during which a number of important issues were clarified for the shareholders and a further restructuring of the club’s finances was rubber-stamped.
Representing the board on the top table were Chairman Dato Chan Tien Ghee (TG), Chief Executive Gethin Jenkins, Finance Director Doug Lee, Company Secretary Alan Whiteley and directors Paul Guy, Michael Isaac and Steve Borley. I would estimate that around sixty shareholders were in attendance at the meeting, which was staged in one of the function suites at the Cardiff City Stadium.
The Chairman opened the meeting at 10:00am and the formal business of the day was conducted almost immediately. The two resolutions proposed by the board were carried unanimously and without any questions from the shareholders, thus enabling the conversion of several major debts into shares.
The details of the share issue to the creditors are as follows:
PMG
PMG Estates Ltd is the successful Cardiff-based commercial property development firm owned and controlled by Bluebirds directors Paul Guy and Mike Hall. PMG have converted £2,850,000 of their loan into 18,164,436 new ordinary shares at a subscription price of 15.69p per share. The balance of the debt has been restructured to be repayable in full by 31 May 2013.
MICHAEL ISAAC
Board member Michael Isaac has converted £500,000 of the monies owed to him into 3,186,743 new ordinary shares at a subscription price of 15.69p per share.
STEVE BORLEY AND CMB ENGINEERING
Director Steve Borley has converted £400,000 of the debts owed to him and his company, CMB Engineering, into 2,549,395 new ordinary shares at a subscription price of 15.69p per share.
VINCENT TAN AND ASSOCIATES
Malaysian investor Vincent Tan and his associates have advanced significant funds to the football club since making their original investment in 2010. They have converted £5,089,441 of those loans into 32,437,482 new ordinary shares at a subscription price of 15.69p. This latest issue means the Malaysians hold a combined total of approximately 49% of the company’s share capital.
As the resolutions were unanimously passed by the shareholders, the directors were given the authority to allot 204,656,719 new ordinary shares. Using the current subscription price of 15.69p as a guide, the new shares are worth approximately £32 million. The directors will immediately issue 56,338,056 to the creditors as detailed above, while the rest will be set aside for future investment opportunities, which may involve more debts being converted into shares. The notice of the General Meeting stated the directors do not currently intend to issue shares to anyone who is not already a shareholder, but they reserve the right to do so if the circumstances dictate.
The formal business of the meeting was concluded by 10:05am, at which point the Chairman invited questions from the floor. A lively forum lasting three quarters of an hour followed, the highlights of which are outlined below:
THE CLUB’S FINANCES
In response to a question from Keith Morgan of the Cardiff City Supporters’ Trust, Company Secretary Alan Whiteley confirmed the conversion of debts into shares covered by the latest agreement is in addition to similar arrangements that were rubber-stamped during the previous General Meeting in May 2010. What that means is a total of more than £15 million worth of debts have been converted into shares during the last fourteen months and the club’s balance sheet is looking a lot healthier as a result.
TG revealed that major investor Vincent Tan has paid the club £350,000 for this season’s ‘Malaysia’ shirt sponsorship deal.
A discussion took place between Keith Morgan and Finance Director Doug Lee regarding a loan of £2.5 million that Peter Ridsdale arranged in 2009 with a company controlled by former Coventry Chairman Ray Ranson called Sport Asset Capital. The loan bore a redemption premium set at a staggering rate of 50%, which took the overall total to £3.75 million. Lee confirmed the terms of this debt were renegotiated in June 2010. It no longer attracts any interest and is repayable through an agreed percentage of the proceeds from player sales. The loan is also secured by way of a second charge over the assets of the football club. The percentage payable from player sales rises as time passes, so it will be in the club’s best interests to clear this debt as soon as possible.
The Chairman was asked if administration has ever been a possibility since he’s been involved with the club. He replied that administration is not an option for Cardiff City and highlighted to the amount of work that has gone into improving the club’s business operations and reducing its debts during the last twelve months. He said that while the club is “still in a period of pain” as a result of historical issues, the new board and the Malaysian investors are fully committed to taking it forward.
Shareholder Mike Roderick pointed to the fact that the club’s income has been smaller than its outgoings for a number of years and asked if the Chairman believes the business is sustainable under such circumstances. TG replied that he sees Cardiff City as an institution rather than a business and one which must be maintained for future generations to enjoy. He described the club as “a sturdy ship” that has been in existence for more than 100 years and said he was determined it would be here for another 100 years.
The Chairman suggested that football is like no other business and admitted that he and his Malaysian colleagues have been on a steep learning curve during the last couple of years. He assured shareholders that the club would continue to aim for promotion to the Premier League but said the board are also doing everything possible to cut out unnecessary spending. He talked of building firm foundations for the future while remaining competitive at the top of the Championship.
Chief Executive Gethin Jenkins said he and his staff are not resting on their laurels and are determined to knock the club’s business operations into shape. He spoke of continuing to drive all available revenues and highlighted the fact that ticket and merchandise sales have increased significantly during the last twelve months. He mentioned that last season’s average home league attendance was Cardiff’s highest since 1960/61 and said the club was making great efforts to maximise its income from non-match day events at the new stadium. When asked about the financial involvement of the Cardiff Blues, Jenkins said the rugby club’s rental agreement involved them making a significant contribution towards the stadium’s maintenance costs. He said the Cardiff City Stadium hosts approximately fifty sporting events each year, including domestic football fixtures, international matches and rugby games, and if he had his way, three teams would share the stadium as opposed to two.
