Championship football club has £2.7m debt wiped ~ Debt Managements and Consolidation

Wednesday 8th June 2011

A major creditor for a Championship football club has swapped part of its debt for equity and a stronger presence on the club’s board.

Mike Hall, co-owner of Cardiff City creditor PMG, has rejoined the club’s board as a director after an agreement between his firm and the football club’s Malaysian backers.According to the South Wales Echo, PMG has turned a “significant sum” of owed debt into equity.A statement on the club’s website went on to say PMG – a property firm owned by Mr Hall and Paul Guy – also backed the decision to hire forensic accountants to examine paperwork dating from former owner Sam Hammam’s time in charge.It said: ‘As a result of a series of meetings and given the undertakings and plans by the Malaysian investors, PMG have agreed to convert a significant amount of their debt into shares while also agreeing a new payment plan which will improve the balance sheet.‘As part of the agreement Mike Hall will join the Board and will work with the Malaysian investors to address the key historical issues facing the club, namely Langston. PMG fully endorse the stance taken by the Board in appointing forensic accountants investigating Sam Hammam and his business dealing whilst Chairman of Cardiff City Football Club.’In May 2010, PMG converted £300,000 of money owed into 1,912,046 new ordinary shares and restructured the balance owed to be repayable by September 30, 2013.Mr Hall told the South Wales Echo: “Paul and I have restructured the plan and turned a significant sum into equity to back the Malaysians going forward, which will hopefully secure the future of the club.“We’re looking forward to working hand-in-hand with the Malaysians and are delighted to restructure the debt and solve what was an ongoing problem for the club.“At the end of the day I’m a fan – I’m interested to see who our next manager will be, which players we will sign and I want us to do what Swansea did.”At the time, it was said a further £2.7 million of the PMG loan could be converted into shares by notice in writing to PMG up to December 31, 2011.It is not clear how much of that £2.7 million has now been converted and seen Mr Hall appointed to the board.Keith Morgan, a football finance expert, said: “It is likely to be at least £2.7 million of the £9 million they are owed, or just as likely to be more. It may be they have extended the deadline for that debt to be paid as well. They are significant shareholders going forward, which suggests they are in it for the long term.“And the only way they will get any benefit from those shares is if they get into the Premier League – otherwise they are worth the square root of nothing.”
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