Town creditors set to meet next month

MANY businesses owed money by Ipswich Town FC could receive as little as 5% of the sums due to them, the EADT has learned – and the total debts of the club are over £54million.

MANY businesses owed money by Ipswich Town FC could receive as little as 5% of the sums due to them, the EADT has learned – and the total debts of the club are over £54million.

A proposed arrangement between the cash-strapped club and its creditors would see the lowest-ranking among them receive 5p in the pound, rising to up to 20p in the pound should Town regain Premiership status.

Even creditors with preferential status, such as the Crown agencies responsible for collecting Income Tax and VAT, face a shortfall of 50p in the pound.

The news was described as a 'sad day for local business' by Suffolk Chamber of Commerce chief executive Bob Feltwell, but administrators Deloitte & Touche said that the deal was better than many offered to businesses caught in the same position with other football clubs.

Ipswich Town chairman David Sheepshanks said the club 'regret the consequences for our creditors from the administration,' but hoped for their support of the recovery plans.

The signs are that the proposal for a Company Voluntary Arrangement (CVA), drawn up by the administrators who were called in by the club in February, will win acceptance.

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A number of key creditors, including the Crown and the club's principal bankers, Barclays, have indicated their support – with the alternative being liquidation which would leave most creditors receiving nothing at all.

Two scenarios are set out in the proposal – one assuming that the club remains in Division One throughout the four-year term of the CVA (to the end of the 2006-07 season) and one assuming that Premiership status is regained from 2004 (not from this season, even though this remains a theoretical possibility).

If promotion is not won, preferential creditors will receive a payment of 20p in the pound in September next season, followed by 10p in the pound in each of the next three seasons, making 50p in the pound overall,

Unsecured creditors will receive a one-off payment of 5p in the pound this September.

If Town win promotion, preferential creditors will receive 40p in the pound for each season in the Premiership until full payment has been made

Unsecured creditors will receive a further 5p in the pound for each season in the top flight, to a maximum of 20p in the pound overall.

Should Town be relegated back to Division One, the annual payments of 10p in the pound for preferential creditors and zero for unsecured creditors would apply once more.

The proposal will be put to a meeting of creditors which is to be held at the Portman Road ground on Friday, May 2.

For approval, it will require the support of creditors accounting for 75% of the debt owed to those voting.

Details of the proposals are contained in a copy, obtained by the EADT, of an "explanatory memorandum" drawn up by the administrators for creditors ahead of the meeting.

The document says that the return to the club's creditors through the CVA would be "significantly higher than might reasonably be expected from a sale of the business and assets" to a new company – even assuming the existence of any credible bid.

A statement of the club's affairs contained in the document reveals that, as of April 4, it faced a total deficiency – the difference between its assets and its liabilities – of £54.127 million.

This figure is inflated by the requirement to include the entire sum due to players throughout the remaining period of their contracts, which alone totals £18.724 million.

More immediately, the statement shows the club owing £2.070 million in Income Tax and National Insurance and £1.589 million in VAT.

Among secured creditors, Barclays Bank is shown to be owed £5.067 million in overdraft and other credit facilities while, among non-preferential creditors, debts to other businesses top £10 million.

Besides Barclays and the Crown agencies, the CVA proposal has also received an indication of support from Norwich Union which in August 2001 put up a £25 million securitised loan (bond) to cover the development of the new North and South stands and improved training facilities.

Barclays has agreed to reschedule its debt over a period of up to 12 years, NU has agreed in principle to restructure repayments beyond the original 25 year period and the Crown has accepted the model under which, unless the club wins promotion, it would receive just 50% of the sums outstanding.

The Football League has also raised no objection, subject to Ipswich meeting in full its debts to other clubs and to all players.

Technically, the club is under notice to be stripped of its league membership, suspended pending satisfactory proposals to exit administration.

If the CVA is approved, the administrators will seek the lifting of this notice.

Control of the club will then return to the existing directors, for whom the first major task will be to raise fresh working capital, which the club's parlous financial state made impossible earlier in the season.

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