Be Careful What You Wish For (43 page)

In early February I received, via Seymour Pierce, an offer of £30 million from the Israeli consortium, using their company United Mizrahi Financial Corporation Limited and supported by a letter from their bankers Mizrahi-Tefahot Bank Limited, an FSA-regulated UK-based bank, saying they were good for the £30 million. It was very encouraging but the correspondence was a little flaky and I was hopeful more than expectant. By the end of February my suspicions were confirmed when the consortium disappeared off the face of the earth. I looked to Seymour Pierce to up their game, which was fruitless and a complete waste of time.

With the offer falling away so too had the team’s performance. What had looked very promising at the end of December was now turning into a damp squib of a season. We had dropped down to fourteenth in the league with two thirds of the season gone. When I really needed Neil to push the team on and get us back into the play-offs or at least competing, the exact opposite happened and just compounded the ensuing problems.

The financial pressure was now increasing and by March there was a hole in the immediate cash flow of £2 million and growing. It would have been even worse if I had not sold one of our younger players in January. Ben Watson was in the last year of his contract and refused to sign a new one, so we took the commercially sensible decision to sell him to Wigan for £1.5 million. It is an irony that if Ben had scored that penalty we may well have been in the Premier
League
and not under these huge financial pressures, rather than transferring him to a Premier League Club at his request!

Clearly this season was going absolutely nowhere. I spoke to Neil in private about the enormous financial pressure building on me. He encouraged me to get out, but that was appearing unlikely as the only enquiries we were getting were from tyre kickers. In order to weather the impending storm that looked like it was going to batter me on all fronts, I needed to focus and couldn’t be distracted by the team’s performance, so I asked Neil to keep the team in the best position he could while my attentions were diverted.

What I now faced was the most difficult and harrowing period of my life. And as a seasoned gambler I was about to bet it all on red.

16

AND NOW THE END IS NEAR

WHEN I TOOK
the £5 million loan from Agilo in June 2008 I knew it was merely plugging a cash-flow hole for a year. I believed a lot of things could happen in that period of time. The team had been narrowly knocked out of the play-offs and there was good cause to be optimistic for the following year. At the time I had reasonable liquidity personally and a host of different commercial opportunities that I considered likely to bring me back some significant cash!

Also, when I took Agilo’s loan, I knew that the cash calls on Palace for the following year, i.e. the 2009–10 season, had been vastly reduced. We had less outstanding transfer fees to pay and a shrinking wage bill coupled with a highly rated young squad as well as an increase in Sky monies. And if push came to shove I might be able to sell a young player like most clubs invariably did when they required funding.

What I couldn’t legislate for was the meltdown that happened in the world’s financial markets in October 2008, which hit me in every area of my investments. And with a club urgently requiring cash injections from me, as unbelievable as it may sound, this was just the start of my problems.

All of a sudden the landscape changed completely. I was no longer trying to sell Crystal Palace, I was trying to find funding to keep the club going to afford me the opportunity to sell it. Seymour Pierce along with a number of others were now tasked with finding investment, which given it was football and the world was going to hell in a handcart wasn’t going to be easy.

In March 2009 I was in serious trouble as my financial position came under enormous threat. I had a portfolio that had lost £4 million in five months and was now £1.5 million underwater, and the bank had started to apply pressure on me to rectify that.

The £2 million I had invested in
Telstar
, despite the film’s huge critical acclaim, was failing to show any sign of a return. The sales agency, Fortissimo, failed to deliver on any of their projected forecasts. We had no UK or US distributor and only a handful of foreign countries buying the film. To add injury to insult the £200,000 the film generated had been swallowed up in marketing costs by the agency.

The Spanish property market had completely collapsed and the millions I had locked in were unlikely to be seen for some considerable time, if at all. The restaurant was in turmoil as I was forced to remove my founding partner and was left having to try and turn this ailing business round – which meant devoting to it time and funds I was running out of – or sell it.

