INSOLVENCY practitioner Marc Landsman has given the Hereford Times an update on the CVA proposal to Hereford United’s creditors.
Will Tommy Agombar’s departure affect the figures in the proposal?
The amounts owed are not affected by his departure, though claims are slightly different so clearly those will change. To be fair, that is pretty standard in insolvency as there are late invoices, additional interest.
Agombar is trying to sell the debts due to him and his associates by the company, he has been told that whoever buys them will have to abide by the agreement to postpone repayment until the after the end of the Company Voluntary Arrangement. How much he gets is up to his negotiations, I am not involved at all but I have asked for evidence of the sale so that I can see as far as possible that he is not involved. I can see that some of the fans were talking on one of the websites about buying the debts and shares I cannot see whether they are being serious or not – if they make a sensible offer quickly it could be very interesting indeed.
Agombar is not allowed to fund the club moving forward, that was clearly the intention. I have spoken at length with John Edwards and Elke Thuerlings and they understand the risks to them personally being associated with a CVA which is accepted but fails. They are confident that they can raise the necessary funds to support the club, and are themselves talking to potential sponsors from their own contacts. They are not blinded by the idea of being directors of a football club and seem to be looking at it from a purely business perspective.
Will new financial information be provided to shareholders and creditors?
It was always intended that some basic update would be provided since the cash flow projections were prepared without the benefit of any games having been played at Edgar Street, so the crowd was estimated. Adding the supporters inside the ground to those outside protesting, the crowd is not far off the estimate. The directors have always hoped that the protesters will return to the terraces but they have told me that they are adjusting the income to take into effect that this will not happen overnight. The announcement of Tommy leaving was only formally made today though very heavy hints were on my website from yesterday at 3.15pm (I wrote them whilst having lunch) - “A number of questions have been raised in relation to the future funding of the company, in particular the person who will provide any assistance required in making contributions. The Nominee has been told that Mr Agombar is no longer able to provide funding in accordance with the FA's rules, but the directors are looking at alternative funding. They are confident that the shortfall will be covered.” and “The Nominee has been told that are to be several changes in personnel at the club - more information will be stated on this site after the Company has made the formal announcements. This includes a change in ultimate ownership of a large number of shares and debts.” Clearly my firm’s website is not as closely followed as some.
Will Tommy Agombar’s shares be allowed to be used to vote in the CVA proposal?
Tommy Agombar has never personally owned any shares in the company – they are owned by Scrooby Ltd. I am waiting to find out whether Scrooby Ltd has sold/transferred the shares (which realistically have little value) to someone else (Agombar has/had control of Scrooby Ltd and they cannot be under his control) or whether the ownership in Scrooby Ltd has changed. All shareholders are entitled to vote, and I have been encouraging everyone to do so no matter how they want to vote.
With Tommy Agombar’s impending departure from the club, who will be responsible for the running the business of Hereford United 1939 Limited?
Tommy has never run the business- as the directors told the club’s website “He is not a man into detail, but surrounds himself with people to deal with detail and the day to day matters”. Certainly in the short term this has not changed, except that John Edwards and Elke Thuerlings are taking far more interest in the business side of things than Tommy Agombar ever did. There is naturally going to be a short period whilst he gets used to not being the ‘owner’, but I am hoping that he absorbs this and starts acting accordingly before the FA decides that even though his views are being ignored by the directors and staff he is acting to the outside world as though he still wields power. If this happens, the club could be suspended or thrown out of the league. He has maintained that he is a ‘football man’ so I do not imagine he would do that on purpose for revenge on club for some of the protesters’ treatment of him, but I can certainly imagine that his eagerness to get stuck in could cause problems. I really think that the journalists will be quite sad that they are losing a colourful character, albeit that the fans prefer the ‘black and white’ and seem happy to see him go.
With the meetings of creditors and shareholders taking place this week, when will the result of the votes be made known to the press and public?
