Is this now a club in crisis?

[Ernie]

Someone was willing to pay £7m for Bury; Bolton went for more than that. Anyone buying Sunderland is buying potential. Donald paid £15m for the shares. You're grossly undervaluing the club, and making a huge leap yourself in assuming there'll be a default. The loan is a term loan, which means that no repayments are due until the term expires. Furthermore, Donald has already said that he and Sartori can cover the loan, which is to Mardox anyway. FPP's primary line of security is the shares in the club. If the loan was called in, the Americans wouldn't have a say in how the loan is recouped; they'd have to appoint administrators, who would be bound in insolvency law to effect a sale as a going concern if at all possible, even if that resulted in a shortfall. Any administrator attempting to wind up a solvent company (which Sunderland is) would be in deep doo-doo. The only insolvent company would be Madrox.


It's not. It is, as the late Terry Pratchett might have put it, an embuggerance.

The only value that matters is the value a purchaser buys the club for. Nothing else matters. We are depreciating in value every minute we stay in League 1.
I would be very interested to learn what EoDs are in LoanDoc, and indeed what financial covenants are knocking around as well. A default could be right round the corner. We just don't know but I admire your optminism!

But on a matter of Insolvency Law, just so I understand, are you saying that in the event of a default and VCCo calling the loan in which is then not settled, HoldCo is NOT insolvent pending no further finance or underwriting of on going support from VCCo? I am struggling to understand how it couldn't be. S123 as you know. In which case VC appoints an IP and HoldCo's assets are liquidated (which includes assets like the stadium) and VCCo get a few quid back.
Adminstrators don't come into it. VCCo have security over everything, and if what you are saying is true step in rights et al. It is VCCo's call whether to put club into admin or liquidate or look to sell and that brings me back to starting point which is I can quite umderstand wht SD/CM don't want to get their hands dirty with the death of the club.

Feel free to call me miserable (won't be he first) but the above is a well trod path and one I really don't think should be dismissed lightly as fanciful.

 

[Grumpy Old Man]

The only value that matters is the value a purchaser buys the club for. Nothing else matters. We are depreciating in value every minute we stay in League 1.
I would be very interested to learn what EoDs are in LoanDoc, and indeed what financial covenants are knocking around as well. A default could be right round the corner. We just don't know but I admire your optminism!

But on a matter of Insolvency Law, just so I understand, are you saying that in the event of a default and VCCo calling the loan in which is then not settled, HoldCo is NOT insolvent pending no further finance or underwriting of on going support from VCCo? I am struggling to understand how it couldn't be. S123 as you know. In which case VC appoints an IP and HoldCo's assets are liquidated (which includes assets like the stadium) and VCCo get a few quid back.
Adminstrators don't come into it. VCCo have security over everything, and if what you are saying is true step in rights et al. It is VCCo's call whether to put club into admin or liquidate or look to sell and that brings me back to starting point which is I can quite umderstand wht SD/CM don't want to get their hands dirty with the death of the club.

Feel free to call me miserable (won't be he first) but the above is a well trod path and one I really don't think should be dismissed lightly as fanciful.

The loan is to Madrox, which is a non-trading holding company for the shares in Sunderland Limited, which in turn owns SAFC Ltd. The security is the shares in Sunderland Limited owned by Madrox, plus fixed and floating charges over the assets of Sunderland and SAFC.

In the event of a default, it's Madrox which is in trouble and possibly insolvent. Sunderland and SAFC are solvent, and likely to remain so unless huge trading losses are incurred before the end of the loan term. The charge document provides for the appointment of a receiver (administrator). The first port of call will be Madrox, and, if Sunderland are solvent, then the onus will be on the administrator to sell the shares in Sunderland as a going concern before any other considerations. The only event in which individual assets of Sunderland or SAFC would be realised is the unlikely one of no buyer coming forward for the shares. Even then, the first port of call would be likely to be the club's bank account.

The other consideration for any administrator will be the EFL. Given the fuss over Bury and Bolton, which were insolvent, can you imagine the ruckus if an administrator tries to close down a solvent club? All hell would break loose.

While your circumstance is possible, it's also by far the least likely outcome.

 

[Ernie]

The loan is to Madrox, which is a non-trading holding company for the shares in Sunderland Limited, which in turn owns SAFC Ltd. The security is the shares in Sunderland Limited owned by Madrox, plus fixed and floating charges over the assets of Sunderland and SAFC.

