Saturday, July 05, 2014

From The Archives - The Beginning Of The CVA

With reports that Hereford United may go for a CVA, BN looks back to January 1998 when the Bulls were in a previous CVA.

HERE is an update on the CVA situation at Edgar Street courtesy of HUISA:
At a Board Meeting on 18th November 1997, the Board of Directors determined that the financial position of the Club was so bad that they had to seek the professional help of a firm of Insolvency Practitioners. This Board meeting took place TWO DAYS, prior to the meeting HUISA called at the Green Dragon Hotel. It is not surprising (and this is the real reason) therefore that the Board refused to attend our meeting.

The Insolvency company, Smith & Williamson of Birmingham have put together a proposal, known as a Company Voluntary Arrangement (CVA), to ward off potential winding up orders from creditors. Details of the proposal were sent to creditors and shareholders just before Xmas (I wonder why??), and a meeting was called at the Club, to agree the proposal, on 7th January 1998.

The CVA documentation shows the Club to be effectively £1m, in debt, with little prospect of that position improving (i.e. it is getting worse). The largest creditors (after the BS Group of course) are the Inland Revenue and Customs & Excise who are owed some £143K and £120K respectively. Football Clubs are owed some £59K, and the club owes money to many varied "trade" creditors totalling some £74K. In fact it would almost be easier to make a list of those to whom they don't owe money.

In return for agreeing not to wind the Club up, the CVA proposed, that the Club pay certain preferential creditors (including the Football Clubs) in full and the balance of the creditors an initial payment of 40p in the £. The creditors are also promised that they will all get the remaining monies due to them, in full, when the Club secures the freehold on Edgar Street and sells it for re-development. The estimated value of the site in these circumstances, is quoted within the CVA at £8-10m. The CVA is explicit that the arrangements include NO provision for a new ground, stating simply that this matter will be addressed, separately.

The money to make the initial payment to creditors, is being borrowed, from a further property development company called "Chelverton Properties". In return for this further loan, and in addition to the interest payable, Chelverton Properties, gain an undisclosed % of the funds to be generated from the sale of Edgar Street. It seems unlikely that this will be less than the 25%, the BS Group have already secured.

At the meeting on the 7th January 1998, the creditors refused to agree the CVA and both meetings were adjourned for two weeks. The reasons for the creditors refusal were as follows:

That the Club could not prove that the loan from Chelverton Properties was in place!!!!

The Customs & Excise disagreed with the Club's figures, as to how much they were owed.

The Inland Revenue and Customs & Excise, were not happy that the Football Clubs received preferential treatment and were paid in full. Only our Board of Directors could make such a cock-up of things, when they were asking others to let them off the hook!!

Despite the fact that the shareholders meeting was technically adjourned, it was nonetheless extremely interesting. If PH (Peter Hill - chairman) was in any doubt as to how isolated he was beforehand, he can have been in no doubt afterwards. He was asked why shareholders (and therefore the fans) had not been consulted on the BS deal, and blamed weakly, a lack of time; he was also asked about his plans to pay the loan back in 1999, if the ground has not been sold by then. He has no such plans, preferring to believe, rather naively as one shareholder pointed out, that the BS Group will simply give the Club more time!

After an attack by George Hyde, who asked how the CVA could be based on the sale of the ground when the Club did not own it, Graham Rivers spoke for all of the shareholders (and fans) when saying that the Club faced a very real threat of closure with or without the CVA, because of the BS Group deal. He went onto say that for the Club to have any chance of surviving there would have to be a complete change in the Boardroom, followed by the bringing and working together of all parties genuinely interested in saving the Club (the supporters, the Council, the commercial sector in Hereford, etc.). He didn't say it directly but it was clear that the latter wasn't possible without the former. He then proposed an extraordinary meeting of shareholders for this purpose and received the full support of everybody in the room except those on the top table. After trying to arrange the meeting for the same day as the Stevenage game (the Chairman clearly didn't have the date in his diary), the EGM was agreed for Sunday 18th January 1998.