Sport is a central pillar of British society.
Not just in terms of shared experience and associated culture but also in taking part and the numerous benefits it brings through exercise and social engagements. The lockdown has been particularly tough for sports enthusiasts.
Economically, like every other sector of the UK economy, sport has taken a big hit. We’ve previously written extensively about sport and insolvency but the coronavirus pandemic and lockdown have acted as an accelerant.
More than a game?
Not for the first time, football and it’s response to the predicament has split it down the middle. Fans, players, managers, CEOs, broadcasters, medical staff and government all have a vested interest in how the sport responds and so far it has been a little of everything.
Non-league football up to and including the National League have declared their seasons over as has League Two in the EFL. They have completed their season using a points per game formula to obtain a final league table and have accordingly promoted the top four teams.
League One are deciding how they will proceed but seem like they will vote to finish in a similar style while the Championship and Premier League are pushing ahead to play on and complete their seasons behind closed doors.
The government has given them permission to begin modified and social distanced compliant training this week with an expected resumption date to be June 12th under the aptly named “Project Restart”.
Playing in front of empty stadiums will be a new experience and not necessarily a positive one. The German Bundesliga restarted this week and the experience was described as sterile and unsettling.
Crowds are the scenery, backdrop and special effects at matches and without them the experience might not be as compelling as the authorities are hoping it will be for viewers and broadcasters.
Finishing the season and maintaining sporting integrity are just two of the issues facing football. The financial outlook for teams in an extended offseason is another.
Swindon Town Chairman Lee Power estimates that without immediate financial support from the government or higher up in the football food chain then 30/40% of clubs in League One and Two will be at risk of insolvency.
This is in addition to many lower league footballers contracts running out at the end of June and some teams such as Oldham Athletic and Macclesfield Town already struggling to pay staff on time.
Even if the season is completed in this truncated format, there will still be restrictions placed on crowds when the following season is due to start and fans might not be allowed into stadiums until at least 2021.
Football finance expert and insolvency practitioner, Gerald Krasner who has been involved with several football administrations underlines the financial imperative for restarting football at a time when less high profile industries are still locked down.
He said: “The reality is that people have managed without football for more than a month now and there’s a real danger that unless the momentum can be regained and fans can begin to watch matches on TV again, the impetus will be lost and the draw of football will be diminished in the long term.
“Unfortunately those clubs with wealthy foreign owners may not necessarily be immune from disaster either. If that was to happen, the television money would soon desert the game too.
“Overseas owners will be forced to respond to the effects of the global pandemic on their own finances and business interests, and for some that could mean that ownership of an English football club is simply no longer viable.”
And this, regardless of health and safety, is the prime consideration for the elite of English football.
Any “one” for Tennis?
Other sports, while not taking a direct lead from football, will be at least watching closely to see how any solutions play out.
Rugby and Cricket are looking to hold some kind of competition to avoid their 2020 seasons being written-off and Silverstone have announced that they are hoping to stage two Formula One races albeit in front of empty grandstands.
Golf and Tennis appear to be faring better at least in terms of participation as they were also allowed to restart in the first wave of recreational reopenings recently.
David Rickman, Executive Director of Governance with the R&A said: “We’re fortunate that golf lends itself to social distancing, so by making a few relatively small changes to the rules and the environment in which we play, we can make it safe for golfers.”
Of course most golf clubs will be operating at a minimal level initially as their bars, restaurants, golf shops and practice facilities will all remain closed.
Additionally, a majority of staff including green keepers remain furloughed so playing will be even more of a challenge for some although the clubs themselves will welcome any influx of income.
Now unlimited exercise is allowed, the demand for facilities will be as large as it is immediate.
Playgrounds, outdoor gyms and ticketed outdoor leisure venues will still remain closed but one-on-one sports such as tennis, basketball or even batting and bowling in cricket nets is now permissible as long as social distancing rules are observed.
All of these changes are based on the latest best practice and advice based on the Covid-19 infection rate continuing to fall. Any second wave of infections, or worse any that could be directly attributable to a sporting event, might mean a second lockdown and further restrictions throwing any further plans into doubt.
One of the key tenets of sporting faith is hope. There’s always another match or season. Always the chance to start again and win this time if you’ve suffered a defeat.