In the event of a default, it's Madrox which is in trouble and possibly insolvent. Sunderland and SAFC are solvent, and likely to remain so unless huge trading losses are incurred before the end of the loan term. The charge document provides for the appointment of a receiver (administrator). The first port of call will be Madrox, and, if Sunderland are solvent, then the onus will be on the administrator to sell the shares in Sunderland as a going concern before any other considerations. The only event in which individual assets of Sunderland or SAFC would be realised is the unlikely one of no buyer coming forward for the shares. Even then, the first port of call would be likely to be the club's bank account.

The other consideration for any administrator will be the EFL. Given the fuss over Bury and Bolton, which were insolvent, can you imagine the ruckus if an administrator tries to close down a solvent club? All hell would break loose.

While your circumstance is possible, it's also by far the least likely outcome.

You were.doing OK until you mentioned the solvency of Sunderland and SAFC. As we all know without 3rd party financial support both will most definitely become insolvent if they are not already..s123 being a continuous test rather than and end of year bookkepping and reporting exercise.

And alas I don't share your optimism with what VCCo would do because in my experience at this level of insolvency street fighting anything is possible. If the Yanks want their money quickly they will get it and leave pdq. If the loan is called.in because of financial covenant default, then I am quite at a loss how we can be so sure Sunderland and SAFC could be considered solvent. Ie SD/CM have done a runner/cut their losses (which was my hypothesis at the start) and left VCCo a basket of assets to be liquidated. Or maybe they would drive things forward. But no-one should be in any doubt that the Americans would take their money or moneys worth without batting an eyelid. Talk of administration is interesting but in the real.world playbook when people want their money back it is a complete bunfight. And my money would be on VCCo.

 

[Wansbeck Viking]

There is no crisis.

We just aren’t very good. A crisis would be 4th bottom with a week to go.

 

[Grumpy Old Man]

You were.doing OK until you mentioned the solvency of Sunderland and SAFC. As we all know without 3rd party financial support both will most definitely become insolvent if they are not already..s123 being a continuous test rather than and end of year bookkepping and reporting exercise.

And alas I don't share your optimism with what VCCo would do because in my experience at this level of insolvency street fighting anything is possible. If the Yanks want their money quickly they will get it and leave pdq. If the loan is called.in because of financial covenant default, then I am quite at a loss how we can be so sure Sunderland and SAFC could be considered solvent. Ie SD/CM have done a runner/cut their losses (which was my hypothesis at the start) and left VCCo a basket of assets to be liquidated. Or maybe they would drive things forward. But no-one should be in any doubt that the Americans would take their money or moneys worth without batting an eyelid. Talk of administration is interesting but in the real.world playbook when people want their money back it is a complete bunfight. And my money would be on VCCo.

There was a restructuring before the loan came in. The two companies are most definitely solvent and the directors have filed a sworn statement to that effect (a condition for the capital restructuring). The loan, by the way, has nothing to do with venture capital. FPP is a pure holding company set up Fuhrman and co as individuals. They are not beholden in any way to clients. That's specifically why MSD were excluded. The Americans by the way, are entitled to their $12m and no more, and the case would be administered in the UK, under UK insolvency law (the loan is actually from the UK holding company they set up). The law around administration is entirely geared towards preserving businesses wherever possible. In the event, if there is no default, they have no cause for action. Given that Donald has consistently said that he and Sartori can cover the loan. what makes you so convinced there's be a default?

 

[hertsmackem]

It's a damn sight better than securing an enormous loan on it. It might help if people looked on this loan for what it really is; it's a potential down payment on the eventual purchase, which is refundable to them if they choose not to go ahead.

It’s a good way of putting it GOM, it also means that our owners are having a go at getting us there on the cheap and if they fail the yanks will have it. So we have to suffer till then to see if our owners experiment works or does not. Fair enough they are trying but it’s hugely frustrating waiting to see if they fuck up and watching our season deteriorate whilst billionaires are in waiting isn’t it?

 

[Zinedine Kilbane]

I expected to get knocked out of the League Cup eventually- but not by bloody Oxford.
I didn't want to progress in the Checkatrade or whatever the fucka is called - but fuck me, knocked out by Scunthorpe?
Realistically we were never going to win the FA Cup - but for Gillingham to knock us out in the first round proper?

If we don't beat Coventry on Saturday I really fear for the long-term future of this club.

The club is dead. Bairns won’t believe me when they’ve grown up and I tell them we were in the prem for 10 years mixing it with the teams like man City and Liverpool and the derbies with Newcastle.

They’ll have a life time of living in the mags shadows, wondering what a derby day feels like

f***ing mental

 

[andysfootball]

the club is in crisis
the management and the team
also the fans
also the supporters
it's going to be our worst year ever
and its sadly as predictable as our demise in the championship

 

[fyl2u]

How far do we need to drop before it's your definition of a crisis?

