Episode 45 – The Nii Lamptey Show

Great show as always guys. Just wanted to respond to a few things that came up when you were discussing the meeting with Sepalla. I’ll try not to ramble on too much but it could go on a bit!

Lack of statements from CCC / ACL – This is down to the ongoing judicial review process. When the case was originally thrown out Lucas and Blundell stated to the Telegraph “For the past few months the threat of litigation has fettered the Council. We’ve been unable to speak out about this issue or talk about the reasons why we’ve taken the decisions we have. That’s been very difficult for us all; we know how important the Ricoh Arena and the Sky Blues are to Coventry people and how desperate people are for us to do what we can to find a solution.”. Of course SISU then appealed and so the silence continues.
In spite of that it’s worth pointing out that Lucas has twice publically asked Sepalla to meet and PWKH (ACL) made the following statement on SkyBluesTalk “ACL has always been prepared to negotiate a deal to allow the Sky Blues to play at the Ricoh Arena. We have made all the running thus far offering two very generous deals which were rejected by SISU. We will now wait for the club to make their best offer to return to play in Coventry.”

Council veto SISU purchase of Higgs share of ACL – This never happened. What actually happened was that SISU made on offer that was under the value specified by the formula agreed when CCFC originally sold their stake. Despite this the offer was accepted. PWKH stated “The Higgs had signed a HoT with SISU Capital in June 2012. This was not taken forward by SISU Capital and no agreement to sell could therefore be reached. There was no request by the Higgs to the Council to sell to SISU Capital and there was therefore no veto exercised by the Council. What may or may not have been said informally to Seppala by somebody from the Council has not been shared with the Higgs by either the Council or SISU Capital. It requires a decision by the full Council to agree or veto a sale of the Higgs shares in ACL, and for that matter the sale of the Council’s shares similarly requires a decision of the Trustees of the Higgs”.
I find it hard to believe that, given the aggressive manner that SISU are said to operate in (not just relating to CCFC), that an informal conversation sent them off with their tail between their legs. Why not push forward and take it to a council vote, the details of which would be a matter of public record?

Council refusing to sell the ground to SISU – As far as I’m aware SISU have never submitted a bid to buy the ground, as with the veto situation if SISU wish to acquire the ground paying a fair market price why not submit a bid that will have to be voted on?
My suspicion would be they are not wanting to pay a market rate but are attempting to exert pressure through non-payment of rent, and now playing in Northampton, to enable a below value sale. Justice Males, when throwing out the judicial review, seemed to indicate the same “the claimants had caused rent to be withheld as a means of exerting pressure in the commercial negotiations, which had led to an unsatisfied judgment of the High Court in ACL’s favour.”
Also worth nothing if SISU did buy the ground ACL still have a valid lease which they would also have to purchase. There actually isn’t any business case to support CCFC needing to own the Ricoh or even the lease, the people who would benefit would be SISU who would take ownership of an asset against their investment. Of course there is also no guarantee that SISU owning the Ricoh would mean it was under the same group of companies as CCFC. From CCFCs point of view what they do need is lower rent and access to revenues, both of which have already been offered by ACL.

Council charging excessive rent – You can certainly argue £1.2m a year is unaffordable for CCFC however when placing the blame with the council a couple of points need to be considered. First of all it was not the only option. At the time the rent was agreed we were still playing at HR, paying a similar rent, and had the option to buy back the ground. Failing that an assumption is being made that the flat £1.2m a year rate was the only offer on the table from ACL. This is not the case, ACL proposed a sliding scale of rent dependent on what division CCFC were playing in however the club rejected this in favour of a flat rate. Also worth considering that the level of rent was not identified as a problem by SISU when they carried out due diligence and it has also been confirmed by PWKH that no request to renegotiate the rent was received prior to SISU withholding rent, including the period before SISU tookover.

Paying rent – Sepalla claims they have been paying rent, this seems to be untrue. If it was the case that rent was being paid how did ACL win their High Court case for non-payment of rent and why was unpaid rent in the administrator report? It seems she is counting money taken from the escrow account as rent payment however a legal requirement of the lease was to keep the escrow account ‘topped up’ and the money in the account in the first place was not from CCFC. It was, I believe, from an FA grant. She also seems to be implying that as they were due a rent rebate from the council this could be offset against the rent. That’s simply not legal as they are two separate legal entities!

ACL rejecting the CVA – How directors, trustees etc respond to a CVA had legal ramifications. None of the parties involved could reject the CVA because they simply didn’t like SISU as they had legal requirements to fulfil. In the case of Higgs, being a charity, their trustees have to accept a proposal that sees them receive a return. The legal requirements of ACL, as a business, are different however their response has to be in the best interests of the company. PWKH has stated that ACL were happy to sign the CVA as long as SISU agreed to two things. He wouldn’t state what those were but at a guess I would say dropping the judicial review and accepting the £150K, 10 year rolling lease offer. It is misleading of Appleton and SISU to say these could not be considered as part of the CVA as they could have easily have been agreed and signed off on prior to the acceptance of the CVA.

AEG – the idea that AEG are going to come in and take over the Ricoh and turn it into a midlands version of the O2 seems at odds with all the available evidence. For a start AEG do not have a business model that would see them partnering with anyone to operate a venue, if they wanted the Ricoh they would make an offer to purchase the lease from ACL. Also when talking about AEG people seem to ignore the fact that ACL have an excelling working relationship with AEG which leads to the Ricoh getting far more stadium shows than other similar venues (for example near me St Marys has had Bon Jovi and Elton John in 12 years). In fact the Ricoh and ACL have been nominated, alongside Wembley and one other I can’t remember off the top of my head, as the best team to work with at the UK Live Music industry awards, hardly a sign that ACL are not managing that side of things well!

While it is good that Sepalla is now talking for me actions speak louder than words and I certainly won’t be accepting her statements as truth without some evidence to back them up given the number of statements we’ve had over the years from SISU which have proven to be, at best, misleading.

That comment was actually from PWKH but I see where you’re coming from but I guess from their perspective they’ve made several offers that have been rejected and have been told that SISU have ‘moved on’ so it’s not really down to them to keep chasing them – they told the Trust they were happy to speak to SISU so they have left the door open to them.

If you look at the sequence of events SISU stopped paying rent then started complaining the rent was too high and ‘league average’. ACL offered a reduction to £400K, SISU rejected and said they needed revenues. ACL offered their share (just under 80%) of revenues and SISU rejected and said it was £400K + match day costs. ACL offered £150K (which with match day costs comes to £400K) and SISU rejected it and said they needed ownership. To be fair to ACL they seem to have given a lot of ground and SISU have seemingly given nothing.

You’re correct on realisable market value but you have to remember that the Ricoh is not on the market for sale so any offer from SISU, and they have yet to make one, is speculative. Were it to be put on the market who’s to say that SISU would be the only bidders?

As I said there’s no real business case for ownership of the freehold (the only positives for that are for SISU themselves, they either have an increased asset value or more worryingly could obtain loans against the freehold to recover their investment and then walk away leaving us with a huge debt). The better option would be to buy ACL and that can be valued using various metrics as it is an ongoing business with financial history and presumably revenue projections. We know the formula for the Higgs share valued that at around £10m and there’s a £14m loan to pay off. So against the cost of a new stadium SISU could offer CCC somewhere in the region of £15m and be back in the Ricoh and benefitting from the revenues very quickly for the same cost as the new stadium and without having to sustain 5 or more years of playing at Northampton.

@39:30 you mention “.. the statement of facts… an essential document to have a look at for some of the background on the financial wranglings”. Could anyone give me a link to this – I’ve tried searching google but could not find anything.