‘Bryan offered them the contract to build the stadium. Because the club was running the project at that stage, they didn’t have to go through the sort of tender process the council would have.
‘HBG came over and decontaminated the land. Then when they asked for payment, Bryan said, “we haven’t got any money.”
‘HBG wanted to take a charge over the land, but then discovered the football club didn’t own it and it was still owned by British Gas.
‘When they found out the football club didn’t own the land, HBG made a contract with British Gas to buy it all.
‘They then said to the council, unless you step in and buy the land, the stadium is gone. They said they would proceed with a retail development.
‘The council paid £20m for the site, which was 70 acres. We then sold 30 acres to Tesco for £60m. Both deals were done in the same weekend.
‘The figure for buying the gasworks part of the site was only £2m. I understand Bryan awarded himself a £1m bonus for doing that part of the deal – but he never actually did it.
‘If the council had not stepped in, it would not have happened. There were five or six occasions during the course of this project when the council had to step in. Sometimes it wasn’t just about money.’
Shortly afterwards, Bryan Richardson was ousted in a boardroom coup by his fellow board members and Mike McGinnity took over as chairman. Richardson had gone, but his vision of a new home for the Sky Blues lived on.
Geoffrey Robinson said: ‘The key thing was to ensure we got our 50 per cent of the Arena. But then Bryan fell out with the board and he went just as the plans were under way.
‘The concept was clearing up a wretched part of Coventry, put a marvellous stadium there and, realising its value, bringing in Tesco – Bryan did all that, he was brilliant, and it was very good.’
In 2002, the club and the council formed Arena Coventry Limited (ACL) – the firm responsible for the Arena – in which they were equal partners.
By 2003, the club had invested an estimated £2m in the project, but they were now strapped for cash.
Through board member and Alan Edward Higgs Charity boss Derek Higgs, they applied for a loan to provide the £21m needed to complete the Arena project from Banco Espirito Santo.
But that loan ultimately fell through and the council, fearing its regeneration project for the north of the city might not be delivered, committed to lend £21m to Arena Coventry Limited (ACL).
John McGuigan said: ‘We created a company called Coventry North Regeneration to build the Arena. It was an “arms length” company, which meant that if it went bust it would not have an impact on the council. But it could not take advantage of tax allowances.
‘There was a figure of £21m for the fit-out of the stadium – and that became the loan we are still talking about today. We wanted ACL to take on the finance for that for tax purposes.
‘The football club negotiated that loan with Banco Espirito Santo. But they said they would only do it if the council guaranteed the deal, and we would not do that.
‘The loan fell through and we had to postpone the full council meeting to sign off the project for a month.
‘Ultimately, the council agreed to put £10m in and we would give ACL a £21m loan.
‘Soon after, Yorkshire Bank took over that £21m loan from the council.
‘We always thought that, when that debt was cleared, ACL would make £4m a year.’
Geoffrey Robinson said the club’s inability to secure finance for the project was a key moment leading up to the situation we have today, but also pointed the finger at the city council for failing to support the club.
He told me: ‘Where it went wrong was when we couldn’t come up with the money for the club’s part, which was about £20m.
‘Derek Higgs would have to carry the can for that. He was in charge of the negotiations with the bank. He failed.
‘At that point, John McGuigan stepped in and said, “this will now be a council-led project.”
‘The idea of a joint-venture project went out the window. It would be run by the council and it was one disaster after another. I predicted to John McGuigan it would be. They’re not set up to do that. It was a big failure from that point on.
‘The council took on the loan and that became the now-infamous loan that is still being argued about today.
‘We couldn’t walk away when we failed to get the loan from the bank. We’d sold Highfield Road by then.’
He added: ‘That £20m is where we failed. At that point, the council stepped in eagerly thinking they had got a bargain and thought “screw the club”. That was their attitude, sadly. They were non-commercial and unrealistic.
‘When the council stepped in with the loan, at the time we breathed a sigh of relief. We could have gone back to another bank to get the money and asked for a stay of execution. But the council was certainly the easiest option.
‘You couldn’t say the council were being overtly forceful in pushing through their solution, but I think they were very keen to do it.
‘My judgement here is that the council saw this as their big moment. John McGuigan said to me, with an air of grandeur, “this will be a council-led project from now on.” They had put the money up so you couldn’t deny them that control.’
He added: ‘We should have stayed at Highfield Road, no question about it, having failed in all the other objectives we set ourselves – to own and control the new stadium, to stay up and when we failed with the loan.’
Despite the project getting under way, the club’s troubles were far from over. Under pressure to reduce their debts further, the club agreed a deal to sell their shares in ACL to the Alan Edward Higgs Charity for £6.5m.
The deal was only ever meant to be a short-term arrangement, and a formula was agreed for the club to buy back the shares in the future. In fact a 2003 council report, which formed the basis of the council agreeing to support the project, anticipated that the club would have bought back the shares and ACL would have cleared its bank debts within ten years.
