Chairman's Programme Notes v Scunthorpe

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GodalmingYellow
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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Mon Jan 23, 2017 12:55 pm

POST 3:

[From Myles Francis agreeing with an assessment by Mark Sennett re the delays in getting Heads of Terms agreed between OxVox and Firoz Kassam]

It's an explanation which makes sense. In corporate financing terms, announcements of agreements, heads of terms etc, affects a business' share price. It's only when those deals are implemented that it affects the business' cash flow.

If an announcement on heads of terms was made today, it would make absolutely no difference to the club in terms of budget setting for next season - clearly a deal isn't going to be completed in that timescale, considering the complexities of what is likely to be involved here.

What it would make a difference to is the club's "share price". Having an agreement in place which is likely to be more favourable to the club makes it a more attractive business to invest in, and that's what investors do everyday - take a punt on businesses with potential.

And that's what I believe Darryl is doing here, trying to push for an announcement of an agreement to make the club a more saleable proposition. In his programme notes last week he said that he has invested around £8m in the club over the last two and a half seasons. It was widely believed that he had around £10m to play with, so it doesn't take a genius to work out that he is coming towards the end of that. So, it would make sense for him to be looking at some sort of exit strategy and try to maximise the return he can get.

[My response]

I don't agree with this.

Investing in anything is about assessing risk and return, whether that be hedge funds, stocks and shares, premium bonds and indeed football club playing staff.

Having an HoT in place significantly reduces the risk to DE of investing in the playing staff of OUFC and pushing for promotion either this season or next, which are in effect governed by this transfer window and the summer respectively.

There is no point DE going for promotion to the Championship by investing in the playing staff, if the business model at that level is unsustainable. As I am sure OxVox and indeed everyone with any sense would agree, that OUFC playing in the Championship in a 3 sided limited capacity stadium with no non-matchday revenues would be near suicidal for the club, and we could easily see the club playing in the Conference again within a relatively short space of time.

So for promotion, which I am sure every one of us would like to see, there has to be movement on the stadium ownership.

It is in Mr Kassam's interest to hold on to the stadium as long as he can. The license if fast running out. Yes there are 9 years left but given the timescales required to achieve alternative accommodation, 9 years is nothing, and whilst Kassam cannot use the site for non sporting activities, he can impose big rent rises and higher maintenance costs and to avoid that would mean going through a lengthy and expensive tribunal, which might not even decide in the club's favour.

And all that whilst we the supporters had expected DE to dip even deeper into his pockets and fund a promotion squad? I don't think so.

If that were not enough, and I think this has been long forgotten by many, the rental terms of even the existing license are much more costly for playing in the Championship, than for playing in League 1 or 2.

Movement on the stadium ownership is very important for OUFC to progress, and anyone using this as an opportunity to bash DE with unfounded myths of selling the club, is fundamentally wrong in my view.

It is a simple situation that Championship football is not an option without access to non-matchday revenues. To be fair, even League 1 is not sustainable without big player sales unless we get the 24/7 use of the stadium.

Now I agree with those who say buying the stadium is a complex issue, an issue made even more complex by the set up of a community trust to own the stadium (and I would agree that is the best long term option), BUT DE is not a bottomless pit of cash. He has previously made it clear that he has a budget for subsidising the club.

An announcement of the existence of an HoT would make it very publicly clear that OxVox is serious about community ownership, that OxVox has access to third party funding, that Kassam is serious about selling, and all that with absolutely no need to breach confidentiality or divulge identities. It is not a guarantee of stadium ownership that might allow DE to invest further, but it is a hell of a reduced risk.

And to those who say it takes a long time to create an HoT. Well you don't really understand what an HoT is, how and why it is created, and what it represents. It is not a lengthy or costly process, and it is not legally binding unless the parties specifically wish to make it so.

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Re: Chairman's Programme Notes v Scunthorpe

Post by Kernow Yellow » Mon Jan 23, 2017 2:12 pm

GY I share your feelings on the timescales of an initial agreement (HoT or similar).

What I'm a bit confused about is why you think a quicker HoT would give DE much reassurance. I'm struggling to reconcile these two paragraphs you wrote in different posts:

"An HoT is only a statement of intent. It is not legally binding, and there is no requirement for exchange of funds. It is only a formal expression of outline basic intent and agreement between parties to a potential contract. It would be OxVox, and whatever Community Trust vehicle that was set up, and Firoka, stating in writing that in principle one party wishes to buy and one wishes to sell, and OxVox agreeing to release the ACV if a deal is agreed, together with very basic outline of terms. It is nothing more than that. It does not require OCC approval. It does not require OCC permission. It does not require planning permission. It does not require details of funding sources. All those elements are for final contracts, which as a result take much longer to achieve."

and

"An announcement of the existence of an HoT would make it very publicly clear that OxVox is serious about community ownership, that OxVox has access to third party funding, that Kassam is serious about selling, and all that with absolutely no need to breach confidentiality or divulge identities. It is not a guarantee of stadium ownership that might allow DE to invest further, but it is a hell of a reduced risk."

