Lessons from Bolton

In the same week that 130 years of proud history nearly ended at Bolton Wanderers, and the club’s largest benefactor sadly passed away, is it time to enhance safeguards for clubs and protect the legacies of investors?

Back in March 2016, The EFL were left in an unenviable position. A consortium led by Dean Holdsworth and Ken Anderson bought a 95% controlling stake in the club for £1. In doing so they secured the write off of £170 million of loans that had been advanced by the outgoing owner, the late Eddie Davies, which gives a clue as to how far from break-even the club had been operating.

There were questions about the source and sufficiency of funding of the consortium, whose bid relied on £5 million of loan finance from BluMarble Capital Limited, secured on the assets of the Burnden Leisure Group and subject to annual interest at an eye-watering 24%. With a winding up petition from HMRC over unpaid VAT, the EFL were left to decide whether to sanction a change of ownership or otherwise risk the club going into administration or even liquidation.

On the surface, most people would think stopping a club suffering an insolvency event must be a good thing but since that decision a host of things have played out which suggest otherwise.

We have seen the unsavoury falling out of ex-player and former joint owner Dean Holdsworth and Ken Anderson, the current Chairman. Only 2 months ago we saw the players striking for the first time in the clubs history over unpaid wages forcing a pre-season game against St Mirren to be cancelled. In recent weeks we have seen a public spat and winding up order issued from celebrity chef Paul Heathcote over unpaid services and contracts that the Chairman inherited.

These exchanges damage the reputation of the club and become divisive issues for supporters and the whole town.

We have seen the unparalleled situation of an Asset of Community Value (ACV) application to list the Macron Stadium by the Supporters Trust being publicly challenged by the Chairman. The legislation only serves to draw attention to the possibility of a sale rather than blocking a transaction being proposed for legitimate commercial reasons, a small step to ensure that Wanderers’ ground cannot be sold off from under them. Alongside a backdrop of the sale and leaseback of car parks adjacent to the stadium, the training ground being sold to local rivals Wigan, and other clubs suffering long term legacies of ground sales (think Coventry City and Oxford United) it’s an understandable move.

We’ve seen the late filing of accounts and the auditors, Deloitte, in an unusually candid notice of resignation filed at Companies House on 21 April 2017, quoting their entire disclaimer by way of explanation for their resignation.

Fast forward to today and it is the issue of repayment of the BluMarble loan (long overdue) that threatened Bolton’s immediate future.

So who is to blame?

Is it Ken Anderson and Dean Holdsworth for taking on the responsibility of ownership seemingly without the resources to sustain it at the current level?
Is it the players that signed long and lucrative contracts with no break clauses for relegation?
Is it the supporters who were happy to enjoy the ride and the success, and then criticise supporters who ask questions?
Is it BluMarble who offered £5 million of credit with 24% interest?
Is it the football restructuring expert who was employed to secure a change of ownership rather than let the club suffer an insolvency event?
Is it the EFL or the EPL, the leagues owned by the respective clubs, who could do more to ensure the competitions are not distorted by unsustainable levels of debt?
Is it the Football Association who could improve the regulatory regime to protect football clubs and their assets?
Is it Eddie Davies who bankrolled the club, taking supporters and the town to the top table with international players and trips to Europe, but who did not then take steps to ensure the club was being run sustainably when it dropped out of the top division?

Or perhaps it’s actually no single party’s fault but a combination of the above.

However, it would be unnecessary to seek to apportion blame if we learn lessons from Bolton’s experience, accept we have a problem and come together to solve it. Rather than pointing the finger of blame it is sometimes preferable to take a step back, think what is happening and ask could we do it better.

Here are a three simple observations…

1. It’s easy for us all to get too caught up in the consequences/fallout and forget about the cure.

2. Professional sports clubs will always look for advantages particularly when the financial rewards for winners at the top of the game are so high.

3. Clubs should outlast owners and have their financial security protected. Sometimes, someone needs to say no.

There are ‘quick wins’ relevant to Bolton’s circumstances some of which we highlighted in our ‘Recommendations for regulatory reform of English football’ paper such as the insufficient power of the EFL to block changes of ownership or to restrict clubs’ ability to incur debt or pledge their assets as security. However, taking an even broader view, it seems the problems at Bolton under the current financial fair play system can be simplified in two ways:

1. The gap between what clubs are permitted to lose under FFP and actually do lose is too big e.g. if the mess is too big, it can’t be reasonably rescued.

2. The consequences for owners who put clubs at risk aren’t sufficient to discourage them from doing so.

The difficulty is who would want to rob Bolton fans of their memories of playing in the Premier League and Europe under Eddie Davies’ stewardship? Likewise, not many Pompey fans would want to trade in their FA Cup memories. If we are too draconian in restricting clubs’ reliance on benefactors, do we prevent any fairytales: do we simply solidify the hand of the powerful clubs? Limiting spending also raises a whole host of other debates such as whether English clubs could still be competitive in European competition without the best players or whether we would reduce the global appeal of the EPL and the associated benefits, ranging from the benefit to the UK economy to money from TV rights that can be reinvested into grassroots etc etc

Although there are counter arguments to many of the points above, if for now we accept that clubs should be entitled to rely on financial support from their owners over and above trading income, then the attention turns to how we should allow this to happen without jeopardising a club’s future stability.

Of course, financial fair play is now in operation in UEFA competition, the EPL and the Championship, while Financial Cost Management Protocol has existed in League One and League Two for over a decade, with the National League operating its own form of cost control. But do these regimes adequately protect clubs’ solvency, especially in a change of ownership scenario? Who can realistically follow the ownerships of an Eddie Davies at Bolton, Ken Hodcroft at Hartlepool United or Glenn Tamplin at Billericay? If the answer is next to no one then we have to accept that clubs and their owners cannot chase the fairytale outcome without adequate safeguards being in place to protect that club’s future if the owner decides to step aside. The Championship now have rules which oblige Owners to formally guarantee forecast losses over 3 years: why not incorporate this obligation in the rest of the EFL and National League rules?

However, if we are serious about preserving the famous histories of our clubs, should we not also look at imposing conditions on outgoing owners who have committed to expenditure beyond a ‘rescuable level’ to provide sufficient financial support to allow the club to return to a sustainable level of operation so that its future is not placed in jeopardy following their departure?

Owners and supporters will never agree on everything but with an adequate safeguard in place at least it eliminates the worst outcome. The indirect benefit would be to enlarge the pool of potential bidders when a change of ownership occurs making the proposition more attractive: whatever people think about Ken Anderson and Dean Holdsworth there weren’t many other credible suitors because of what they would be taking on, and there was great pressure for a deal to be done.

Facilitating a calmer transition will make for a more competitive bidding environment, with a focus on long term planning and celebrating and protecting club heritage rather than avoiding the risk of insolvency.

We’d love to see the FA and the leagues to work together to look at changes to club regulation in this light, so that the incredible generosity of investors such as Eddie Davies can benefit clubs, rather than it paradoxically being the architect of their demise..