Jason Elliott discusses unsecured creditors and Derby County administration: BBC Radio Derby

Cowgills Partner and Head of Business Recovery, Jason Elliott, spoke to Andy Twigge on BBC Radio Derby this morning (September 22^nd), about the administration of Derby County, how it might be saved, and the difference between secured and unsecured creditors.

Listen to the full interview here from 07.16am, or read the transcript below.

Andy: Unless you’ve been living under some kind of rock, you’ll know that Derby County is set to go into administration. It’s happened to some football teams over the years particularly in the north west, but what exactly do the administrators do? Jason Elliot is an insolvency practitioner who helped with the administration of Bolton Wanderers in 2019.

Andy: Morning Jason

Jason: Morning Andy, how’re you doing?

Andy: I’m very well because it’s Derbyshire day today. Jason what does this all mean then, what does an insolvency practitioner actually do?

Jason: How long have you got? If I start talking on this one we could be here a while. Let me break it down to where we’re at at this moment in time and the conversation should flow from there. You’ll all be aware because it’s all over the news that a notice of intention to appoint an administrator has been served and that was served last Thursday. That will last for two weeks, so at this moment in time, Quantuma, who are the proposed administrators will be working hard behind the scenes to get lots and lots of information – that basis of which will be twofold.

Number one, it’s the finances, because when they’re appointed over the next week, the first thing they’ve got to do is keep the doors open so at the moment they’ll be working on preparing cash flow models to make sure they can keep in trade, and if it were me I’d be looking at the next three months. The starting point will be what cash have they got on day one, and who critically do they have to pay to keep this business going whilst they sell it, and can they fund it with the cash? If they can’t, what assets do they have? So obviously there’s the players – do they need to be speaking to the FL for special dispensation to sell players because they’re out of the transfer window? Do they have any other assets they can sell? You know, you talked about Bolton Wanderers – there’s the training ground, so at the moment Andy, they’ll be putting together a strategy that looks at how they keep the business going, who do they have to pay and how do they get the money together?

And then the other thing they’ll be doing is pulling together information that you would expect any interested parties to want to see. I’m not sure how they’ll do it but they’ll probably put together a data room, and in that data room of information they’ll have all the information on creditors and it will be secured creditors and football creditors because of the FL rules, who are the normal unsecured creditors – they’ll be looking at players, contracts, what are the termination provisions, they’ll want to make sure they don’t trigger those and lose anybody free of charge. They’ll be looking at whether they can shed staff to save some costs, shed players – so there’s lots and lots of things going on right now that come before they’re actually appointed.

Andy: What is an unsecured creditor?

Jason: Unsecured in it’s basic term is your ‘normal’ – the butcher, the baker, the candlestick maker. A football creditor will be, let’s say, a football agent, but the guy who supplies the milk or the papers round the corner, he’s just a normal, unsecured creditor. He doesn’t have to be paid in full because of the FL rules, but your football agent as an example, he does – so anybody who isn’t directly associated with football is an unsecured creditor.

Andy: So the man who supplies the meat then, who’s got a little business and he’s dependent, he can miss out, but a football agent might get all his money?

Jason: Yes, when an insolvency practitioner deals with a regulated business like football, the FL sets their own rules – you know this isn’t as per the insolvency act, this is the rule that the FL will say to any purchaser, if you come in, you have to pay all football creditors in full, but you only have to pay your creditors X amount if they’re not football related. Is it right? I don’t agree with it, but that’s what the insolvency practitioner has to sell it on the basis of.

Andy: What could the outcome be in all of this Jason? You seem to know this pretty inside out.

Jason: I do, and I’ve been banging on for a long time about the FL rules and how restrictive they are and I don’t want to worry Derby County fans because above and beyond everything else, I think it’s important for you to know that I am a massive Bolton fan. I lived the Bolton Wanderers administration both as a fan, and a professional, and being involved and seeing how close we got to the wire were the darkest days of my life mate, so I don’t want to worry them, but I’ve been saying for a long time that a big club could end up going into liquidation.

I haven’t seen the numbers yet, but you are potentially asking somebody to come in, and pay tens of millions to buy a club that isn’t worth that, and I think I see a lot of similarities in Derby Country with Bolton and Wigan – they both got their stadiums at the same time, they’ve both got ex-premier league experience, Derby are undoubtedly bigger at the moment and they’ve got a better fan base, but the debts will be a lot bigger as well, and there weren’t people banging on the door of Bolton and Wigan to buy these clubs so in answer to your question, whilst I wouldn’t want to worry anybody, a club will eventually fold at a level of Derby – I just hope and pray that it isn’t Derby County and I’m not suggesting it would be.

Andy: There’s just one thing as well, you know Derby – we mentioned the ground etc, well derby County as I am aware do not own the ground, that is owned by another company. So, is that even harder for the administrator to sell? Because it becomes less attractive doesn’t it when you haven’t got the ground. Isn’t it like buying a garden with a house on it, you own the garden but you haven’t got the house!

Jason: It could be Andy yeah, and again it depends on who’s interested in Derby County because somebody may well come in and go to the owners and say we’re interested in the club, but we only want it if we’re going to buy the ground as well, and if they’re not willing to sell, you’re right, it could limit your audience, so it’s not the greatest starting point, but the flip side to that, is it won’t cost them as much if they’re not having to buy the stadium.

Andy: Just before you go, and I do appreciate your time this morning Jason, you’ve been fantastic, and I think you’ve made things crystal clear – what was the outcome for Bolton, how did they get out of it all, because they seem to be on the up again.

Jason: We were very fortunate, it was a very difficult administration, and we had a party that included a lifelong Bolton fan but was headed up by a very dogmatic lady who I’m very fortunate to be close to and consider a friend. They were a party that despite all the obstacles, got the sale over the line but Andy – had they at any stage pulled out, we were in deep trouble, but they didn’t, and I thank my lucky stars every day.