The problems kept coming. The investment in the stock-market-changing oil business had fallen on its arse and I had lost my seven-figure investment. I had an extremely high cost base of personal expenses running at over £100,000 per month, which included the salaries of staff in the UK and Spain. All these problems were surmountable if you didn’t have a football club haemorrhaging money and requiring further investment merely to stand still.

I had managed to fly by the seat of my pants when it came to
cash
flow at The PocketPhone Shop; I was going to have to do the same at Palace. To get Palace’s cash flow under control I either had to bring in some significant income or reduce the outgoings in some shape or form. From a personal point of view I needed to do this rather than call upon my rapidly depleting financial reserves. The traditional method of bringing in cash required selling players but this wasn’t an option as the transfer window had closed and wouldn’t reopen until the end of May.

So the only option was to reduce outflows and the only place to go was the Inland Revenue. We were a large payee and National Insurance contributor given the salaries on our books, paying HMRC £450,000 per month. I decided to use a newly introduced government edict to help businesses with cash-flow problems to put a proposal to the Revenue that allowed me to defer the next six months’ worth of payee payments, circa £2.7 million, and then to pay that off in equal amounts over the next twelve months. It would give me cash flow and the chance to find funding opportunities, player sales or any other things I could exploit to inject cash into this business.

Their response was a resounding no. We showed them the cash-flow hole and explained we had nowhere to go given the time constraints to get funding so it had to be a yes in some form. Their advice was go to a bank and borrow the money. What bank would that be then, the Bank of Neverland!

HMRC’s blunt and unhelpful no was never explained and our circumstances never taken into account. HMRC had a hard-line approach to football primarily because back in 2003 they had lost their position as a secured creditor and now they were going to war with the game. It was irrelevant that clubs contributed large amounts of tax, were often funded by individuals and were part of the fabric of a community. HMRC couldn’t care less and had
football
firmly in their sights. If it meant forcing clubs into administration and only getting 10p in the pound rather than helping cash flows and getting all their money then they seemed to prefer the former!

Although I wanted to work with HMRC I was prepared to use commercial shotgun tactics and quite simply not make the payments anyway. My view was by the time they caught up with me hopefully I would be in a better cash position.

Whilst I was grappling with HMRC and trying to find a deal I was working with Seymour Pierce to find a funder. They came up with a new football lender called the Hero Fund which apparently had £125 million at their disposal, and had a revolutionary way of lending which resulted in repayments only being made if and when players were sold, which in real terms was a unique and very palatable way of getting funding.

While I was fighting these many battles my biggest enemies were yet to show themselves.

The relationship with Agilo throughout the year had been very cordial. They got paid their £65,000 interest every month on time. There had been a change of management in their business: Jason Granite, who I knew well and had a very good relationship with, departed and I was now dealing with a Serbian-American, Milos Brajovic, who I had met before and had done some of the negotiations with on the original deal. He appeared a perfectly amiable kind of guy and I initially got on quite well with him. But that was all to change!

So as the football season ended with Neil Warnock and a disappointing eight-year low in performance finishing fifteenth in the league, at the end of May I approached Brajovic with a short-term proposal. Agilo were due a bullet repayment of £900,000 on the
loan
on 15 June. Palace didn’t have the cash so I was going to have to personally pay it. I asked Brajovic if I could split the payment in two, paying £450,000 on 15 June and the other £450,000 on 31 July and pay any interest penalties. By doing this it gave me a chance to raise some funds before the second payment fell due. As far as I was concerned, we had a verbal agreement to this effect, which I assumed would be confirmed in writing soon enough.

On 15 June I paid the £450,000, then on 26 June I received a default notice from them, calling in the balance of the loan three years early. They cited the non-payment of £900,000 and completely ignored the agreement in principle I’d made with Brajovic. More sinisterly, this notice arrived after the seven working-day window I’d had to remedy any breaches. I hadn’t thought there were any.

