Her er en dybde-gjennomgåelse av avtalen mellom Cellino og GFH som kom i stand den 31/1-2014. Vi kan merke oss at Cellino
ikke foretok en grundig Due Dilligence og får svi litt for det akkurat i disse dager. Vi kan også lese at
å stenge TA sannsynligvis gir flere negative enn positive konsekvenser!
Ellers er det verd å merke seg den makten GFH fortsatt har ved å kunne si
veto til det meste av Cellinos forslag til endringer.
Noorodin vil sitte som Chairman inntil utgangen av neste sesong!
Merkelig nok er det avtalefestet at Cellino skal bruke sin makt og myndighet til å skaffe bedre spillere og samtidig ha en ambisjon om både PL spill og etterhvert
Champions league! Her ønsker vel GFH å presse sitronen helt tom før de selger sine aksjer i klubben!
http://leechapmanssofa.wordpress.com/2014/05/21/leeds-united-the-original-mg-why-the-cellinogfh-financial-car-crash-isnt-the-biggest-problem-the-club-has-pt1/Leeds United the original MG, why the Cellino/GFH financial car-crash isn’t the biggest problem the club has pt1.By Editor on May 21, 2014
For the last few days we have watched as the finer details of the deal struck between Cellino/Eleonora Sport Limited and GFH slips into the public domain. We have also looked on as the day-to-day financial position has been exposed. Whilst the two things are closely inter-twinned once you recognise the reality you quickly realise that whilst the ownership/financial position is problematic it is in fact controllable over the medium term. Other issues that will have a profound effect on the team and the club also exist and these also need an airing. This missive is split into 2 parts, the first part which brings together all the known facts around ownership and current financial performance and puts them into context. The second part (next week) looks at the consequences of part 1 on the footballing and related operations of the club. We make no apology for letting Leeds United fans know the facts and we most definitely do not hesitate to take a realistic stance on what the future holds.
It has been a heady few days all in all. Interestingly though what has been the motor for lots of the light and heat of the Leeds United Cellino era this week is technically old news. What has been coming out, via various forms of social media, is what Cellino (via Eleonara Sport) and GFH agreed on 31st January 2014 and how that agreement impacts on how the club will operate going forward. From this point on there is no excuse for supporters not to recognise the truth. In terms of the deal done between Cellino and GFH all this article will be doing is repeating what twitter and other mediums have put in the public domain, and in the absence of other information those facts can be considered incontrovertible. We will divide off between the ownership issues and the financial issues, starting with the former. In what will come as a surprise to some I won’t be allocating blame in part 1, except to make the two following points:
1) Cellino willingly signed up to the deal and didn’t do the due diligence required with such a prestigious purchase (he admits that himself). He could have chosen to do that due diligence and simply continued to provide financial advances (of which at least 2 had already been made by the end of January) to the club to ensure continuation and then himself continued the normal process of dd. He chose not to, he pays the price for that decision.
2) GFH have protected their position and set up all the initial and going forward arrangements for Leeds United as if they were still a 50/50 partner. No significant decision can be taken without a GFH nominated director agreeing, they basically have a veto on a wide range of issues.
Ownership.
So we now know, Eleonora Sport (Cellino to you and me) agreed on that now infamous 31st January to purchase 75% of the shares in the capital of the then GFH owned company Leeds United Holdings Limited. The total cost of this deal was £35m divided between about £11m up-front payable to GFH, and then repayment by the club of somewhere around £10.5m of then existing shorter-term debt within about four years (which happens to be owed to GFH), and then repayment by the club of close on £13.5m of what is classed as long-term debt (which also happens to be owed to GFH and we think is payable on promotion to the PL in two batches) which Cellino is responsible for ensuring gets paid come what may. No earth shattering exclusive in that I think.
Contained within the detail of that sale agreement (they are called Share Purchase Agreements in those circles, GFH and Bates/Associates we know had one in November 2012) are likely to be a series of conditions and in this case lots of detail around such conditions seems to have got into the public domain, of which the most important IMHO are:
• Cellino is obliged to attract really good footballers (whatever they are) and top notch management talent to the club and to increase also in his spare time additional sponsorship revenues so as to put Leeds United in the Premier League and then whilst he is at it the Champions League. What could be simpler?
