Ipswich in bid to cut debt burden
IPSWICH Town are in talks to have their £33million debt bought for a greatly reduced amount.If negotiations between a mystery consortium and the club's three major lenders are finalised the Blues could end up slashing a large proportion of their current liability.
By Derek Davis
IPSWICH Town are in talks to have their £33million debt bought for a greatly reduced amount.
If negotiations between a mystery consortium and the club's three major lenders are finalised the Blues could end up slashing a large proportion of their current liability.
The EADT understands talks are planned with Morley Fund Management, who are looking after the Norwich Union debt of £25m owed by Ipswich Town, and main bankers Barclays and Bank of Scotland, who have the much smaller amount of a further £8m outstanding.
Although an initial purchase offer was rejected by the trio of institutes, fresh talks are envisaged as the football club seeks to relieve its debt burden.
Ipswich Town have, on a number of occasions in recent months, talked in general terms about their efforts to improve its financial situation, without going into any detail.
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A club spokesman last night maintained this stance, saying only: “We are in constant dialogue with our lenders and have commented many times, most recently at the club AGM last December, that we are continuing to explore possible solutions to the ongoing debt burden and indeed this remains the case.”
The consortium, thought to be made up mainly of new investors who are not already major shareholders or board members, have offered to buy the debt from the three lenders and would then charge interest to Ipswich Town. Although the proposed deal is very similar to the one that Derby County negotiated with the Co-operative Bank, it is fundamentally different inasmuch as a whole new board was appointed at Pride Park.
It is also understood that the current board would stay in place at Portman Road and David Sheepshanks would continue as chairman for the foreseeable future, unless he is not re-elected in the normal cycle of office.
The advantage of having the debt bought by a third party to the Blues would be a significantly reduced amount showing in the red, which would make the club more attractive to new investors interested in putting in sizable amounts of money to fund a serious challenge on Premiership promotion.
The three lenders would benefit by having a lump sum up front rather than a large amount outstanding that is currently not reaping any interest and with no foreseeable date when it would be repaid.
The Blues negotiated an interest-free two-year period and the chances are that arrangement would continue indefinitely.
A possible down side is that Ipswich would pay interest to the new consortium, and unless significant new money was invested, the club would have less to give Jim Magilton for his playing budget.
With season-ticket sales likely to drop as a direct correlation to Town's league form and final position, revenue would be down as would retail sales and commercial activity as a whole.
Norwich Union, Bank of Scotland and Barclays, all declined to comment as the matter was subject to customer confidentiality.
With Ipswich making a £3m loss in the last financial year the club are currently saddled with a total £36m debt, which largely came about following relegation from the Premiership in 2002 and the subsequent administration that followed.
Apart from the three major lenders, all other creditors have now been satisfied under the terms of the CVA (Company Voluntary Arrangement).