The creditors meeting on Thursday afternoon will reach a decision – it will either accept or reject the proposal or accept it if it is modified. If they seek modifications which cannot be dealt with immediately, or it appears that the shareholders are going to seek modifications that the creditors will need to consider, or it just seems that they want more information about something I will adjourn the meeting. Depending on the nature, it may be up to two weeks, if it is just because of a potential interaction with the shareholders I will just adjourn to Friday morning. I will announce the outcome of that meeting ‘immediately’, ie once I have counted the votes – this will depend on how many people vote, but should take far less than an hour. In most companies, creditors are more likely to want modifications than shareholders. The shareholders meeting on Thursday is informal and as it is outside of the times allowed for the Insolvency Act meetings no vote can be taken. I will, however, supply proxies so that everyone at that meeting can have their vote counted the next morning without them having to attend again.
On Friday morning, the formal shareholders meeting will take place, during which the vote will take place. The outcome will be also be announced ‘immediately’. Results are announced to the meeting, but I rather imagine they will be tweeted or texted before I have a chance to call you!
Other things that seem to have been missed in the discussions Can the club be promoted?
They will lose 10 points if they go into the CVA, but if they get enough points they will automatically go up or go into the play offs as long as they are up to date with the CVA.
What happens if the CVA is rejected?
There is already a winding up petition against the company which will be heard again at the beginning of September. Unless someone comes in and pays off the petition debts (about £200,000 between Martin Foyle and HM Revenue & Customs) or reaches agreement with them the company will go into liquidation.
What happens if the CVA is accepted?
The club carries on as it is, looking for additional directors, and bringing in better management and business skills, and must make the payments agreed (and set out in the proposal). It will prepare a new set of rules since the old ones have caused so much trouble, but that is not as a direct result of the CVA.
If the payments are not made on time, the CVA will fail and the company will go into liquidation. Creditors will get paid out of what has already been paid in.
Why didn’t the company go into Administration?
An Administration is an insolvency process where a Licensed Insolvency Practitioner manages the business whilst he or she puts together a rescue plan. This can get very expensive. Alternatively, they sell the business very quickly (often called a ‘pre-pack’) to avoid the costs of running the company. The problem with a ‘pre-pack’ is that it is often sold with very little marketing and no matter how hard the Administrator tries it is never seen as totally transparent. The benefit, however, is that it provides a ‘financial bubble’ round the company so no-one can take legal actions against it. In this case, the winding up petition does that anyway.
According to the Football League Rules, the only way to save a football club is through a CVA. I therefore recommended to the directors and Tommy Agombar (who was fully involved at the time) that it was fairer to the fans to be able to see what was going on, and the money saved could be used to pay the football creditors that they needed to pay to remain in the league!
Why is there so much talk about the leases?
There is space at each end of the pitch to build flats, a hotel, shops or pretty much anything else that anyone has ever thought of. This was the basis of the CVA proposed back in 1997, but development never took place. Other companies were involved to fund it between them, but again it never took place. Some of the fans are quite rightly worried that all Tommy Agombar wanted was to come in, strip out the leases and take a relatively quick profit. From a business point of view (even ignoring what has happened since) that is remarkably dangerous – there is no planning permission, no designs (unless old ones exist somewhere), no money to fund development, and very strict rules in the leases with the council about what can and cannot be done – asset stripping is definitely in the latter category. Given that Tommy Agombar has paid getting on for £250,000 to people and companies owed money and to tidy up the financial mess from before he became involved and clearly any planning permission would be opposed (adding even more to the costs), he could have bought land elsewhere without these problems. He could have walked away when he had ‘only’ spent £80,000, but despite all the problems he stayed whilst he could and the directors have caught the bug.
As directors they have to do the right thing for the company, which means the shareholders. If any development meant the debts could be paid earlier they would have to consider it, but the likelihood of the company being able to afford the costs since only it could benefit from the profits is very low. Given all the opposition being encountered when that is not even being proposed, I shudder to imagine what the opposition would be if it were a feasible option.
What’s the problem with the directors?
Tommy Agombar was appointed because he controlled so many shares. He appointed John Edwards and Elke Thuerlings (though they did not sign the documents until they were able to get to Hereford) because they were recommended by Mark Ellis. Tommy Agombar Jr was then appointed (who has since resigned), as was Philip Gambrill (an accountant who was appointed only to deal with setting up the CVA and who planned on standing down after it was considered as he would have done his job).
The only active directors are John and Elke since the others would not pass (or failed) the tests laid down by the FA. Tommy Agombar failed because of a conviction over 20 years ago, which he thought was no longer able to be taken into account, if I knew why the other 2 even thought they would pass I would say.