• We thought that since April no-one was really running the club on a day to day basis. In reality the official Managing Director of the club, something we believe was always going to happen even before Haigh was removed from any position within the company, is Cellino himself. President is but his own personal title.
• The divide between owners is 75% Eleonora Sports, GFH 10.46%, Envest (Nooruddin’s company) 7.02% and IIB (the bank) 7.52%, we know this from press reports. The other three owners are close business related and as such can be classed just as GFH people (as opposed to GFH bank).
• Of the £11m money Cellino pays to GFH the bank direct for the shares £6m has we believe been paid and £5m is due by the end of this this year, which is fairly standard stuff.
• Every penny put in by Cellino going forward is a loan from Eleonora Sports to Leeds United Holdings Limited, which again is normal for these kind of deals.
• All loans attract a rate of interest, in the case of ESL loans to LUHL that will be capped at something like 10% per annum.
• The short-term outstanding loans due to GFH the bank we believe are paid by the club sometime over over the next 40 months, in at least three instalments and is most likely to have a small single figure interest rate attached.
• As mentioned above the long-term debt likely as not only gets paid off when we get back in the PL. It remains on Leeds United’s books in the meantime probably growing due to interest of a higher single figure rate.
• On January 31st we know, from the subsequent public fall-outs, there was also a £1.95m combined debt to Sports Capital Limited, a Guernsey based company Haigh is involved in, and to Andrew Flowers. The SCL part of that debt is subject to a winding –up order on June 9th. It is assumed the Flowers element was settled between January 31st and the dismissal/removal of a winding up order subsequently.
• Cellino was likely obliged to make loans to the club as part of the completion process and is likely obligated to meet all running costs (remember the row before the FL appeal over wages which told us this). A rumour of 6 months has now evolved through further information to an unspecified period and leads to belief that GFH people can choose not to contribute to operating costs.
• GFH people are believed to also have the right not to provide 25% of any capital injections but equally have to be offered the chance to do so.
• Board size is presently 6 or 7 (depending on how you look at yesterdays announcements on the Cellino brood’s involvement), GFH people we believe are entitled to 2 places (in additional to the already public news Nooruddin being Chairman until the end of next season), ESL up to 5. After yesterday 4 we already know about, Cellino’s M, E and E, and Daniel Arty. At least one, we are given to understand, GFH people nominated director has to agree to a proposal for it to pass.
• GFH people seem to have done a job in protecting their interests, numerous sources say no decision that materially affects the club can be taken without their agreement, no mechanism exists to dilute their share or force them to provide capital, and they have rights to information, board meetings, senior staff access, extensive mechanisms for dispute resolution, parking spaces, match tickets and other related benefits most of which is standard stuff. We hear they also have the right to an annual business plan/budget, to be set by the MD (Cellino) the first of which can’t be far away in advance of the new season and which given the noises off recently will be an interesting meeting when they discuss it.
• GFH people seemed to have valued the club at £45m when selling, meaning they likely valued their 25% at just under £12m.
• We have strong reasons to believe Cellino can only add more than £10m to the company debt level’s with GFH peoples’ agreement, except where that increase is required to cover paying off the short-term loans, which of course goes to them.
I could go on for ever on these details that have become public knowledge somehow and I am sure readers recognise their is a reason for the way it has been expressed today. What is important is we recognise what it all means (assuming of course one side or the other doesn’t try and change the contents of the sale agreement in the courts and even then you can be sure as eggs is eggs that is covered in the agreement). In a nut-shell, Cellino is expected to do a lot but within the restraints set out in the agreement, GFH people hold extensive cards but it is in their interests Cellino is successful. Working arrangements have to be set up and that means only one thing, GFH people won’t be selling and will be part of the club for some time to come until or unless someone throws silly money at them. From what will be discussed from here on in that is unlikely to be Cellino.
Financial.
