A SHIVER ran down the spine of football administrators following an announcement by Plymouth Argyle that its appointed insolvency practitioners would take a 50% cut in fees to see a deal to save the club pushed through.
Football administrations have always been regarded as complex and high risk. However, seeing a veteran administrator such as Brendan Guilfoyle, who has previously worked on numerous clubs, placed in such an awkward position.
The decision by the administrators to reduce their time costs by such a dramatic amount in order to save the club has led the firm to suggest it will consider whether it can handle football administrations in the future.
Brendan Guilfoyle, who worked on the Crystal Palace and Leeds administrations, and Christopher White and John Russell, all from P&A Partnership, were appointed joint-administrators to Plymouth Argyle on 4 May.
The administrators are owed approximately £750,000 in fees (to September). However, they are willing to accept payment of half that amount and will complete the sale and subsequent Company Voluntary Arrangement (CVA) – which all clubs must exit an administration from – for free.
A CVA would see repayments made to creditors over a five-year period, with supervisors appointed to oversee the process.
The current deal on the table from Akkeron, the asset management business lined up to buy the club, is to pay just 20% of the administrators’ fees. However, Guilfoyle hopes to negotiate that figure up.
Although cutting your fees seems counter-intuitive, Deloitte insolvency partner Lee Manning, believes it is a sensible decision
“It’s in their best interest to get something in the coffers. If they fail to sell the club, they won’t get anything,” he explains.
“With any insolvency you have to know when to cut and run, you could incur huge trading losses and creditors could be worse off if you are unable to sell the business quick enough,” he added.
However, it is not only their decision to reduce fees that has left practitioners with a nervous tick. Since their appointment the P&A Partnership team has had its fair share of problems.
All clubs must exit an administration via a CVA – which must be voted for by 75% or more of the creditors, by value, for approval. Something HM Revenue & Customs voted against because it was likely they would be repaid less than 1p for every pound owed along with the other unsecured creditors. However, the CVA was approved.
The administrators were also slammed by the Professional Footballers Association for terminating a player’s contract because he refused to sign a wage waiver contract that would see his back-dated wages paid when the club was sold. That too was resolved after much negotiation.
Most recently the administrators were the subject of threatening emails from fans, which led them to announce they might step down.
With all the stress of acting as a football club administrator, is it any wonder Guilfoyle and Co decided to take a cut to complete the deal?
Overseeing a football administration, while keeping the club alive, is always tricky.
One of the most difficult aspects to administer is the Football Creditors Rule (FCR), which prioritises the payment of players, managers and clubs in the event of a club entering administration. If a club collapses the football creditors are paid in full with the remaining funds divided between the creditors, with the unsecured creditors claiming they are treated unfairly.
“Normally in a business collapse you can sell it in five to six weeks, however, there is no guarantee with a football club. You have to look at the costs to trade the club and your own costs. Part of the difficulty in trading the club is the hurdles you have to overcome because of the FCR,” said Manning.
Other difficulties brought about because of the FCR include maintaining the integrity of the player contracts. A new owner must pay the previously contracted wages, making it difficult to entice purchasers who like to buy a business with a clean slate.
Supporters’ attitudes to administrators range from being non-plussed, to full blown rage. Throw in fee pressure, and the cumbersome football insolvency rule set, could see insolvency practitioners throwing a body-swerve away from football club administrations.
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