Please don't think I'm nitpicking your posts, just genuinely curious why you think having a HoT in place would significantly reduce DE's planning risk. Would OxVox (or whoever) have to provide evidence of funding before a HoT could be drawn up for example? Could FK enter into a HoT without any real intention of carrying through with a sale (or at least of doing so with any urgency)?

It seems to me that the key to everything (particularly as far as DE is concerned) is getting an actual deal done quickly. HoT are largely irrelevant, except that not being able to even agree HoT for 6 months or more would indicate that a quick (or even tolerably slow) deal is out of the question...

GodalmingYellow
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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Mon Jan 23, 2017 2:40 pm

I'm unsure why you are unable to reconcile the two KY.

An HoT is an expression of intent. Whilst not legally binding, you incur costs and time having the agreement drawn up. No one incurs costs for no good reason and so the existence of an HoT shows that all parties are serious about doing a deal. It also shows that all parties are able to do a deal.

Without an HoT, who is to say that Firoz Kassam isn't just using OxVox as a stalling tactic, or indeed what his motives might be.

Without an HoT, who is to say that OxVox truly has access to the funds required to buy the stadium?

With an HoT, that would prove OxVox has access to the necessary funds, and would significantly reduce the risk that Firoz Kassam isn't playing games.

In addition, an HoT shows that all parties have an agreed way to a deal, subject to detail.

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Re: Chairman's Programme Notes v Scunthorpe

Post by Kernow Yellow » Mon Jan 23, 2017 4:18 pm

GodalmingYellow wrote:I'm unsure why you are unable to reconcile the two KY.
I guess my point was that since, as you point out, a HoT agreement isn't legally binding, there is only so much reassurance DE could take from one being in place. But I'm not particularly familiar with how they work, hence the question. Your point about both parties having to expend cost (and effort) to get that far does give some assurance that a deal should in principle proceed. But if I were DE I'd still be concerned about timescales for a deal conclusion even if a HoT were in place. It sounded to me from his interview on Saturday that he'd want both certainty over stadium matters AND another significant investor on board before we could even think about competing in the Championship - where it's not entirely beyond the realms of possibility we could find ourselves next season...

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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Mon Jan 23, 2017 8:01 pm

Kernow Yellow wrote:
GodalmingYellow wrote:I'm unsure why you are unable to reconcile the two KY.
I guess my point was that since, as you point out, a HoT agreement isn't legally binding, there is only so much reassurance DE could take from one being in place. But I'm not particularly familiar with how they work, hence the question. Your point about both parties having to expend cost (and effort) to get that far does give some assurance that a deal should in principle proceed. But if I were DE I'd still be concerned about timescales for a deal conclusion even if a HoT were in place. It sounded to me from his interview on Saturday that he'd want both certainty over stadium matters AND another significant investor on board before we could even think about competing in the Championship - where it's not entirely beyond the realms of possibility we could find ourselves next season...
I suspect he only needs another investor if we get into the Championship and he has to fund buying the stadium or building a new one. This will undoubtedly be why he is so keen on the community trust model.

I agree there are still risks with only an HoT in place, but it is about managing risk v reward. And with an HoT in place, buying the stadium by the summer would be a realistic timescale. So reduced risk over a short period, as opposed to the present position of high risk for an indefinite period.

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Re: Chairman's Programme Notes v Scunthorpe

Post by tomoufc » Mon Jan 23, 2017 11:24 pm

GodalmingYellow wrote:
In addition, an HoT shows that all parties have an agreed way to a deal, subject to detail.
That's I think the crux of the matter. I doubt there is any shared agreement about just how a deal may be done, and one could speculate endlessly about why that might be. On the other hand, the idea that DE could afford the aquire the stadium himself is equally speculative.
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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Mon Jan 23, 2017 11:36 pm

tomoufc wrote:
GodalmingYellow wrote:
In addition, an HoT shows that all parties have an agreed way to a deal, subject to detail.
That's I think the crux of the matter. I doubt there is any shared agreement about just how a deal may be done, and one could speculate endlessly about why that might be. On the other hand, the idea that DE could afford the aquire the stadium himself is equally speculative.
When I referred to how a deal may be done, it is only in general terms in the HoT - price, what's included, who the parties are, funding and other basic information. This usually takes a very short period of time, as the basic format of a deal is usually agreed verbally and then forms the HoT. So if all parties are serious and willing, there should be no hold up on HoT.

I have no doubt that DE could fund a stadium himself. Whether he would want to is another matter entirely, and almost certainly unlikely. Those with wealth, don't have it sitting around in bank accounts.