Peter Knatchbull-Hugessen is clerk of the Higgs Charity and husband to Marilyn Knatchbull-Hugessen – chairman of the charity and sister of Derek Higgs. He explained how the charity had become involved with the deal.
He said: ‘The charity was already heavily involved with the club when the ACL shares issue came up. The charity had loaned the club £2.5m secured against the value of players.
‘The objective of the loan was essentially about remembering 1987. The loan was made in the early 1990s, when the 1987 FA Cup win and the effect it had was still in the trustees’ minds. They wanted to continue that and so they set it up as a cash investment.
‘It was done with proper legal advice and they paid instalments as you would with any other loan.
‘When it came to the time that loan needed to be repaid, it was post-Bosman. We had a guarantee of double the loan in players, but after Bosman that was not as secure. The club could offer no security.
‘We knew the club was in a parlous state, so we said you have to pay the money back.
‘At the same time Geoffrey Robinson had loaned the club £5m, but our loan had to be paid back before his.
‘The result was that they could not pay the money back. The charity was faced with forcing the club to go into administration. Clearly, we did not want that to happen.
‘At the end of the 2002/03 season, they needed more money just to start the next season. They were not able to borrow any more because of all the other loans they had not paid back.
‘At this time, ACL was just being set up. So we got the shares in ACL for £6.5m and they got £4m in cash and £2.5m was effectively paid back to the charity.
‘The shares had a formula for the club to buy them back and the intention was it would be a short-term deal, although there was no official timeline.
‘From the charity’s perspective, it was lose £2.5m or do the deal.’
He added: ‘The charity b
elieved it was very important to secure the building of the Arena for Coventry. The north west of the city was a regeneration zone.
‘There needed to be something that would create employment benefit, bring inward investment. Creating a relationship with the city council should have been a secure and sensible thing.
‘We both had interests in the betterment of Coventry for the people. For the charity it was a two-way motive, a financial motive, and that it would benefit the people of Coventry.
‘The deal was given the green light by Grant Thornton and legal advisers, who checked it over as a cash investment. We had to be sure it stacked up – and it did clearly, although it was deemed riskier than if we had invested in shares in a bank, for instance.
‘We asked if it stacked up given the charity’s objectives and the answer was yes it did.
‘It was not about supporting the club.’
John McGuigan described the situation leading up to the sale of the club’s shares in ACL from the council’s perspective.
He said: ‘One year into the project Stella Manzie, the council’s chief executive, and I were summoned to Highfield Road.
‘Bryan had gone by then and Mike McGinnity was in charge. He explained that the club was under severe pressure from the bank and had to sell its shares in ACL.
‘I told Mike at the time “what you have sold is your income streams for the future.”
‘There were two options. Geoffrey Robinson could buy them or the Higgs Charity was prepared to buy them. He asked us who they should sell to.
‘It took us all of ten seconds to decide it should be the charity.
‘They were a regeneration charity, they didn’t want to make a profit and they wanted to sell them back to the club eventually.
‘Derek Higgs eventually did the deal. They ultimately put something like £6.5m in to buy the football club’s 50 per cent share in ACL.
‘The option agreement to buy back the shares in the future was something like 75 per cent of the 50 per cent at the original price and two per cent interest on the remaining 25 per cent.
‘That was because, as a charity, they had to be seen to be getting recompense.’
Geoffrey Robinson acknowledged this was another area where the club’s board had failed.
He said: ‘We did a deal, which was Derek’s idea again. It was another bad step.
‘He failed on two things in this. But he was very good, and a wonderful chap. We must not speak badly of him.
‘But there were two things he did that were utterly catastrophic from the point of view of the project.
‘One was to fail to get the money we needed. We wouldn’t have had a problem with it.
‘In the wake of that, we then had a problem where, in addition to the £2m we put in, we had to find a further £4.5m.
‘In hindsight, we should have dug into our pockets and put it back in.
‘But the Higgs Charity put in their £6.5m and bought the club’s half share in ACL off them.
‘We were out of the project, but we had an option to re-buy it.
‘The charity together with the council was an absolute disaster.’
The council committed £10m cash into the project and they worked with the football club to secure a further £10m in external funding.
After a lengthy and heated council meeting in October 2003, the local authority eventually signed off the deal and the Ricoh Arena project was officially under way.
Subsequently, the council agreed a deal with Yorkshire Bank to take over the ACL loan – the loan which ultimately became the subject of a lengthy legal battle between future owners Sisu and the city council.
John McGuigan gave an insight into why the council seemed resistant to signing off the deal at the time.
He said: ‘The club put in about £2m to create the Arena 2000 company, get designs drawn up and secure planning permissions.
‘The council said we would put £10m in and we would be 50/50 shareholders. The idea was that we would be back-seat passengers.
‘In 2002, the company moved from Arena 200 to ACL. The council put in £10m and brought in £5m in European funding and another £5m from Advantage West Midlands.
