Town close to escaping administration

CREDITORS of Ipswich Town Football Club yesterday gave their overwhelming backing to a rescue deal – but it was warned there is still more work to do before the club can come out of administration.

By Duncan Brodie

CREDITORS of Ipswich Town Football Club yesterday gave their overwhelming backing to a rescue deal – but it was warned there is still more work to do before the club can come out of administration.

The vote at the end of a creditors meeting at the Portman Road ground saw a Company Voluntary Arrangement (CVA) prepared by administrators Deloitte & Touche approved by creditors accounting for 98.2% of the club's debt.

In an exclusive interview with the EADT following the meeting, administrator Nick Dargan, who has been running the club since February, spoke of his delight that the CVA had been accepted.

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But he expressed sympathy to the unsecured creditors who will receive just 5p for every pound they are owed, possibly rising to 20p in the pound if Town win promotion next season.

He revealed there were times during the past three months when it had seemed possible that it might not be possible to agree a CVA, which would have left the present club facing liquidation.

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And he warned that the club still had to raise vital finance, through a loan note issue and season ticket and debenture sales, before it could finally come out of administration – hopefully by the end of this month.

Under the CVA, the club's secured creditors will receive 100% of what they are owed and preferential creditors, such as the Inland Revenue, will receive a minimum of 50%, rising to up to 100% in the event of promotion.

Mr Dargan said that, with many major creditors voting by proxy, he had known the outcome of the vote in advance of the meeting – although, as usual on such occasions, some unsecured creditors had expressed disappointment at the size of their pay-out.

"That, of course, is their right, but most creditors recognise that there is real value in the business going forward and the vote in favour was far over the 75% required," he said.

"There were people who asked why they would only receive 5p in the pound, or only a maximum of 20p. I have great sympathy with that view but there is a business going forward and we have to make sure we do not get back into the same position again.

"The business plan on which the CVA is based is the best that could be offered while ensuring that the club survives, which is the most important thing."

By achieving the rescue of the existing club, said Mr Dargan, creditors were receiving a higher pay-out than would have been the case had the business and assets been sold to a new club with new investors. This was what happened at Leicester City, where unsecured creditors received nothing.

Yesterday's vote meant Ipswich Town had achieved stability and now had the framework for successful refinancing – but much remained to be done before the club could exit administration.

Key to this would be the uptake of a proposed loan note issue, intended to take place before the end of this month, and the level of sales of season tickets and the new debentures being offered to supporters.

Under the loan note issue, people are invited to loan the club money which is then repayable at a later date.

The amount raised through these measures would heavily influence the extent to which the club had to reduce its wage bill, either through the release of players reaching the end of their contracts this summer or through more player sales.

With the transfer market still depressed and player sales unlikely to take place anyway until clubs return to training in June, concern was expressed at the creditors' meeting of the "robustness" of the club's business plan.

However, Mr Dargan insisted that the CVA did provide the "breathing place" required and, even if players had to be sold, the club would still be able to pursue a strategy for the playing side rather than having to let players go on a "fire sale" basis.

Once the loan notice issue was complete, the club should be able to demonstrate to the Football League that a sound start to the business plan had been achieved which should finally clear the way for the club to exit administration.

Mr Dargan said he was "delighted" that the CVA had been achieved. "An enormous amount of hard work has gone into the offer to the unsecured creditors and into renegotiations with the secured creditors," he said.

"It gives the club the opportunity to achieve a sound financial base and although we are not there yet we have taken a major step. There were times when there was a possibility it would not be achieved."

He added that he would continue to manage the club until the period of administration is over but the board, to whom control would then return, was now is a position to negotiate the refinancing of the club which, later in the year, is also expected to involve a share issue.

The Football League is currently considering new rules under which clubs going into administration in the future could have points deducted or even be relegated.

Mr Dargan said the clubs which had gone into administration in the past year or so were not attempting to gain an unfair advantage but were acting in accordance with the law, prevented insolvent companies continuing to trade normally.

However, he said the new penalties proposed by the league would be fair, provided they were not introduced for at least another year so that all clubs affected by the sudden down-turn in the financial conditions facing the game had time to "get their house in order" first.

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