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Re: Chairman's Programme Notes v Scunthorpe

Post by tomoufc » Tue Jan 24, 2017 12:55 pm

I wonder if anyone's been able to pop into the KasStad to look at the housing development plans? I feel that if you want to know what's really going on, it's there that you'll get some real clues.
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Re: Chairman's Programme Notes v Scunthorpe

Post by Myles Francis » Wed Jan 25, 2017 2:24 pm

Thinking more about this Heads of Terms discussion, a penny suddenly dropped. Even by announcing HoT right now for a stadium deal between Firoka, OxVox and (probably) OCC, that should have precisely ZERO bearing on the club's ability to plan for next season. The club are clearly banking on a deal providing some sort of immediate cash windfall to them either through a rent reduction, access to additional revenues, or both. But why is that being assumed? Particularly if the plan for the new ownership is to improve and expand the ground, such a move may not be possible in the short term. Of course, the idea of community ownership will be to work for the mutual benefit of the club and the wider community in the longer term, with a view to making both the club and stadium sustainable entities, but that may well require a period of "business as usual" in the short term.

The more I think about this, the more bizarre I think the club's approach has become.

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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Wed Jan 25, 2017 3:02 pm

Myles Francis wrote:Thinking more about this Heads of Terms discussion, a penny suddenly dropped. Even by announcing HoT right now for a stadium deal between Firoka, OxVox and (probably) OCC, that should have precisely ZERO bearing on the club's ability to plan for next season. The club are clearly banking on a deal providing some sort of immediate cash windfall to them either through a rent reduction, access to additional revenues, or both. But why is that being assumed? Particularly if the plan for the new ownership is to improve and expand the ground, such a move may not be possible in the short term. Of course, the idea of community ownership will be to work for the mutual benefit of the club and the wider community in the longer term, with a view to making both the club and stadium sustainable entities, but that may well require a period of "business as usual" in the short term.

The more I think about this, the more bizarre I think the club's approach has become.
How can it have zero bearing on planning for next season?

If the stadium is in OUFC or community ownership, then the club will benefit from non-matchday revenue, reduced rent or even zero rent depending on who buys the stadium, match day catering revenue, restaurant and corporate entertainment revenue, stadium advertising revenue, rental income from various ancillary businesses that operate on matchdays and non-matchdays, full corporate box revenue, elimination of club shop rent, increased attendances, increased merchandise sales, use of stadium for non-football sporting events and so on.

All that lovely lolly would be available to cover the huge increases in costs associated with Champioship football.

If the stadium is in Kassam's ownership, it isn't worth investing for promotion because the club would not be able to cope with the weight of accumulated debt and costs.

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Re: Chairman's Programme Notes v Scunthorpe

Post by Isaac » Wed Jan 25, 2017 3:04 pm

Admittedly I'm not at all close to this, but I did listen to the radio interview and I have sympathy with the club. Myles - aren't you assuming that there aren't any other time pressures influencing Eales - presumably if he waits 6 months to find out that there is no HoT agreed (which is actually fairly likely, in my uneducated opinion/experience of Oxford/council/kassam etc), then that's 6 months he's wasted when he could be investing time/money in other stadium ideas for the club. Secondly, if it takes this long to agree a HoT, how long will it take to agree the detail? Short term could end up being 2, 3 or more years. Which at £1m a year in League 1 is considerable debt for the club to take on.

My opinion is he is expressing his frustration with Kassam in particular (Eales pointedly said in the interview that if Kassam is supportive of the club, which he often says he is, then he could reduce the rent)

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Re: Chairman's Programme Notes v Scunthorpe

Post by Myles Francis » Wed Jan 25, 2017 3:06 pm

Terry, you have completely ignored the point I made and making the same assumptions that the club seems to be making.

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Re: Chairman's Programme Notes v Scunthorpe

Post by GodalmingYellow » Wed Jan 25, 2017 3:33 pm

Myles Francis wrote:Terry, you have completely ignored the point I made and making the same assumptions that the club seems to be making.
I don't think I have, on either account.

Feel free to enlighten me.

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Re: Chairman's Programme Notes v Scunthorpe

Post by Myles Francis » Wed Jan 25, 2017 3:48 pm

GodalmingYellow wrote:
Myles Francis wrote:Terry, you have completely ignored the point I made and making the same assumptions that the club seems to be making.
I don't think I have, on either account.

Feel free to enlighten me.
I said: The club are clearly banking on a deal providing some sort of immediate cash windfall to them either through a rent reduction, access to additional revenues, or both. And went on to explain why this may not be the case. at least in the short-term.

You said: If the stadium is in OUFC or community ownership, then the club will benefit from non-matchday revenue, reduced rent or even zero rent depending on who buys the stadium, etc Which is repeating the same assumptions the club have been making in their statements, and ignoring the point about why that may not happen.

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Re: Chairman's Programme Notes v Scunthorpe

Post by Kernow Yellow » Wed Jan 25, 2017 4:28 pm

It would be interesting to know whether what is proposed is a 'stand-alone' deal for the sale of the ground and associated land at an agreed price; or whether it is tied into other deals between FK and other parties eg to allow him more development opportunities in the vicinity. If the latter, then that could explain the delay in agreeing HoT's - while the basics of selling the stadium might be relatively straightforward, maybe what FK wants as his part of the deal isn't.

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