John and Elke are looking for local fans to become directors. They would be responsible for making sure that the Bulls spirit is kept alive. Business knowledge would be helpful, but not necessary. They would, however, need to work for the benefit of the company as well as the club and not oppose anything ‘just because’, but have good reasons and be able to explain why – this is the same as in any company.
How much does the company have to pay?
The company is expected to pay at least £18,000 per month from trading.
Based on the estimated claims, an additional £68,500 must be paid within the first month.
On top of this the directors are expected to raise about £215,000 over the three years.
Why is the first £86,500 payment going to Carmichael & Co?
It is only the way the proposal is written.
The football league rules insist that 10% of the debt be paid in within 28 days. If it is not, the CVA must be failed. The Insolvency Act allows 28 days for anyone to object to the CVA and lodge an application in Court. It is therefore possible that another £86,500 will be paid (originally by Tommy Agombar, now by the directors) and lost because of the timing. I do not think that this is fair. This is a way that they can make the payment but know that they will get most of it back if the CVA is overturned but the Court.
If the CVA carries on all the money (apart from the real fees due to Carmichael & Co) will be paid into the CVA.
Why are they only paying every 6 months?
Again, this is because of the way the Football Leagues Rules work. The CVA must be failed if any contribution is more than a week late. If they are to make monthly payments a match postponed because of bad weather could ruin everything. They are, however, expected to make monthly payments on account (which can be up to 1 month late to deal with that sort of problem).
Why was David Keyte paid £2,500?
I was originally told that this was for him acting as chairman. I have since been told that it was the first payment for the debt assigned by him to Scrooby Ltd. It was supposed to be paid whilst he was chairman, hence the confusion. This will not now be included for voting.
Can the company really go after old directors for the amounts they were paid?
The legal advice received is that this may be recoverable, but it is not as simple as it may seem at first glance. If the company goes into liquidation the Liquidator would be expected to look at the costs and feasibility of taking legal action. Over £1million of the payments to directors were between 1999 and 2010, with another £68,000 in the following two years. It is not certain who was paid this money, and how much was from subsidiary companies since the accounts were combined.
This would go a long way to paying the company’s debts if it could be collected, and it can be done whilst the Company is in a CVA – it does not need to be in liquidation. Whether it is worthwhile, of course, remains to be seen.
If £1million is recovered after a winding up order is made, the Insolvency Service (the Government department) would charge a fee just to accept the money into the bank account (not to do any of the work) of about £68,000 – in the CVA there are no such fees.
What about the money borrowed being more than the directors were allowed?
This could also possibly be recovered but is far more complicated.
What is the difference between a shareholder and a creditor?
A shareholder owns part of the company – if it makes enough money the company can pay dividends on the shares. You can buy and sell the shares and they give you the right to vote at company meetings (for example for directors), you will not be paid anything in the CVA but the shares may be worth more if everything goes well. A creditor is owed money and will be repaid over the 3 years, but apart from within the CVA has no say in the running of the company.
When will creditors be paid?
Assuming the CVA is accepted, the first payment is expected to be about 6p/£ (ie £6 if you are owed £100) at the end of September. This assumes that all the claims have been received and there has been no objection to the CVA. After that it is about 16p/£ every 6 months until you are paid in full.
How do we make sure we receive our payment?
Fill in the claim form and include your bank details. Claim forms have already been sent to all creditors.
When will you next write to shareholders and creditors?
We will not. The County Court at Hereford agreed that the costs of doing so were so high that we can put notices on the web site (www.hufc-cva.co.uk), but we will send paper copies to anyone who asks. There is no charge to anyone asking for paper copies.
Is it worth voting?
Absolutely. If you are a creditor and want the CVA vote to accept it or others may reject it for you. If you want to make sure that it is rejected and you do not vote it may be accepted and you will be part of it whether you like it or not. Likewise for the shareholders.
How do we vote?
People are only allowed to vote at the Shareholders Meeting if they are a shareholder, and at the meeting of Creditors if they are owed money.
If people are in one of these categories, send back the bright yellow proxy form (fax: 0330 223 0985), email email@example.com, it is probably too late to send it back by post, or come along to the meetings.
Marc Landsman, nominee