If Brajovic couldn’t agree the £450,000 deferral to 31 July he should have said! I would have paid the £900,000 in one sum, as I eventually ended up paying the other £450,000 out of my own pocket because Palace’s cash flow was still shot to pieces. By not telling me of any issues with our agreement, Brajovic had lulled me into a false sense of security, and then served me with a default notice.

Calling in this loan would add even greater problems to my increasingly worsening financial situation. After speaking to Brajovic he confirmed the default, said it was designed to protect their position and was merely a piece of bureaucracy which he had to go through. When asked as to why he hadn’t told me if there was a problem, he assured me he had no intention of ‘fucking me over’. But, rather conveniently, he did admit his hedge fund was under redemption pressure and he wanted to work with me to get this loan, which was only twelve months old, repaid as soon as possible.

By now Keith Harris had introduced me to the Hero Fund,
which
had this alleged investment fund for lending to football clubs. The security they took was charges against your playing squad and ostensibly the younger players. It was innovative and creative as their margin was taken from player sales. What this did was enable a club like mine to keep their younger home-grown players, who traditionally were on significantly lower wages than players you signed in, for much longer. It also enabled you to keep them whilst their potential value became more tangible, get the benefit of their abilities, and then pay the Hero Fund their monies and profit back through the increase in their value at a later date.

The only problem was that the Premier League had already outlawed this funding vehicle as they considered it bordered on third-party ownership. Following the furore over the Carlos Tevez affair at West Ham they were extremely cautious. Another issue was they didn’t understand it and had no wish to.

The Football League had followed suit and would not approve this type of funding for their members. So, given that I could see no buyer on the immediate horizon and that there were no other funding opportunities besides emptying the entire contents of my bank account into this football club, somehow I had to get the Hero Fund in a position so they could lend.

In June 2009 and against a backdrop of increased pressure from HMRC and almost daily cash calls on me from Palace and other areas of my business portfolio, I went to a Football League meeting for the first time in seven years. It was the year-end conference, held in Portugal, three days attended by the owners and CEOs of all seventy-two League clubs. My sole reason for going was to convince the Football League board, its chairman Lord Brian Mawhinney and the other clubs to approve funding from the Hero Club.

I flew out to Portugal with Theo Paphitis, who, along with
Deloitte
’s, was giving a keynote speech about football finances. Upon arriving I was greeted by the League officials with a degree of suspicion as to why I was there and what trouble I may be seeking to cause. It was not without grounds as at the last meetings I attended I was the ringleader in the outcry over the ITV Digital debacle and a staunch critic of the League’s chairman of the time, one Keith Harris, and over the years since been very outspoken in my criticism of the football establishment.

The League meeting was its usual scenario of small-minded nonsense dealing with minutiae of rule changes and the same old endless circular argument over why the lower leagues apart from the Championship got such a small percentage of the Sky money. I ingratiated myself straight away by pointing out that I had been absent from such meetings for years and the same crap was still being debated, adding that frankly nobody was remotely interested in watching Darlington v Lincoln live on Sky; it was the Championship that generated the monetary interest. The other leagues should pipe down and accept that and work with the Championship to squeeze more money out of Sky and the Premier League.

The subject turned to football finances, the very reason I was there. Theo and Dan Jones from Deloitte’s gave a doomsday speech about the spiralling costs in the Football League and the lack of funding available. Lord Mawhinney spoke about revenue streams and getting costs under control and deals with the Premier League for the future. Once he had finished speaking, the floor was opened up to all seventy-two clubs.

I was about to lose the will to live when John Madejski, the Reading owner, piped up with his particular cure for resolving spiralling costs. He suggested the Football League board implement a rule change allowing all clubs to unilaterally immediately reduce
players
’ contracts by 50 per cent! The unrealistic nature of John’s outburst gave me the platform to intervene and speak after Madejski’s stunning cure for all ills.