So where does all the ownership complications leave us in terms of day-to-day finances around the club. Let us start with two pieces of good news, the first is the SPA (as understood by its dripping into the public domain), despite its obvious complexities, means the club is further away from a self-inflicted administration and liquidation than it has been for over a decade, even if Cellino has very little cash to play with (or even has lots). What GFH have done is closed that door off for any of the owners (but not for the tax-man alas so let’s keep paying that shall we Massimo). The second bit of good news is the fantasy of Cellino the billionaire has been finally shattered by Cellino himself, good for him, it takes off the pressure he put on in the first place! Where Cellino and the brood sit on the scale between the average cost of a detached house in the Middleton area of Ilkley and the ridiculous over the top value of £850m some child has put on the Wiki page for English league football club owners is anyone’s guess. Cellino himself says it doesn’t matter and to be fair for the purposes of him meeting the obligations in any sale agreement, he is right (subject to him getting about £40m for Cagliari, which seems a little over the top to me). He states that, and you can see why he would rather not have to personally fund a potential £24m worth of obligations to GFH as well as cover £12m worth of losses if he can help it, the club needs to be financially self-sufficient. However how he goes about achieving that is another matter (and that will be looked at in pt2).
It is manifest that Cellino inherited a mess (but as previously stated he should and could have known that). Two examples of pre Cellino takeover largesse that have leaked out are £630k’s worth of external PR advice and a £50k flower (not Flowers as in Andrew, flower) bill. The latter would with a wider circulation render the infamous Ridsdale rented goldfish story old hat but in truth the former is the real indulgence and idiocy if confirmed. Having said that, Mishcon de Reya lawyers, forensic accountants and bets at York races don’t come cheap either! It is that disconnection between going for the easy small gain cuts (closing Thorp Arch etc) and still buying in expensive out-sourced assistance that means I hold that the responsibility for hard-working non-football employees of the club being made redundant is clearly Cellino’s.
I equally find the casual staff (low-paid) not being paid this month as his responsibility also. It really is the ultimate nonsense that a £900k debt to a man everyone wanted to no longer have an association with the club is not paid off at the earliest juncture. The point of disagreement in court is not going to be who is responsible for the debt, that is likely to be clear in not just the sale agreement but also the paperwork between SCL Guernsey (which included Haigh) and the then GFH owned Leeds United, including Haigh, no it will be some mute point about repayment terms, a expensive mute point given the standard of lawyer required. As an aside if it does get to court that is going to be one interesting questioning session of how the Chinese walls worked in that particular loan arrangement. The reality is Cellino can pay this, he is simply being stubborn for reasons not related to ability of pay and because of that an account is frozen and people who live off their casual wages are suffering. Frankly it is not good enough (more of this in pt2). Financially we should be raking in season ticket renewals monies (did GFH mortgage the 14-15 season ticket revenues? Who knows because both sides say something different, which is surprising when you consider most sale agreements have confidentiality and agreed statement clauses) but if that money is heading straight for a frozen account that seems a bit of a mess.
Now Cellino has suggested that outgoings are about £3m a month provoking most people who have looked at the accounts recently published to presume losses of about £2m a month. The 12 departing players don’t kick in financially till July and are guesstimated at saving £200-300k a month but less whatever pay rise Taylor gets. If we assume it takes 6 months for the losses to go back to the £1m a month the accounts showed that is an additional £12m Cellino will have to loan to the club minus income (which is anyone’s guess until we see the fixtures, the manager/coach, the squad and thus the motivation of fans to attend home games). This all starts to feel familiar, that build up to the inevitable selling of the star player, in this case McCormack. £8m is the recently reported figure, which looks more than he is worth to every other club but Leeds but which shatters a whole glass factory’s worth of optimism (which in itself might not be a bad thing) in the support if it happens. The glass gets crushed into tiny shards when Cellino bluff threatens to leave Thorp Arch.
Again there is a lot more going on in terms of the day-to-day finances at Elland Road than we know about today. Obviously should any more information somehow find its way into the public domain no doubt I will let you know it is there. Here end’s pt1, you now know what kind of pup Cellino willingly bought but you also know by some bizarre twist of fate we haven’t been this secure from an administration process or liquidation in years (predominately due to the web GFH have constructed around the sale). Time has come to move on from January 31st (notwithstanding the potential return of the “fit and proper†question) and focus on ongoing developments and including non-financial issues which to put bluntly scare me as much as the finances used to. See you in pt2 (next week).
MG.