‘When we started construction, the football club owned half of ACL.
‘They had essentially wasted £2m but hadn’t put a penny more in.
‘If the club was not there, the arena would not have been built. They added value that way. The council did want to help them. They still do, I’ve no doubt about that.
‘It was nearly overturned on the day of the council, but that wasn’t malicious. It was because Dave Nellist [a former Labour Coventry MP and Coventry City councillor at the time] put an amendment in.
‘At the full council meeting where the stadium was agreed, Dave Nellist tabled a motion to vary the deal because the council had taken all the risk and put the most money in.
‘I took Dave to one side and explained that for the integrity of the council and the deal, we had to proceed on the basis of 50/50. Without that, the deal would have collapsed.’
He added: ‘The council never intended to run the scheme. We put £10m in to it as regeneration investment.
‘We ended up in a situation where we were going to lose the whole site unless the council stepped up and took control of it.’
The subject of how much hard cash the club actually put into the project has been hotly debated in the past. Some of the club’s historic accounts show wildly varying totals ranging between £6m and £11m being spent on the new stadium project.
But, according to the council’s 2003 report ahead of the construction of the Arena being signed off, the club had contributed £2m. It reads: ‘These resources have been used to meet the day-to-day office costs, legal and other specialist advice to ACL and elements of the initial phase of design work.’
That total also marries up with the council’s Arena Construction Completion report, published in 2006, which puts the club’s total financial contribution to the building of the £116m Ricoh Arena at £2m.
The council figures were also the ones subscribed to by Geoffrey Robinson when asked about how much the club had invested in the project – but he contested the club had added value in other ways
He said: ‘Before we got there, three of us had to put a combined £2m seed fund in for the whole project.
‘That was myself, Derek and Mike McGinnity. Without that money, the thing would never have got going.
‘That was a cash donation to it. We did not get any money back, even when the Alan Edward Higgs Charity bought the club’s half share in ACL.’
He added: ‘The club itself didn’t have any money to put into the project. There was the £2m which we put in.
‘That would have been perhaps £1m or £2m in consultancy fees and so on, but hard cash – very little. There was £2m gift money from the three directors.
‘You should argue that this money spent on architects and consultants was an investment by the club in the project.
‘Having the idea is also a huge investment. Without that, you have nothing.’
He added: ‘The club came out of it very badly in the end. For us to get 50 per cent of the project for nothing, our tenancy was what we were bringing. We had no other assets.
‘We had £20m to find, and we failed. To get 50 per cent of everything, and all the revenues attached, for £20m would have been a fabulous deal for the club.
‘But we brought the potential of revenue, we made the deal possible by offering the football club as the base stone for the profits for the whole stadium on an ongoing basis.
‘We were going to get 50 per cent of the ground by offering nothing more than the club.
‘It was a good deal for the club, and it was a fabulous deal for the council too. It would have been a good deal for everybody. That’s the point of a good deal.’
Another point of contention soon arose over the level of rent and how it was set.
It would come back to haunt
the club after the £1.3m annual rent fee ultimately led to a dispute which saw the club leave the Ricoh Arena and play home matches at Sixfields for more than a season.
John McGuigan explained how the rent level was calculated at the time.
He said: ‘This was all based on the premise that it would be a Premier League team in a Premier League stadium. In that scenario, there would have been no problem at all.
‘The way the Arena business was supposed to work was that they would pay around £1m in rent and they would be handed a cheque back for £2m.
‘The rent had to be set at that level because we had to be careful about state aid law. We spent a fortune on European lawyers.
‘With the club putting in £2m up front and getting planning permission, we could justify that deal. But for them to occupy and make use of the asset there had to be a rent.
‘There was nothing similar to it anywhere in Europe that had already passed the test. There are quite a few council-owned grounds but they tended to be much smaller.
‘We hired specialist companies [Pinsents, Renouf and LECG] who spent a lot of time on research.
‘They said it would stand up to scrutiny if we charged them £1m a year in rent.
‘My initial thoughts on that were that this is a bit of a surprise. I couldn’t see huge evidence of why it was £1m.
‘We then did basic research on the Highfield Road accounts. In previous years, they had spent about £800,000 running Highfield Road. Not on players or anything like that, purely on the running of the ground.
‘Since they weren’t going to be paying anything at the Arena, that made bigger sense.
He added: ‘The whole Arena project came up at a cost of £113m. Of that, £64m was on the actual Arena. If you took the £64m Arena and stripped out the stadium bowl, that part would probably come out at about £25m.
‘We then asked how much would the refinancing costs be if they built that stadium and it worked out at about £1.2m – that’s how the rent figure was calculated.
‘The advice we got was that the maximum lease we could offer was 45 years, maybe 50.
‘In due course, you can extend that lease because the freeholder retains responsibility for the asset. In this instance we were not selling them the land, we were renting them the Arena. It was always intended that in due course we would restructure the lease and the club would take over all responsibility for running and managing the Arena.’
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