Monday, February 28, 2005

The Cost of the CVA

Details have emerged of the cost of the CVA to Hereford United. The "voluntary arrangement" took effect on January 21st 1998 and was completed on January 28th this year.

In summary, the club was unable to continue trading in 1998 because of mounting debts and Chelverton Properties Ltd, as it was known at the time, made sufficient funds available to enable the club to continue to trade.

At the same time the club entered into a Joint Venture Agreement with the objective of acquiring the freehold interest of its trading site, obtaining planning permission and disposing of the site.

Initially dividends of 100p in the pound were paid to preferential creditors and 40p in the pound to unsecured creditors.

Last summer the club proposed a final payment of 5p in the pound to the unsecured creditors and this was accepted at a meeting of the creditors on September 13th.

The receipts and payments accounts shows that Chelverton loaned £315,000 to pay off the secured and unsecured creditors in 1998, but the recent final payment of 5p to the unsecured creditors was funded by the club. This amount came to £10,893.

Altogether the club put some £19,935.88 into the settlement over the original £315,000 from Chelverton.

On the payment side, the Inland Revenue received £129,744 and the Customs and Excise were paid £44,617. They were the only two secured creditors.

The total paid to the unsecured creditors was £98,038.16. Some creditors did not ask to be paid at all as the original statement of affairs showed that £282,833 was owed, but £217,862 was the eventual deficit on which the 45p in the pound was paid out. In effect it looks as though some £65,000 was written off by creditors by taking decisions not to persue their claims or by lowering their claims.

However the payments show just how much the CVA has cost the club in supervisor and other fees.

The Supervisors, Smith and Williamson, have received a fee of £46,849 with added expenses of £2,430. Legal fees came to £10,223.

In the report the supervisor has a report on his fees. It shows that some 80 hours of work up to the end of December 2002 were claimed by a director at an hourly rate of £195.75 which came to £15,660. Since that time those fees for directors work have increased to between £200 and £275 per hour.

Graham Turner and his board at Edgar Street have worked hard to put the CVA into the history books. There is little doubt that supporters, too, are very pleased that the club is now back to relative financial stability.