In business, administration can offer a similar hopefulness and route to redemption. A lot of otherwise good and profitable companies are finding themselves in terminal circumstances because of the Covid-19 pandemic but there could be a way for them or any business in difficulty to dust themselves down and start again on a level playing field when it’s time to go again.
If this sounds appealing or you’d like to know more than you can get in touch with us here.
We’ll arrange a convenient and free initial consultation with one of our expert team of advisors who can begin our dialogue.
Once we have a clearer view of your business, it’s financial situation and immediate circumstances, we can help you plan out an effective and efficient way forward for you and your business.
Rumours have begun circulating that the Championship, the top division of the English Football League, are considering an unprecedented group or collective administration involving each of their 24 member clubs.
This would mean that as well as some of the most storied and famous names in English football such as Leeds United, Nottingham Forest, Sheffield Wednesday, West Bromwich Albion and Middlesbrough potentially folding and reforming as new entities, while releasing every single one of their players, managers, coaches and match-day employees.
They would then look to re-employ them on new but reduced terms. Alternatively, they could exit from administration via a Company Voluntary Arrangement (CVA) and retain the previous ownership and identity.
Regardless what method is chosen, the rationale for what would still be a unique and staggering move, is that it would be a way of reducing outgoings and debt.
It’s also important to remember that these scenarios are being discussed at the same time as the players PFA union are in negotiations with the EFL to agree to league-wide wage deferrals or reductions which would alleviate some of the immediate pressure on the clubs.
Under current EFL rules, any team going into administration or suffering any other kind of insolvency event during the season is immediately liable for a ten point deduction, which as the season only has nine matches left to play, could be pivotal in promotion or relegation scenarios.
The league would either have to waive the penalties in this case or apply them to every club in the division simultaneously so that nobody would be at a competitive advantage.
Football also has specific rules concerning the payment of debts and the reformation of clubs at the same or a lower level.
Currently all football creditors such as players, are entitled to receive 100% of what they’re owed before any new club can be launched whereas other employees or non-football creditors, such as the St John’s Ambulance or HMRC, would only receive 25p in the pound following the takeover of the club’s assets, although this could rise to 35p if repaid over a longer period.
One of the main hurdles to this plan would be reaching an agreement against the poaching of players from other teams as every player would be a free agent and legally entitled to sign for whoever they wanted, regardless of the status of their previous contract and that their registrations would fall outside of the usual transfer window periods.
This would only apply to clubs within the EFL and there could be nothing to stop Premier League or foreign teams poaching them. Football is notorious for being based on a series of “gentlemen's agreements” rather than contractual law so this could see previous loyalties and alliances broken forever.
1,500 EFL footballers are out of contract at the end of May or June and usually leave or are free to leave or renegotiate new deals but if the season is artificially extended into July or August then this creates obvious difficulties.
It also raises questions of professionalism - if a star striker knows he is leaving at the end of the season regardless, then how motivated will they be to risk injury and put their body on the line in a vital relegation battle?
Several sports leagues have collapsed in the UK before including the National Basketball League and the British American Football League but none as high profile or consequential as the Championship or any EFL division.
Other sports such as county cricket and rugby league and rugby union are also trying to find funding formulas to keep as many clubs functioning as possible so will be looking at developments within football with interest.
Formula One, possibly the most expensive sport in the country, is also facing an existential crisis.
Chief Executive of McLaren Zac Brown has warned that as many as four of the ten teams set to contest the 2020 season could fold if no agreement is reached between teams and staff if racing restarts at some point later in the season.
Nine of the 21 grand prix’s have already been cancelled or postponed and their rules state that at least eight have to be completed for a meaningful championship to be awarded.
While the clock is ticking, Eamonn Wall, Managing Director of Business Rescue Expert is sceptical that the clubs would pursue their doomsday strategy.
He said: “As we’ve seen previously this season with Bolton Wanderers and Bury, administrations are not unknown in the EFL and sadly there may be more to come especially if the enforced lockdown means that the season is elongated or even declared null and void.
“What would be highly unlikely is that all the clubs would enter administration at the same time. As well as the contractual chaos it would cause, there’d be lots of objections - especially from their creditors and would likely be led by HMRC.
“The PFA and EFL are still negotiating for a mutually agreed settlement which would require 75% of clubs to agree to change the EFL rules and allow this or any other collectively agreed changes to the players contracts to take place.
