Knowledge Is Power

On 31st July 2018, I spoke to Stewart Donald about the deal to buy out Ellis Short. It was a simple deal (compared to most) which showed the Madrox team (Donald and Methven) liable to pay a total of £40m. Donald was very clear when he spoke to me (and you can find it in the archives on this website) that this was made up of two amounts, £25m to clear an outstanding loan and £15m to Short.

Subsequently, because of extra due diligence that was performed (also reported in the 31st July article), the final figure changed. This was because Ellis accepted that some of the issues in the club shouldn’t be the exclusive cost of the new owners, he’d pay his share.

That meant the total became £37m rather than £40m. Unsurprisingly the bank still wanted their £25m so, in a way, the Madrox partners bought the club for £12m (with debt still there of £25m).

So… nothing new so far.

On 29th April this year, the accounts were produced for the football club and then, the following day, for the group as a whole with the top company, SJD Leisure Holdings Ltd (Stewart Donald’s company) part of that release.

I reported on the ALS website that day what the key findings were in terms of the club, its future and what needed to be known. We also spoke to various people in the club to get information about a couple of figures which didn’t quite fit the story.

Looking back, I regret not pushing harder for answers to those questions and I suspect the people we asked regret not answering them. Had we got those answers, I suspect the Mail article would never have been written and the online rumours would have got nowhere.

Stewart Donald has now explained what those numbers are and it all fits together. They relate to money being moved around (legally and reasonably) and an accounting error.

The key information offered is that Donald and Methven will have paid £37m for the club - £12m to Short and £25m to the bank. This is what we thought was the case originally but had become confused by various accounting issues and newspaper articles.

The mechanism for payment is, if I’m entirely honest, none of our business but, as the board have offered clarity, the money has been paid over mainly from the club. This is because the club had the money sitting there ready to be used. That money is listed as being owed to the club by Madrox and the owners’ intention is to pay that money back into the club as and when it is needed. If we buy a right back for £1m, that money is likely to come straight from the owners, reducing the amount they owe the club by £1m. If work needs to be done on the Academy, that money would come from the owners rather than the club. There’s nothing too terrifying or conspiracy worthy in that information, it’s a bit like taking money from your current account rather than savings because it’s easier and there aren’t early withdrawal costs.

At the end of the story, the club will have had use of the parachute payments, Donald and Methven will have paid £37m out of their own pockets, the club owes nothing and Ellis Short got £12m.

The fact that Short left with £12m is, in a way, doing him a disservice. By writing off £145m of debt in exchange for £12m he has effectively given the club £133m (though we’ll leave to history how we wasted most of that over the years).

The debt being cleared, with Madrox paying the final £25m (as required by the terms of the deal) is, in a way, a double benefit to the club. Parachute payments are designed to pay the ongoing costs of a former premier league club after they fall out of that division. They are designed to avoid a club falling into debt. Not only has the club kept the parachute payments, they have had the debts cleared. If the deal had been that Short sold for £12m and left a debt of £25m, no one would have questioned the use of club money to pay the debts off.

I’ve already been asked today by a few people how we can be sure they’re not lying.

Well, the statements they’ve made are very clear and explain exactly what has happened according to the available data. The next data will be published in April 2020 and it will be immediately obvious whether it meets the explanation or not.

One person replied ‘but what if they’ve sold before then?’. If they have, then whoever bought the club will have gone through every line with a fine tooth comb and the purchase price will be changed based on what they find.

The owners have no reason to lie and gain nothing from doing so. As this is the fourth article I’ve had to write to try and explain the same thing, I think rather than lie or, for that matter, tell the truth, I suspect in the future they might just say nothing. And you couldn’t blame them if they did. As far as I’m concerned, the matter is closed.

Now, can we, at least until an investor comes along or next April, all move on to worrying about how we stop trying to sit on a 1-0 lead and who we should sign over the summer?