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At the end of a year dominated by billionaires buying Premier League clubs, two in the Championship, Coventry City and Ipswich Town, were suddenly snapped up in December. Backed by the private equity fund Sisu, Ray Ranson plucked debt-laden Coventry from financial meltdown, while a ?12m takeover at Ipswich by the entrepreneur Marcus Evans has sent the manager, Jim Magilton, browsing the transfer window with some Christmas money to spend.
The debts and continuing losses suffered by both were at the deeper end of the financial mire in which most Championship clubs find themselves, caused fundamentally by the huge gap between the Premier League and its Football League former brethren, which has just widened again. Crowds in the Championship have risen as fans flock to football in astonishing numbers, yet most clubs are still losing money as they compete frantically to reach the Premier League booty. That plight itself makes the Championship more attractive to investors: the larger clubs' dire financial position makes them relatively cheap to buy, and a bountiful payday awaits if some new money for players can clatter them to promotion.
At Ipswich, Evans's takeover is designed to deliver him a bonanza if his ?12m investment in the club and a transfer kitty, with more promised if necessary, enables Magilton to drive the Tractor Boys up. The takeover jolts Ipswich out of a dire period not foreseen when most people in football - outside Norwich, granted - cheered the club's promotion via the play-offs in 2000.
David Sheepshanks, hailed as a new-model chairman, enthused then about the "five-year plan" that had taken the club up, and in 2001, the then manager George Burley's side finished a stunning fifth in the Premier League. But subsequent signings, including the striker Finidi George and the ?5m goalkeeper Matteo Sereni, did not work, the wage bill swelled to ?24m, and the following season, Ipswich were down.
All three clubs relegated in 2002 soon collapsed into insolvency: Derby County were placed in receivership, Leicester City and Ipswich into administration. Sheepshanks endured his first pointed criticism when Ipswich paid only 5p in the pound to local businesses and other small creditors - including ?9,047.50 unpaid to St John Ambulance - yet even that did not cut the bulk of the debt, owed to Norwich Union and Barclays Bank, which was secured, mortgaged on the Portman Road ground, and so could not be reduced like the money owed to unsecured creditors.
Sheepshanks points out that the money was not borrowed to fund reckless spending on players. "It was considered sensible," he says. "We borrowed long-term money to invest in the club, ?25m from Norwich Union to build the new North and Green King Stands, ?4m from Barclays to build a training centre."
Yet down in the Championship, where this season each club will receive ?1m from television compared to an average ?40m in the Premier League, even the interest on those borrowings became unpayable, increasing the amount owed. Still averaging loyal crowds above 22,000, Ipswich lost ?3.2m in 2005, ?2.7m in 2006, and would have lost the same again last year without an exceptional ?2.6m received from the sell-on of the former Ipswich striker Darren Bent by Charlton to Spurs.
With Ipswich unable to pay, Norwich Union agreed to suspend interest on its loan between January 2006 and August 2007 in return for taking a 9.9% stake in the club. Sheepshanks accepts the club's financial position was "unsustainable" and for a year they cast around for a buyer to scoop up the debts. Their scale, however, meant that a very rich investor was needed, prepared to risk multi-millions on a punt to the Premier League. Sheepshanks says no firm offers arrived until Evans made contact.
Evans, known to be 44, with an address in the tax haven of Bermuda but who runs his hospitality and conference business from the Premier League's old offices in London's Connaught Place, takes guarding privacy to a new dimension. He has written warm letters to the Ipswich fans saying he appreciates the club's heritage and community identity, but given no interviews. No public pictures of him exist, and it is not known if he has yet been to a match.
He is reported to have begun in the "sports entertainment" business by hosting garden parties for Wimbledon tennis goers when he lived near the All England Club; now the Marcus Evans Group operates around the world. His UK holding company turned over ?31m in 2005, the last year for which accounts are available, and is ultimately owned by Marcus Evans Investments (MEI), registered in Bermuda.
That company is the vehicle for the takeover of Ipswich, which is shrewd, based on financing a promotion push, with huge potential profits for Evans lying in the detail. His ?12m investment is split: ?3.9m to buy the club (87.5% of the shares), ?8.1m put in as "preference shares," which will function like a loan. They will pay Evans an annual return of 7%, ?564,000, but the club does not have to repay the ?8.1m until it has been in the Premier League for five years.
Evans's MEI has also bought the major lenders' debts, which had risen to ?32m. Barclays are understood to have settled for just a fifth of the money owed to them and Norwich Union are reported to have accepted a similarly reduced sum although this has not been confirmed. Certainly Evans has paid the institutions substantially less than the full ?32m, but the club nevertheless still owes it all, now to MEI, with interest at over 7%, ?2.24m a year. If his ?12m investment is spent wisely by Magilton and Ipswich have the wherewithal, pluck and luck to win promotion, Evans could be paid ?32m, plus the regular return on his preference shares, and own a Premier League club worth a great deal more than he paid for it.
"Marcus Evans was attracted because Ipswich is a community club and he supports the club's values, but clearly it is a business," Sheepshanks acknowledges. "He does stand to make a huge profit, but the good news for our supporters is that his interests are aligned with the club. He will not make that profit until the club can pay it, and that means making it to the Premier League. He has bought Ipswich Town because he wants to own a Premier League club, and all the benefits which go with it."
Sheepshanks, while hailing the investment as vital for Ipswich, did say it was "sad" to lose the club's historic, local ownership. He has tried to draw a comparison with the well-known financial involvement of the Cobbold family - old Etonians like Sheepshanks, and local brewers, who took the club professional in 1936 then steered it through the distinguished eras of Alf Ramsey from 1955-63 and Bobby Robson, from 1969-82. There is a difference, though, as Sheepshanks acknowledges. Those backers, unlike those of today, did not become involved in football to make money for themselves.
An 'iniquitous' gap
Discussing the financial context for Marcus Evans's takeover, David Sheepshanks attacked the "iniquity" of the gap between the Premier and Football Leagues, and criticised the FA for supporting the breakaway. "I tip my hat to the Premier League," Sheepshanks said. "They have done phenomenally well to capitalise on their opportunities. But the fault lay with the FA in 1992, in allowing the clubs to break away on woefully inadequate terms. Championship clubs' problems are the fallout from that iniquity. We are very grateful the Premier League has agreed to make 'solidarity payments' [worth around ?1m to each Championship club], but the gap has grown greater than ever between most Championship clubs and those which have parachute payments."
david.conn@guardian.co.uk

Posted By: UtterlyHuckerby on March 26th 2009 at 20:45:31

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