“Each side is looking to gain leverage over the other - it’s a business negotiation after all - and the potential threat of multiple administrations might be enough to get the PFA and players to renegotiate their contracts, which is the main outcome that the clubs are seeking.
“It’s certainly a lot easier and cheaper for them to conclude the issue this way than by looking to launch a unilateral group administration before the season has formally concluded.”
We’ve written previously about sporting administrations and insolvencies and while they may look the same as other businesses and sectors they also have the added complexity and interconnectivity of being part of a wider association or league.
They also have a disproportionate emotional hold on supporters and communities.
We’ve all got a favourite shop or beer but not many of us have got that name or logo tattooed on our bodies, or can reel off the names of the previous 12 CEOs like a stanza.
But they are businesses with employees to pay and debt repayments to meet and like any business if they can’t meet these obligations then they’ve got to make some serious choices - and quickly.
If you contact us one thing we can guarantee is that you’ll be listened to.
One of our team of expert advisors will arrange a free virtual initial consultation with you to understand what you’re facing and to work with you to come up with an effective response.
The club owes debts of over £600,000 to Blitz’s company Brassbank and the club are due to attend a hearing scheduled for this afternoon. This morning the club were facing a winding-up petition in the High Court brought by HMRC for unpaid tax debts in the region of £70,000 which may or may not already have been set-aside at time of publication.
The Oldham Chronicle reports that a potential administrator has already been approached and Mr Blitz is keen to continue to provide backing through the administration process.
The Football League deadline for imposing points penalties is March 26th although any penalty incurred after this date would see the team begin next season on minus points as Bolton Wanderers did this season.
Going into administration currently incurs an automatic 12 point penalty which would effectively see the Latics relegated from the Football League for the first time since their acceptance in 1907.
The club is currently operating with only three stands open on match days as the local council has closed the North Stand over safety concerns so further financial intrigue is the last thing they’d want.
It’s been a bleak year for North West football clubs with Bury going into administration and being expelled from the league, Bolton’s points deduction effectively guaranteeing them relegation to league two and Macclesfield Town facing winding-up petitions after staff had been paid late for the fourth time this season.
It’s also just come to light that Southend United’s players are still awaiting their wages from February.
Oldham owner Abdallah Lemsagam, a former players agent, took over the club in January 2018 and saw them relegated in his first season in charge. He hired former Manchester United great and Oldham native Paul Scholes to be manager in February 2019 who later resigned only seven games later claiming he had been mislead.
Lemsagam later alleged that he was making a complaint to Greater Manchester Police regarding the financial conduct of former owners including Simon Blitz regarding grant money from Oldham Council towards the building of the currently closed North Stand.
Blitz, a US based entrepreneur, claims that the club owes £200,000 for the rent and a further £330,000 for an unpaid loan with late fees and interest accruing further debt daily.
The club accepts it has not paid rent and under the terms of the loan Blitz has the right to appoint an administrator.
There’s claim and counterclaim between Lemsagam and Blitz regarding various land and property deals involving the club and the local council which the hearing may shed more light on but the clear and present danger facing the club relates to it’s self-admitted rent arrears.
Chris Horner, Insolvency Director with Business Rescue Expert, says it’s quite unusual for a business to face an administration order under such circumstances. He said: “When an unsecured creditor is pursuing a debt, they will generally seek a winding up petition. An administration application from a creditor is a more complex request.”
“Usually, as the club is already subject to a winding up petition from HMRC, the landlord could have sought to be attached to this petition or to support the petition. The administration application however means they have brought their own separate action, which could prevent the winding up petition.”
“In addition, with an Administration Order, the creditor is able to nominate the insolvency practitioner(s) who will act as administrator. With a winding up petition, the Official Receiver will be appointed in almost every case.”
Bill Shankly said that football is a simple game made complicated by people who should know better. The same can be said for running a business.
Anything that makes profitability more difficult or impedes progress could ultimately turn into a big problem for any company.
If you’re finding running your business is more like wading through treacle than effortlessly gliding over a wet pitch then get in touch with us.
One of our team of expert advisors will arrange a free, convenient initial consultation to talk through your situation and help you plan an effective way forward to help you transform from relegation candidates to real contenders.