As a Coventry City fan of nearly 50 years I’ve been looking on in bewilderment at recent events, trying to discern some logic in what’s going on. In particular what is driving SISU’s actions over recent months? Why don’t they just reach a settlement with ACL and pay the rent? Why are they apparently set on taking the club away from the Ricoh, indeed away from Coventry, for the foreseeable future, with all the damage that carries in its wake? Where on earth is the logic in building a new stadium, at huge expense, even assuming an alienated city council is willing to grant planning permission, when a purpose-built ground already exists?
I write as a layman with no inside knowledge. All I have to go on are press reports, insights gleaned from this excellent fan site, and some commercial experience of my own. So what follows is speculative, but it does seem to me to weave together some of the otherwise bizarre events we are seeing unfold.
As a starting point…SISU is an investment business. They make their money by buying assets, or stocks, or derivatives, and selling them on at a profit. They get the money to do this from investors, who have to be convinced that SISU is giving them a good return. Just why an investment company should buy a struggling football club - in particular one with little in the way of tangible assets - is perplexing. When SISU acquired Coventry City it appears they inherited substantial debts, some player registrations (of apparently dubious worth), some sponsorship and TV rights, and a few cash-generating sidelines such as the club shop. Oh, and a golden share with the football league, which in the meantime seems to have gone missing.
Where was the upside? An optimist might suggest they would build value by achieving on-the-field success. Given time, promotion to the Premiership, and some very careful management, the funds generated through TV income, sponsorship and gate receipts might just have allowed SISU to trade profitably and pay off some debt, or alternatively to sell-on the enterprise at a profit. If this was the strategy at Coventry it seems manifestly to have failed. Clubs don’t build value by being relegated and going into administration. In any case experience teaches us that football clubs don’t make successful investment vehicles (think Chelsea, Manchester City, QPR and any number of other loss-making vanity projects).
A more tangible upside emerges if SISU can gain control of the Ricoh Arena and adjacent development land. In normal circumstances the Arena itself seems to run reasonably profitably, so it has some intrinsic value as a business. And there is the added benefit of keeping match day revenues generated at the venue. Development land, particularly if it’s ear-marked for commercial use, is potentially lucrative. These seem a much safer bet as a way of recouping SISU’s investment in the football club. And this certainly seems a more rational financial strategy for an investment fund to adopt.
But SISU doesn’t yet own the stadium or adjacent land. How are they to get hold of them? One option would be to negotiate in good faith with the Higgs Charity and ACL in order to buy their respective stakes in the Ricoh at a fair market price. The downside is that this involves SISU in yet more outlay. And these transactions on their own would achieve little towards neutralising SISU’s inherited debts and losses to-date, which may be anything from £15m to £60m depending on whose numbers you believe. OK, the cashflow would improve and the day-to-day operation may become a little more profitable. But even if they sold-on the club, stadium and associated land as a package it looks to me unlikely that SISU would be able to recover all their debt in the club and present this to their investors as a profitable project.
My surmise is that SISU’s business model now depends on them acquiring the Ricoh and associated land at a knock-down price, so they can sell-on at a significant profit. To achieve this they must somehow dragoon ACL and the Higgs Charity into selling cheap… if necessary through a fire-sale prompted by a collapse in profits at the Arena and the ensuing insolvency and administration of ACL.
So how does this help us to understand what’s going on?
SISU’s refusal to pay rent for the Ricoh (clearly in breach of its contract), its unwillingness to enter seriously into negotiations on the rent, and its habit of communicating by press statement rather than discreetly and in a business-like manner direct with the interested parties, all suggest to me a lack of good faith. It seems to me that behind this manoeuvring there is another agenda which Tim Fisher, as front-man and conjurer-in-chief for SISU, is doing his level best to avoid having to explain.
For me, SISU’s plan finally comes into focus with the High Court summons. Why should a football club get involved in the financial arrangements of its landlord (ACL), an independent business? The city council’s intervention in the financing of ACL has no bearing on the club’s tenancy agreement, other than to secure ACL as a going concern – surely a positive from the perspective of the football club? The impact of the council “bale-out” is to stabilise the financing of ACL, and reduce immediate financial pressure on the stadium owner. By challenging the city council’s action, SISU finally reveals its hand. SISU’s interest is in piling-on as much financial stress as possible, in the hope this will force ACL into a rental deal at any price…or better still to precipitate the collapse of ACL, leading to administration and a fire sale of its assets. Hence the refusal to pay rent, the threats to stop using the Ricoh, and the “decision” to build a new stadium elsewhere in Coventry. All these actions, or threatened actions, are calculated to pressurise ACL’s business model. From SISU’s perspective the council’s intervention undermines - potentially fatally - SISU’s destabilisation strategy. That’s why SISU has adopted such high profile legal measures to challenge it.
If I’m right, where does all this leave the football club?
As far as success on the pitch is concerned, my guess is that this is of only marginal interest to SISU. Of course SISU will try to have the club administered efficiently, and may aim for a degree of success, in order to maintain the club as an asset and mollify the fans. But large-scale, game-changing investment – which SISU surely has the muscle to apply if it so wishes – looks highly unlikely. The return is just too uncertain. The sad fact is that the football club is simply the means to a bigger financial end for its owners.
What does it mean for outside bidders for the club, like our current “White Knight” Mr Haskell? SISU will be looking to recoup all their outlay, plus a reasonable profit, through any sale. Investors, after all, build their reputations by selling-on at profit. The recent claims that the club is £60million in debt may be SISU’s way of naming a price to a potential buyer. But who in their right mind would pay £60m for a bundle of player registrations apparently worth only a fraction of the debt? Hence Mr Haskell’s insistence that he will only buy if the club goes into administration, meaning its stakeholders will receive only a fraction of the money they are owed. And hence SISU’s focus on ensuring an administration sale of the club doesn’t happen, using every legal and commercial ploy they can muster.
Unless, of course, the administrator sells at a cut price to another branch of SISU, meaning SISU holds onto the club and simply shuffles the debt to somewhere else in its organisation. This is perhaps the most worrying scenario - where SISU keeps hold of the club after the administration process, to use as a slowly dying hostage as it tries to force ACL to capitulate - the only chance left for SISU to recover its investment. Under this scenario we will get ever more bizarre propaganda
statements from Mr Fisher as SISU tries to push ACL under, actions which are sold to the supporters as unavoidable, or for the long-term good of the club. In reality the wellbeing of CCFC will be very much secondary.
I would be happy to be proved wrong in these meanderings. If I’m correct it’s a sad reflection on the ethics of the investment business. It suggests that football clubs must be managed prudently if they are to avoid being snapped-up by financial predators. It underlines the need for community involvement in the running of football clubs.
As for the fans, we can only watch from the sidelines, hoping Mr Haskell’s bid will be successful, that SISU don’t have some clever spoiling tactic up their sleeves to thwart his bid, and that he really means what he’s saying when he speaks about more community involvement in Coventry City.