THE LANGSTON LOAN NOTES DEBT
The Chairman confirmed the forensic accounting investigation into the legitimacy of the loan notes agreement with the Langston Corporation and the expenditure incurred while the club was under Sam Hammam’s control is ongoing. He suggested it will take some time before the inquiry is concluded and said: “We want to be sure there are no more nasty surprises.”
Doug Lee stated the loan notes deal which is currently in effect is the October 2006 agreement, ie: the one which the club successfully fought to protect during the High Court battle in March 2008.
That particular revision saw the Langston debt written down from £24 million to £15 million in exchange for an entitlement to future income up to a maximum of £9 million arising from the sale of the naming rights at the new stadium. All historic interest was waived as a part of the deal, while interest on the remaining £15 million was set at 7% per annum. The interest began accruing in March 2007, although the agreement stipulated that no payments of either the principle sum or interest were necessary until December 2016. The deal also meant that Langston became eligible for a £5 million ‘bonus’ payment if the Bluebirds managed to gain promotion to the Premier League before December 2011 or, if later, at any time that the principle sum of £15 million remained outstanding.
Lee said the revised December 2009 agreement had expired on 31 December 2010 and is now null and void. He underlined that no additional interest or penalty payments were due to Langston as a result of the club’s decision not to clear debt by the end of December 2010, and confirmed the terms have simply reverted back to those of the October 2006 agreement.
PLAYERS
Gethin Jenkins denied reports in the local press claiming the deal which brought Craig Bellamy to the club last season was personally funded by Vincent Tan. He said the Welsh international’s wages were paid through the business in the usual manner and his loan agreement had been no different to those involving any other player in terms of the way in which it was funded. However, he added that investment from Tan and his associates, including the local directors, had been vital in ensuring the club could continue to meet its wage bill and other obligations. Jenkins said the club drove a hard bargain while attempting to sign Bellamy and his arrival helped bring about a significant upturn in ticket and merchandise sales, so the deal proved worthwhile in financial terms.
On the subject of Bellamy, the Chairman said last year’s captain would be welcomed back to the club at any time but he is a Manchester City player at present and his situation with them must be sorted out before anyone can even think of him coming back to Cardiff. Gethin Jenkins added that Bellamy’s situation is considerably more complicated than it was at this time last year as he only has twelve months left on his contract with the Premier League club. He said Manchester may not be prepared to agree to a deal that falls within Cardiff’s budget limits, but he didn’t completely rule out the possibility.
Jenkins said the option of signing Dundee United striker David Goodwillie is probably not something Cardiff will be pursuing now that Kenny Miller has arrived at the club. He stated the manager is looking to bring in several more players before the transfer window closes but added they must be affordable within the parameters of the current wage budget.
MISCELLANEOUS ISSUES
In response to a question from shareholder Steve Perry, TG revealed the club is set to invest a significant sum of money in a lighting system that will help to improve the playing surface at the new stadium.
The Chairman fielded a couple of questions concerning a recent Channel Four Dispatches documentary entitled ‘How to Buy a Football Club’. The programme linked Thai businessman Joe Sim and a Bangkok-based football investment fund called London Nominees with major Bluebirds investor Vincent Tan. TG jokingly thanked Channel Four for giving Cardiff a mention but stated the club and its investors have no involvement with Sim whatsoever and the fans have nothing to worry about in that regard.
When asked about the charges brought against former Chairman Peter Ridsdale by Cardiff City Council in relation to the 2009 Golden Ticket scheme, Alan Whiteley claimed the authority’s Trading Standards department are fully satisfied with the club’s role in the affair. He said neither the club itself nor the other directors who were on the board at the time will be facing any charges.
Gethin Jenkins was quizzed about the recent saga involving Alan Shearer being named by certain sections of the media as the new Cardiff City manager. He stated a couple of members of the press had got hold of the story, decided to run with it and Shearer himself had made a statement, but in reality the former England striker was merely one of a number of candidates who were interviewed for the job. He added that several other well-known figures were interviewed but their names never made it into the papers.
Jenkins was then asked about City’s lack of participation in this season’s Welsh Cup. He said the club were offered an invitation to enter the competition and had sought clarification from the Football Association of Wales on several matters, but the answers were not forthcoming before the entry deadline passed. The main issues were said to be European qualification for the winners and fixture clashes with Football League games and FA Cup ties. He stated the club is still talking to the FAW about the situation and didn’t rule out City rejoining the competition at some point in the future.
Elderly shareholder Bert Webber, who has been an ever-present supporter since 1947, said he had been on a tour of the Millennium Stadium but hadn’t yet been on a tour of the Cardiff City Stadium. He asked the Chairman why he couldn’t have a tour of the club he supports. TG replied: “You can, in five minutes. I’ll take you around the stadium myself when the meeting has finished.” Gethin Jenkins added the club is currently looking into the possibility of arranging guided tours of the stadium for the public during the school holidays.
With no more questions for the board to answer, the Chairman closed the meeting at 10:53am. He told the shareholders: “We’ve come such a long way together and have a big agenda, so let’s not falter this season. Let’s have another bash at it.”