So being financially sound but in the same league as South Shields wouldn't be a crisis? Are you just deliberately being contrary?

We're nowhere near that point. I've made it clear what I mean. We're near the top of our division, we've stopped the freefall we were in, we have new investors, the future is bright.

But boo f***ing hoo we're out of all the cups, let's slit our wrists.

Who gives a toss about the cups this year really? Being out of them lets us concentrate on the league, like many of us wanted us to do anyway after last year's fixtures pileup saw the team looking knackered at the end of the season and chuck it all away.

We’re in our worst ever position. In a hundred plus years.

that’s a crisis. That’s not slightly disappointing

It's not though is it? We're not on the verge of the club imploding. We have new investors and our owners have indicated we'll be spending in January. Plus we're near the top of the table. Stop being melodramatic man.

 

[chuckyroll]

We're nowhere near that point. I've made it clear what I mean. We're near the top of our division, we've stopped the freefall we were in, we have new investors, the future is bright.

But boo f***ing hoo we're out of all the cups, let's slit our wrists.

Who gives a toss about the cups this year really? Being out of them lets us concentrate on the league, like many of us wanted us to do anyway after last year's fixtures pileup saw the team looking knackered at the end of the season and chuck it all away.


It's not though is it? We're not on the verge of the club imploding. We have new investors and our owners have indicated we'll be spending in January. Plus we're near the top of the table. Stop being melodramatic man.

Head in sand post

 

[fyl2u]

Head in sand post

Instead of summing up what your post would have been, do you fancy putting in the real content?

 

[Mouldedplasticseats]

I expected to get knocked out of the League Cup eventually- but not by bloody Oxford.
I didn't want to progress in the Checkatrade or whatever the fucka is called - but fuck me, knocked out by Scunthorpe?
Realistically we were never going to win the FA Cup - but for Gillingham to knock us out in the first round proper?

If we don't beat Coventry on Saturday I really fear for the long-term future of this club.

We're a big club in name and history only now Sadly

 

[pinewaves1868]

Was reliably informed yesterday, by a mag at work, that we are in real danger of folding because of the shady dealings of Donny, Charlie, et al (although he didn’t know - and I didn’t care who(m) - those “others” are). The radgie little c*nt takes great interest in rumors and online shit & cant wait to tell me the latest ’news’.
So obvs we ARE a club in crisis. Cos our beloved neighbours say we are.

 

[The Cabbage]

Depends on if you think that being owned by a group of well-meaning morons, who don’t possess a quarter of the ability and nous to get Sunderland afc promoted out of league one, constitutes a crisis I guess.

 

[bernardbresslaw]

We're nowhere near that point. I've made it clear what I mean. We're near the top of our division, we've stopped the freefall we were in, we have new investors, the future is bright.

But boo f***ing hoo we're out of all the cups, let's slit our wrists.

Who gives a toss about the cups this year really? Being out of them lets us concentrate on the league, like many of us wanted us to do anyway after last year's fixtures pileup saw the team looking knackered at the end of the season and chuck it all away.


It's not though is it? We're not on the verge of the club imploding. We have new investors and our owners have indicated we'll be spending in January. Plus we're near the top of the table. Stop being melodramatic man.

You've totally missed my point, well done. If you read my post properly you would maybe get the impression I don't give a fuck about the cups. What I do give a fuck about is the embarrassing performances against utter shite teams which suggest we've got little chance of getting out of this league this season. We're at our lowest point in our history and playing utter garbage with not one decent goalscorer and I'm being melodramatic by asking if we're in a crisis? Fuck off man.

 

[chunkyshanhawk53]

We're nowhere near that point. I've made it clear what I mean. We're near the top of our division, we've stopped the freefall we were in, we have new investors, the future is bright.

But boo f***ing hoo we're out of all the cups, let's slit our wrists.

Who gives a toss about the cups this year really? Being out of them lets us concentrate on the league, like many of us wanted us to do anyway after last year's fixtures pileup saw the team looking knackered at the end of the season and chuck it all away.


It's not though is it? We're not on the verge of the club imploding. We have new investors and our owners have indicated we'll be spending in January. Plus we're near the top of the table. Stop being melodramatic man.

