April 1, 2009
Financial woes at Southampton Football Club jeopardise listed parent
Southampton Football Club's listed parent company was teetering on the brink of administration last night after the club failed to agree an extension of its overdraft with Barclays Bank.
Shares in the AIM-listed Southampton Leisure Holdings will be suspended this morning and Begbies Traynor, the accountancy firm, is standing by to step in as administrator of the troubled club, which has struggled since it was relegated from the Premier League in 2005.
It is heavily indebted after spending more than £30 million on a 30,000-seat stadium four years ago.
Rupert Lowe, its colourful executive chairman, is well known in the City as a former Deutsche Bank banker and the present chairman of WH Ireland, the stockbroker. However, Mr Lowe's return to the club last May after a well-publicised falling-out with Michael Wilde, its chairman, has failed to arrest the decline of the club.
Barclays, which is being advised on talks with Southampton by DLA Piper, the law firm, declined to comment.
However, sources close to the situation said that the board of the club would convene this morning to make the final arrangements to put the club's parent company into administration, with the business expected to apply to a court for an order within the week.
It is understood that then the heavily indebted club will have until the end of the summer to find a buyer or face bankruptcy itself.
Southampton has a £4 million overdraft with Barclays, which it has exceeded, and it also owes Norwich Union about £24 million for its stadium.
It is understood that Barclays declined to extend Southampton's loan or invest equity on the grounds that it was not commercially viable.
However, it is hoped that moves to put the club's parent company, rather than the club itself, into administration will save it from having points docked by the Coca-Cola Championship.
The club received two years of parachute payments, totalling about £13 million, to cope with the reduction in income after relegation; however, inevitably, it was forced to sell its best young players, including Theo Walcott, the England winger, to Arsenal, and Gareth Bale, the Wales defender, to Tottenham Hotspur.
Last year, Southampton avoided relegation to the third tier of English football on the last day of the season, although it faces a similar battle again, sitting second from the bottom of the Championship.
A logical thought process which, alas, tends to fall foul of the "administration is bad, full stop" brigade on here.... Open mind is the best policy IMHO