Mike Ashley’s Frasers Group has taken over the lease of Coventry City Football Club’s home ground after the stadium’s operators were placed into administration.
The sportswear tycoon’s retail group secured the CBS Arena lease after the appointment of administrators paved the way for the completion of its £17 million purchase of the stadium operators’ business and assets.
Earlier this month, Arena Coventry Limited (ACL), Arena Coventry (2006) Limited (AC06) and IEC Experience Limited said they had applied for administration but the CBS Arena would remain open.
The approval of administrators by a specialist judge in London on Thursday was made despite a last-minute bid by lawyers representing local businessman Doug King to delay court proceedings to allow for consideration of his potential rival offer of £25 million.
It is the bird in the hand, and more than that, it's the product of many months of trying to find financial support for the group— Judge Prentis
The court proceedings came the day after the Sky Blues’ owners Sisu Capital agreed to sell a majority 85% stake to Mr King in a deal which will leave the club debt free.
The High Court was told that, on appointment, administrators sought to “effect a pre-packaged sale of the companies’ business and assets to entities controlled by Frasers Group plc”, with the deal covered by an “exclusivity” agreement.
Making the administration orders at 1.22pm, Insolvency and Companies Court judge Sebastian Prentis said the Frasers Group deal was the only “viable prospect” to prevent the group of companies “entering immediate insolvent liquidation”.
Judge Prentis explained to the court an on-hold deal between Frasers Group and the CBS Arena operators, which included the pre-payment of a £1.2 million exclusivity fee, had already been signed and would be completed upon the companies entering administration.
He said: “It is the bird in the hand, and more than that, it’s the product of many months of trying to find financial support for the group.
“It’s the only, on this evidence, viable prospect for this group not entering immediate insolvent liquidation”.
The judge said he respected the “ardour” of Mr King’s offers, which included potential funding to keep the companies operating in the short term, but added he did not consider there was “enough substance” in what his lawyer had said in court “to allay even the immediate fears over how this group can continue to trade”.
Rajnesh Mittal and Andrew Sheridan of FRP Advisory Trading Limited were appointed as joint administrators of the arena companies.
The group of companies operates from the Coventry Building Society Arena, the freehold of which is owned by Coventry City Council, the court was told.
ACL is a wholly owned subsidiary of Wasps Holdings Limited, which went administration last month, leading to the English rugby club’s entire playing and coaching staff being made redundant.
AC06, a wholly owned subsidiary of ACL, holds a 250-year lease of the arena, which it subleases to ACL, which in turn subleases part of the stadium to Coventry City and other tenants and receives revenue from naming rights.
IEC is the trading vehicle for conferences, events, retail, car parking and the operation of the Hilton hotel on the site.
Simon Passfield, representing the operator companies, told the court they “cannot afford to trade beyond today”, with there being only around £1,200 jointly available in bank accounts at the time of the hearing and the companies potentially facing a “black hole” of some £465,000 in payments due by the end of this week.
In written arguments, he said if the sale to Frasers Group could not be completed on Thursday then “there will be no available funds to allow the companies to continue to operate or engage in a further marketing process and, in consequence, it will be necessary for the companies to enter immediate compulsory liquidation”.
He warned in court liquidation would be “terminal” for the companies and said if administrators were not appointed then the council might forfeit the stadium lease and employees would be made redundant.
During Thursday’s hearing, Nigel Dougherty, representing Mr King and Coventry City owners Otium Entertainment Group Ltd, sought to delay the companies entering administration and secure funding talks between directors and Mr King.
He told the judge that Mr King purchasing the arena leasehold would provide a “long-term solution to the club home ground” and that his potential £25 million offer, subject to due diligence, was “much higher” than the Fraser Group deal and presented a “potentially significant higher return for creditors”.
He said the offer was not “illusory”, was made “on the basis of funding that is available and could be put in place to consummate that deal” and that discussions over interim funding could “remove the spectre that the companies are heading to a crunch point”.
Mr Dougherty also said Mr King indicated “his willingness to extend financial support to the operation of the arena” such as employees’ wage bill in order to allow for the consideration of his offer.
Mr King’s offer had “political support”, Mr Dougherty said, adding there was a “sense of frustration” over administrators appearing to be “hell bent” on pursuing the deal with Frasers Group.
Urging discussions, he said: “If there is a willingness to dance, we will tango.”
However, after a short break in proceedings, Mr Passfield told the court that “the companies cannot have any discussion with Mr King because of the exclusivity agreement”.
If the court orders were not made, then administrators did not wish to be appointed as they “cannot be satisfied that the purpose of administration will be achieved”, Mr Passfield said.
Stephen Robins KC, for Frasers Group, said that if administration orders were not made then its acquisition offer would be withdrawn.
He said this was “not an attempt in any way to hold this court to ransom”, but it was a commercial decision, with his client “not prepared to throw good money after bad and will instead call it quits”.
The court heard that as of July 2021, ACL had net liabilities of £27.174 million, AC06 had net liabilities of £30.557 million and IEC had net liabilities of £5.54 million.
Available assets after payments made on Thursday were a little over £1,000, with payments due in the near future of £124,000 for energy, £127,000 over VAT and £50,000 for PAYE, the court was told.
Mr Passfield said in written submissions that administrators had previously received four other offers to purchase the arena operating companies.
Frasers Group’s £17 million offer, less the £1.2 million fee already paid, was agreed on the basis the sale was free of security interests, including those relating to a 2015 bond issue by Wasps Finance plc, the court was told.
As a result of Thursday’s ruling, some £13.5 million would be paid to bondholders, amounting to 30 pence in the pound, as opposed to “nothing” or a “much smaller return”, the judge said.
