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Financial experts issue stark warning to football after Coventry crisis
Last updated at 13:55 15 December 2007
Tough times: Coventry boss Iain Dowie
Football finance experts believe that Coventry's flirtation with financial ruin should serve as a warning to the rest of the Coca-Cola Championship.
The Sky Blues look set to avoid administration after Ray Ranson's SISU Capital consortium completed their protracted takeover at the Ricoh Arena on Friday.
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The Championship club, who are around £38million in debt, had been given a 4pm deadline to complete the deal and prove their solvency, or allow accountants to take control of their finances and incur a mandatory 10-point deduction.
With little over half an hour remaining before the deadline, Ranson proved to be City's saviour.
Philip Long of PKF Accountants & Business Advisers said: "I wish Coventry well and I hope that there are no other clubs in the same position.
"But I fear that this might not be the last time this season a Championship club finds itself on the brink of administration."
Long blames the 'glittering prize' of promotion to the Premier League for Coventry's woes.
Following their relegation from the top flight in 2001, Coventry continued to operate with a huge wage bill and have been criticised by some observers during the takeover process for not using the money from the sale of their old Highfield Road ground more wisely.
PKF's 2007 survey of football club finance directors revealed that four out of every five interviewed from the Championship predicted they would not make a pre-tax profit in their next accounting period.
Moreover, not one Championship club interviewed had increased their bank facility in the previous year and a third had come under more pressure from their bank.
Long added: "Before the first ball of the season was kicked, I warned that the Championship had become a pressure cooker and that this situation might arise.
"In the close season, the banks had already clearly become concerned about the level of debt they were exposed to among Championship clubs. We believed even then that the banks were unwilling to extend club overdrafts, not that the clubs were adopting a more cautious approach to their finances.
"Since then the credit crunch has hit the banks and football clubs looking to increase their borrowing without the TV revenues available to Premier League clubs are not going to get a positive response.
"The frightening thing is that with such a large percentage of Championship clubs not expecting to make a profit, there may be more facing the prospect of administration, and the automatic 10-point deduction that follows, before the end of the season.
"As a lifelong football fan, it gives me no pleasure to be proved right, but I argued at the beginning of the season that spending beyond their means was a high-risk strategy.
"The Premier League status that Championship clubs are fighting for is a glittering prize but the investment gamble only ever pays off for three clubs a season."
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Read more: http://www.dailymail.co.uk/sport/football/article-502487/Financial-experts-issue-stark-warning-football-Coventry-crisis.html#ixzz2X3tnq0Xs
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Last updated at 13:55 15 December 2007
Tough times: Coventry boss Iain Dowie
Football finance experts believe that Coventry's flirtation with financial ruin should serve as a warning to the rest of the Coca-Cola Championship.
The Sky Blues look set to avoid administration after Ray Ranson's SISU Capital consortium completed their protracted takeover at the Ricoh Arena on Friday.
Read more...
Coventry agree Ranson takeover to avoid administration
Greek billionaire David scared off by 'falling apart' Coventry
Coventry choose Sisu and snub David's bid
Plot takes a twist in Coventry saga as film mogul steps in to help out
The Championship club, who are around £38million in debt, had been given a 4pm deadline to complete the deal and prove their solvency, or allow accountants to take control of their finances and incur a mandatory 10-point deduction.
With little over half an hour remaining before the deadline, Ranson proved to be City's saviour.
Philip Long of PKF Accountants & Business Advisers said: "I wish Coventry well and I hope that there are no other clubs in the same position.
"But I fear that this might not be the last time this season a Championship club finds itself on the brink of administration."
Long blames the 'glittering prize' of promotion to the Premier League for Coventry's woes.
Following their relegation from the top flight in 2001, Coventry continued to operate with a huge wage bill and have been criticised by some observers during the takeover process for not using the money from the sale of their old Highfield Road ground more wisely.
PKF's 2007 survey of football club finance directors revealed that four out of every five interviewed from the Championship predicted they would not make a pre-tax profit in their next accounting period.
Moreover, not one Championship club interviewed had increased their bank facility in the previous year and a third had come under more pressure from their bank.
Long added: "Before the first ball of the season was kicked, I warned that the Championship had become a pressure cooker and that this situation might arise.
"In the close season, the banks had already clearly become concerned about the level of debt they were exposed to among Championship clubs. We believed even then that the banks were unwilling to extend club overdrafts, not that the clubs were adopting a more cautious approach to their finances.
"Since then the credit crunch has hit the banks and football clubs looking to increase their borrowing without the TV revenues available to Premier League clubs are not going to get a positive response.
"The frightening thing is that with such a large percentage of Championship clubs not expecting to make a profit, there may be more facing the prospect of administration, and the automatic 10-point deduction that follows, before the end of the season.
"As a lifelong football fan, it gives me no pleasure to be proved right, but I argued at the beginning of the season that spending beyond their means was a high-risk strategy.
"The Premier League status that Championship clubs are fighting for is a glittering prize but the investment gamble only ever pays off for three clubs a season."
Print this article Read later Email to a friend
Read more: http://www.dailymail.co.uk/sport/football/article-502487/Financial-experts-issue-stark-warning-football-Coventry-crisis.html#ixzz2X3tnq0Xs
Follow us: @MailOnline on Twitter | DailyMail on Facebook