Coventry city council leaders have issued a stark warning to Coventry City FC that they need to sort out their dispute over the rent for the Ricoh Arena in the near future.
The football club claim they are to have more talks with the council "very soon". The council, on Monday, admitted publicly that "in principle" they agree to lowering the rent payable for the Ricoh Arena, but the council leader John Mutton thinks the club is "a long way off" from having a viable business plan.
Talks are ongoing between the football club and to co-owners of the Ricoh Arena (ACL), the city council and the Alan Edward Higgs Charity.
Councillor Mutton said there were no further talks scheduled with the council at the moment. The city council have two representatives Martin Reeves and Chris West, on the board of Arena Coventry Ltd (ACL).
In addition to the rent dispute, Sisu want to buy a share of the Ricoh, but again, no meetings between the interested parties are scheduled. Sisu want to buy the Higgs Charity's 50% share and in principle the Higgs Charity want to sell but under the right conditions. However the council, who own the other 50%, have the power of veto over a deal if they disagree with the terms.
Peter Knatchbull-Hugessen, of the Higgs charity, told the CT that there were no further meetings planned with Sisu in the short term.
It has emerged that ACL has been able to recover the missed monthly payments from an escrow bank account set up when the Ricoh was being built even though the football club has not deposited any money into the jointly agreed rent bank account.
An escrow account is an account set up and administered by a trusted third party but does not belong to that party. The money is kept separate form other funds and is usually to be used for only one purpose. For example if buying a custom built car in advance of it being available, the buyer would deposit the money into an escrow account until the car was ready. Neither the vendor or seller could access the money until the car had been delivered. Once the car had been delivered the trustee of the escrow account would release the money to the seller.
Councillor Mutton revealed that ACL had been able to withdraw from a reserve of £500,000 deposited by Coventry City in one of the escrow accounts set up when the Ricoh was being built.
However, the escrow account is now nearly empty hence the warning issued by councillor Mutton that an agreement must be reached soon.
Council deputy leader George Duggins said to the CT's Les Reid: “This unsatisfactory situation cannot go on indefinitely. It isn’t satisfactory that there is a difference between what the club believes they should pay and what ACL believes.
“There is an agreement in place. If it’s not fulfilled something else needs to be put in its place. The option not to pay doesn’t exist in the medium term.”
Councillor Mutton said: “Lowering the rent is something we would consider if all the other pieces of the jigsaw fall into place. Sisu has got to show us a proper business case for the club. They are miles away from it yet, because we haven’t seen any form of business case.
"We’ve only seen three options; get rid of everything, get rid of half the players and backroom staff, or get rid of nothing. It’s not just about cutting wages. They’ve got to increase income.
“If we were to drop the rental payment by £500,000 that would cover only one month’s losses at the football club. It is losing £500,000 a month, plus another £3.7 million from the Football League and TV rights due to relegation.
“ACL’s profits are expected to be around £1.1 million this year. If that’s sustainable profit, we have some flexibility in lowering the rent, but we are not going to lower the rent to chuck it into a black hole and let the losses keep building up at the football club, with sooner or later the football club going into administration.”
More on this: http://www.coventrytelegraph.net/coventry-city-fc/coventry-city-fc-news/2012/07/10/92746-31359530/