't understand why many fans feel DCFC have been punished several times over isn't capable of critical thinking.

 

[The Baron]

10 minutes ago, Shipley Ram said:

Although I don't have an issue with most of your work I do have an issue with the language you use. As I understand it the change in policy didn't reduce overall losses but moved them to a later accounting period. The way you worded your statement encouraged people to think the losses had been magically disaapeared rather than kicked down the road. This has provided ammunition to those who accuse Derby of systematically cheating, which deeply pi**es me off.

As far as I can see Mel saw a grey area he could take advantage of and recklessly steamed into it. The EFL just shugged their shoulders and ignored the matter, despite getting your letter informing of the impications, untill they were threatened with legal action.   Then then went back and charged us for the whole period, their cheer leaders from Middlesbrough and Wycome then weighed in with their systematically cheating alligations, which I think were against EFL rules and they should have been charged for.

We were found guilty of being in breach of FRS 102 due to professor Pops evidence which atated there was not a sufficient resale market for our system to work and that the amortorisation represented there value on the field and should be a straight line. This appear to be at odds with the policy of Stoke and others to reduce the values below a straight line and attribute the losses to Covid. Surley if you rely of professors Popes evidence that their values should be on a stright line reduction this policy is also against FRS 102? 

I'm happy to be corrected if I have misinterpreted anything.

 

Fair comment, I’ve said all along the new policy makes no difference in terms of overall cost over the life of a contract (it's 1+1+1+7 instead of 2.5m x 4 if a player is signed on a 4 year deal for example). Provided DCFC were promoted before the last year and high depreciation figure kicked in then they were outside of the clutches of the EFL in terms of a points deduction.

By having a lower amortisation charge (a non cash expense) in the early years this did allow the club to pay more in wages, which are a cash expense, and still fall within P&S limits, and so give the club with such an amortisation policy an advantage against other clubs. These extra cash costs in terms of wages need to be funded from somewhere.

Provided the owner is willing and able to do this then the risk of administration is no higher or lower than before. If the owner realises that the short term gain of the amortisation policy has expired, as is the case with Derby, the choice was either take it on the chin or walk away from the club, and the latter choice appears to have been taken. 

[The Baron]

8 minutes ago, LeedsCityRam said:

Hi Kieran,

I do understand the point about whistleblowing - I don't think most Derby fans would relish attempts to gain an unfair advantage if it was prescribed in the rules (which of course neither charge was)

Unfortunately your actions set in place a domino effect which was exploited to the maximum by the EFL & Steve Gibson for their own personal interests - EFL to avoid legal action from Gibson and punish Morris & Gibson to engineer a pay out & get one over Morris. Not your intention I'm sure but the effects have been catastrophic.

Hindsight is a wonderful thing but would you have handled it all differently knowing what you know now? And has it influenced your subsequent reporting of other clubs?

I think you’re overstating my position though.

Whilst have to accept have a high profile in the football finance side of things today, in 2018 that was not the case.

The EFL told me to get stuffed as took the view I was a tin foil hat wearing nobody crank. 

The one thing I got most spectacularly wrong was in relation to Morris.
 

Thought that he was trying to game the system with the unusual policies but never thought that he wasn’t really a fan and would put the club (but not the stadium) into administration. No one of that wealth, who is genuinely a fan, would take such an action. 

[The Baron]

11 minutes ago, Crewton said:

I think this is the aspect that most rankles with Derby fans, and fuels the conspiracy theories about the EFL running scared of Steve Gibson and therefore doing a deal to pursue DCFC to the maximum possible in order to avoid Gibson suing them. Their pronouncements have often been disingenuously timed and grudging, or even bitter, in their tone. When you factor in how Derby were robbed by the FFP cheating of both Leicester and QPR in 2013/2014 (which you've covered very equitably in the past) but received zero compensation, anyone who doesn't understand why many fans feel DCFC have been punished several times over isn't capable of critical thinking.

 

Agree, can fully understand the frustration. I would have been livid, especially in relation to the QPR issue, if I was a Derby fan.

From what I’ve heard (and don’t want to come over as ITK on relation to this), Boro we’re not the only club putting pressure on the EFL to charge DCFC. 

Edited May 26, 2022 by The Baron

[curb]

I don’t see why the stadium sale is of any concern to the EFL or any of its members, apart from acknowledging that we will still be able to play football there. Once the stadium was sold to an external company and not owned as an asset by the club, then it’s no business of anyones if it gets sold to another external party.

Any lease agreed is between the new owner of the football club company and the new owner of the stadium, it has nothing to do with any previous evaluation.

As a side thought, if Lord Kirchner buys the stadium for £80m off the new stadium owner sometime in the future, can we write that cost off against FFP?  ?

[Mr. P]

Update is there is no update

 

[LazloW]

1 minute ago, Mr. P said:

Update is there is no update

 

At least there’s no bad news there (small mercies)

[ram59]

1 hour ago, The Baron said:

Hi HB

I will try and unpick the different elements.

In respect of the 12 point deduction for going into administration, it seems fair, Wigan were subject to a similar deduction when they went into admin themselves. The claim that Covid was the sole reason for administration is a weak one as (a) why did it not happen to other clubs? and (b) there were already significant sums owed to HMRC prior to Covid.

I have to disagree with this point. Without the loss of around £20M+, Derby wouldn't have been going into administration when they did. Put it this way, had a fairy godmother given Derby £20M the day before they went into administration, I think that they would have continued to trade normally, maybe it would have only delayed things for some months/years, if trading had continued at previous levels but COVID (a force majeure) was ultimately the deciding factor on the decision at that time.

Other clubs situations are irrelevant, other clubs may have better finances and/or owners with deeper pockets.