Football club secures £14m bailout despite rent arrears

Football club secures £14m bailout despite rent arrears

A founding Premier League football club has secured a £14 million loan from a local council in order to secure the future of its stadium.

A founding Premier League football club has secured a £14 million loan from a local council in order to secure the future of its stadium, reports the Coventry Observer.

Coventry City Football Club’s future at the Ricoh Arena has been made more tenable after Coventry City Council voted to bail out the firm which runs the team’s stadium, Arena Coventry Limited (ACL), with the eight-figure loan to safeguard “a publicly funded asset”.

ACL currently runs the stadium on behalf of the Council and the Alan Edwards Higgs Trust charity.

The City’s local council – made up of 43 Labour councillors and 11 Conservative representatives – voted unanimously to back the £14 million deal.

The move means that the local authority is now effectively ACL’s acting banker, allowing the firm to pay off a previous loan arrangement made with its existing funding provider, Yorkshire Bank.

The council were quick to point out, however, that they were not putting any cash into the club directly.

Bosses at Coventry City had speculated that Yorkshire Bank – which provided funding for the development of the stadium with a £21 million mortgage – was set to call in the debt and put ACL into administration, a move which could have seen the club’s current owners – hedge fund management firm SISU – buy it at a knockdown price.

Since March, the League 1 side has failed to pay rent of £100,000 per month as part of a long-running dispute with the venture company, resulting in a bill which stood last month at £1.1 million. It is now the subject of legal wrangling.

Though the club had been threatened with a winding-up order over the unpaid amount, such a move means that ACL can be more flexible in reclaiming outstanding rent.

The unprecedented and historic move saw the council pay off the outstanding mortgage with Yorkshire Bank – thought to have been a significant proportion of the original amount – with the council effectively becoming ACL’s bank, according to council leader John Mutton.

The title reports that interest rates on ACL’s new facility with the council are considerably lower than those demanded by the bank and will be paid back over a longer period.

The leader of the Labour-run city council, Councillor John Mutton, said: "We have taken a decision that will benefit city taxpayers and secure the future of one of our most important and best loved public assets that brings great benefits to Coventry people.

"Not many councils would have done what we've done, but I've always believed that councils can - and should - be prepared to take bold and radical decisions when they are the right thing to do.

Speaking about the existing disagreement between the Football Club and the owners of the stadium, he added: “It's up to ACL and the club now to find a way forward on the rent issue.

"We know that ACL is totally committed to doing this, and we hope the club's owners will be committed to doing so, too."

The council claimed that the deal will bring a “net surplus to council taxpayers” and that the stadium could be used as security to protect the taxpayer from any default by ACL on loan repayments.

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