The Gills ...yawn

[REDolent3]

As a little deviation to our current turmoils you may be interested to see Mr Scally`s letter of this week. Sorry its so long winded

 

Dear Supporters,

 

Most of you will be aware of my attempts to return the business to a more stable footing, to achieve an acceptable restructuring of our debt, to improve performance on the pitch and to pave the way for a new stadium and associated facilities which in turn will ensure a bright and prosperous future for everyone who cares about this fine football club. To this effect I have now almost finalised a restructuring agreement with our Bankers, which is subject to Bank internal credit approval, and as such have called an EGM for shareholders to consider and, if they feel fit, approve the necessary resolution which will allow the restructuring to be completed.

 

Whilst shareholders have been served the appropriate notices, this is a matter which should be of interest to all supporters and as such I have decided to explain the situation, in as simple language as possible, to ensure firstly that everyone understands the huge importance this restructuring is to our progress as a football club, and secondly that, in the absence of proper quality information, to ensure the rumour machine does not go wild with ridiculous theories, misconceptions and false statements etc which would only mislead the public at large and possibly cause damage to the business.

 

I have therefore set out to explain the position, the process and the benefits which I hope will give all connected to the club a high level of comfort.

 

Current Position

 

Priestfield Stadium is owned by Gillingham Football Club plc with the shareholding in the football club currently standing at just over 75% owned by me personally and the balance owned by about 3300 other shareholders, with the highest of these individual shareholders owning 2.13%.

 

The Priestfield Stadium building and costs in fitting out the newly built stands and facilities in their entirety stands in the books at approximately £11.1m. This should not be confused with a valuation of the site, as the value can range enormously based on current usage, ie as a football club, or vacant possession with no planning permission, or vacant possession with planning permission etc. The value can also vary based on the level of planning gain, ie the Council Planners can allow a variety of different schemes based on a variety of different situations, for instance if Medway was keeping its football club in Medway they may take a different view on planning than if the Club was moving outside of Medway because clearly the football club is a huge asset to Medway and its communities and they (Medway Council) would want to ensure the club remains part of those communities for many a year to come, as indeed we all would wish to be the case.

 

Debt and Interest Payments

 

The cost of constructing and fitting out Priestfield was originally intended to be mostly financed by monies we understood were legally due to us under a broadcasting contract that subsequently collapsed leaving the Company with a huge construction deficit in or about March 2002. Given the construction was advanced at that time, our Bankers kindly supported the club with the required funding to complete the construction. In addition, our incomes dropped heavily during the period 2002-2006 and as such our trading position showed losses that compounded the debt, which, when interest of up to £800k pa was added, increased our total debt to our Bankers to the current level of approx £13m. Our Bankers have been working closely with us over the past four years and they are much comforted and impressed with the measures we have taken, the costs we have cut, and the efforts in increasing income that we have made, despite the fact we also suffered a relegation in that period and a further loss of valuable income. Such has been the trading turnaround that in our last trading year (to 31/5/07) we actually managed to make a trading profit of c£160000 before bank interest of £808k and depreciation of £450k. We expect a similar performance in this current year but clearly the need to finalise and restructure our bank debt, a task that has been ongoing for 3½ years, is imperative to continued future success.

 

The Way Ahead

 

Our Bankers now accept that we have taken all possible measures to manage our business keeping losses to the minimum possible, and in fact we are forecasting a balanced budget for this current year. The Bank further accept that the current level of debt is unaffordable to the club and unmanageable in terms of the level of interest appertaining thereto. It has therefore been agreed in principle to restructure the debt between the football club, and a new company (Priestfield Developments Ltd) set up to progress the development of the new arena/stadium, such Company to be wholly owned by me personally so that I can, not only ensure that the terms between the two Companies are beneficial to the aims of the football club, but further that we have control of the redevelopment process and that profits achieved on the future sale of Priestfield, after bank debts have been satisfied, are used for the benefit of the football club in the construction of a new arena and associated facilities. In agreeing to these principles the bank required the new Company to own the Stadium, thus the new structure that I am proposing to members at the EGM should be put in place. In return for, what is in effect a sale and leaseback of Priestfield between two Companies which I control, the following points should be noted.

 

1. Security of tenure for the football club is maintained. The stadium cannot be sold or developed for as long as the club requires the facilities, and until alternative facilities are built.

 

2. The stadium is sold across to Priestfield Developments for approximately £9.8m, the value suggested by Atis Real (an independent firm of Chartered Surveyors approved by the Bank) which will leave the football club with a manageable overdraft not exceeding £3.5m.

 

3. Priestfield Developments Ltd will enter into a lease with the football club for an initial proposed term of 10 years with the first three years being effectively rent free, thus allowing the club to build up its business again. After the initial three year term, it is proposed a lease fee based on Divisional status is paid at terms to be agreed.

 

4. Future profits on developments of Priestfield Stadium will be used for the benefit of the football club.

 

5. There will be no liability to the Bank from the football club for any sums other than the reduced overdraft or any other such sums as may be agreed in the future.

 

6. Interest payments to the football club will reduce from the current levels of c£800k pa to about £200k pa, a substantial saving of about £600k per year, that is £1.8m over the first three years.

 

7. Investor interest will be easier to achieve by 'splitting' the asset from the football club, as some people are interested just in the club, whilst others are not interested in football but would wish to invest in the stadium development.

 

8. By my continuing to control both the football club and the development project, I can ensure the interests of the club are always maintained, as has been my sole objective over the past 13 years as your Chairman.

 

I trust the enclosed can be clearly understood and I very much look forward to the return of the good times that we have enjoyed in the past, and which, I truly believe are returning to the club once again.

 

Thank you for all your support over the past years and in the years ahead.

 

Up the Gills.

 

Yours sincerely,

 

 

Paul D. P. Scally

Chairman

 

[PatMan]

Great as a cure for insomnia....

[Lord Horn]

Originally Posted By: PatMan

Great as a cure for insomnia....

A bit like their footie prowess then....

[Slartibartfast]

So to summarise the salient points:

 

The Gills are £13m in debt.

 

In their last trading year (to 31.5.07)they did brilliantly to make £160k less interest and depreciation = c£1m loss.

 

They are hoping for a similar performance (another £1m loss) this year.

 

The only asset the club has is the stadium which Scally will take of of their hands still leaving the club c£3.5m in debt but with no assets.

 

I wonder how long before Scally redevelops the site?

 

 

[American FLEET FAN No1]

Originally Posted By: Slartibartfast

So to summarise the salient points:

The Gills are £13m in debt.

In their last trading year (to 31.5.07)they did brilliantly to make £160k less interest and depreciation = c£1m loss.

They are hoping for a similar performance (another £1m loss) this year.

The only asset the club has is the stadium which Scally will take of of their hands still leaving the club c£3.5m in debt but with no assets.

I wonder how long before Scally redevelops the site?

Surely you are not suggesting a conspiracy theory, at another Club, Slarti? You have been around me far too long!