Mate. I like you as a poster but you’re talking crap

- Sunderland are a club that have spent virtually their entire history in the top 2 divisions
- this is the 3rd season ever
- never in those 3 seasons have we looked less likely to get promoted
- we have been knocked out of all 3 cups, not because we tried to but because we were rubbish
- we have a manager most of the fans didn’t want.
- performances are getting worse rather than better
- the new owners came in on huge amounts of goodwill, that has all but disappeared
- we have next to nothing coming out of the academy, and where we do they are leaving before playing a first team game

you can hang your hat on investment if you like. Or the fact that we aren’t bankrupt. But it’s a stone cold fact that we are in the worst possession in our history

 

[chuckyroll]

You've totally missed my point, well done. If you read my post properly you would maybe get the impression I don't give a fuck about the cups. What I do give a fuck about is the embarrassing performances against utter shite teams which suggest we've got little chance of getting out of this league this season. We're at our lowest point in our history and playing utter garbage with not one decent goalscorer and I'm being melodramatic by asking if we're in a crisis? Fuck off man.

Head in sand as I replied to him or her.

 

[chunkyshanhawk53]

Mate. I like you as a poster but you’re talking crap

- Sunderland are a club that have spent virtually their entire history in the top 2 divisions
- this is the 3rd season ever
- never in those 3 seasons have we looked less likely to get promoted
- we have been knocked out of all 3 cups, not because we tried to but because we were rubbish
- we have a manager most of the fans didn’t want.
- performances are getting worse rather than better
- the new owners came in on huge amounts of goodwill, that has all but disappeared
- we have next to nothing coming out of the academy, and where we do they are leaving before playing a first team game

you can hang your hat on investment if you like. Or the fact that we aren’t bankrupt. But it’s a stone cold fact that we are in the worst possession in our history

Position you twat

 

[fyl2u]

Mate. I like you as a poster but you’re talking crap

- Sunderland are a club that have spent virtually their entire history in the top 2 divisions
- this is the 3rd season ever
- never in those 3 seasons have we looked less likely to get promoted
- we have been knocked out of all 3 cups, not because we tried to but because we were rubbish
- we have a manager most of the fans didn’t want.
- performances are getting worse rather than better
- the new owners came in on huge amounts of goodwill, that has all but disappeared
- we have next to nothing coming out of the academy, and where we do they are leaving before playing a first team game

you can hang your hat on investment if you like. Or the fact that we aren’t bankrupt. But it’s a stone cold fact that we are in the worst possession in our history

We are in a poor position as far as our history is concerned, you'll get no argument from me about that, and I agree with all but the last two of your bullet points. I just reserve the word "crisis" for considerably worse situations than this, such as the examples I gave earlier of Bury and Bolton.

With regard to the last two bullet points:

- I still have goodwill for the owners as do many others. There are certainly many people that are losing faith in them but I wouldn't go anywhere near as far as saying that it has "all but disappeared".
- We have a steady stream of young players coming through the academy. One of them started on Tuesday and our bench was packed with them. One of our currently-injured first team regulars was a product of our academy and last year's captain who now plays a division above us came through the academy.

 

[Ernie]

There was a restructuring before the loan came in. The two companies are most definitely solvent and the directors have filed a sworn statement to that effect (a condition for the capital restructuring). The loan, by the way, has nothing to do with venture capital. FPP is a pure holding company set up Fuhrman and co as individuals. They are not beholden in any way to clients. That's specifically why MSD were excluded. The Americans by the way, are entitled to their $12m and no more, and the case would be administered in the UK, under UK insolvency law (the loan is actually from the UK holding company they set up). The law around administration is entirely geared towards preserving businesses wherever possible. In the event, if there is no default, they have no cause for action. Given that Donald has consistently said that he and Sartori can cover the loan. what makes you so convinced there's be a default?

That's the point of my posts GOM. Some are placing an awful lot of faith in SD/CM - I really hope it is not misplaced btw. Confirmations in the past mean jack all which again is the thrust. If SD/CM decide to run (and I have proffered the reason they might do so above) and/or there is a default (and neither of us or indeed any 3rd party - advisors aside - will ever find out the terms of the loan until it unravels and maybe not even then - just the consequences) HoldCo, and Sunderland/Safc could certainly be declared insolvent by VCCo and away we go down the WU road.
I hear your point about Insolvency Law but alas in the real world it doesn't really work that way. We will (do?) have different perspectives on this I am sure given our respective disciplines but from where I am sitting (and have sat for many years) if we have to rely on IA86 to save us we might as well all go home. Cynical yes, but also borne out of experience.

Chances of my doomsday scenario? 20% but rising all the time we stay in League 1.
Chances of VCCo coming on board as investors rather than Lenders? 5% but rising the better we do.
Chances SD/CM putting more.cash in - 5%. I really suspect that's it from them.
Chances of sale by SD/CM - 1% given the Debenture and the quite bizarre commercial decision to raise cash by loan rather than equity/capital contribution by the owners. We are at the behest of a third party competely unconnected with the club and the area - sound familiar?

Where will we be in a year's time? League 1 with no new finance and nervous supporters 69%.

What a mess.