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Thoughts from the Editor

Finally... the £10.4M Truth?
14 January 2005

There was a strange exchange at the Everton AGM back in early December that few alert Evertonians missed... although far fewer ever claimed they understood.  It involved a loan of £10.4M received by Everton in February 2004.

So what?  Well, when challenged to provide an explanation to Everton's Shareholders, this is what the Everton Chairman, Bill Kenwright, had to say:

Harry Markham: "Harry Markham.  On page 17, near the bottom, we have Increase in borrowings - a figure of £10.4 million."

Bill Kenwright: "Yes."

Harry Markham: "Could you just explain.... who we borrowed that from, under what terms was it borrowed and have we paid it back?"

Bill Kenwright: "OK, that is what we've been doing really for the last 4 or 5 years and what you'll find most football clubs do, that is, bringing forward, i.e. factoring the SKY money, erm, you know, the money we get, a portion of the money we get each year – we haven't done that this year because we're in a better position and that's all it is.  Erm... what was the other question ?  How much did it cost us to borrow it?"

Harry Markham: "Just really wanted to know — why have we borrowed 10 million from somebody?"

Bill Kenwright: "No we didn't BORROW it, we've brought forward the payments we were due - we were probably due them in August and we brought them forward to January, which is..... common practice in football."

Harry Markham: "So why didn't you do that last year?"

Bill Kenwright: "Why DIDN'T.... I think we DID it last year, we're not doing it THIS year.  I think we've done it every year 'til this year.  We tried to stop it because at the end of the day you're just.... building up your borrowings and we're trying to stop that – that right Keith?  OK?  If anyone doesn't understand that I'll explain it again – you get several million from SKY, each year, obviously, and the minute your status for the following season is erm... in the bag, i.e. you're going to be in the Premier League, you can bring forward the money you are due, and we've done that."

[…then later on…]

John Quinn: "Can we just make it clear about this 10.4 million pounds?  You are saying that SKY owed us £10.4 million at the end of August...."

Bill Kenwright: "No."

John Quinn: "Well can you explain that then before I go any further?"

Bill Kenwright: "I'll re-explain it again.  Y ou can draw on your SKY's following season's money, when you attain your Premier League status and we just brought that money forward, but we were going to get it, so we got it earlier."

John Quinn: "What money have you brought forward – where has this £10.4 million pounds come from?"

Bill Kenwright: "SKY."

John Quinn: "We get 10.4 million pounds a year?"

Bill Kenwright: "We get a lot more than that."

John Quinn: "OK, OK, thanks."

Bill Kenwright: "I think you'll find most football clubs do it, because as you probably know, there's a time in the calendar when there is no money coming in, we've had all the season ticket money and we've got to pay a lot of things out, and you draw it early.  But we haven't done it this year."

If the loan was really against the next season's Sky money, it seems highly unlikely in the extreme that Sky would actually distribute money ahead of the time when they are contractually obligated to do so — Why would they?  If they hold on to the money, they earn interest on it, improve their cash flow, etc.  The truth, however, is somewhat different; It appears that the loan was provided by a third party, perhaps secured against the Sky money — which might in some twisted way be considered to represent a reasonable explanation for Bill's re-explanation of what actually happened.

You have to be somewhat aware of the financial context to fully understand the significance of these events we are describing.  Everton were financially in dire straits during the early months of 2004.  At one point, the taxman apparently came knocking, looking for payment of unpaid VAT.  Despite massive gates, built largely on Rooneymaina, most of the income was from season tickets (record sales of  22,000) and that money had all been spent.  The fresh ticket sales for each game bring in relatively little cash at that stage of the season.  And the new transfer windows were beginning to bite.  Everton could not make quick influxes of cash — as they had done in the past — by liquidating one of the many appreciating assets that happened to be maturing nicely though the Youth Academy.

Imagine, if you were getting a loan from a third party when your normal finance routes (the Bank) were effectively closed; that third party would put far less faith in Everton's survival at that stage (because the bookies had us at short odds for the drop) than they would in, say, Wayne Rooney's net worth to the Club...

What if the loan was actually secured against Wayne's value (contrary to Bill's assertion)?  Then the prospect of getting a third party loan would be clearly much higher.  The Club had been advised that the Tribunal would agree a figure in the region of £10 million for him at the end of his contract, and he may have been insured for that amount.  This would therefore be solid collateral with no risk — something which Everton's survival in the Premiership was not!

Everton Shareholders have had their chance to look at the accounts: Everton borrowed £10.4 million from somebody — at a time when the Club couldn't even cash cheques, were rumoured to be hounded by the taxman for unpaid VAT, and looked increasingly likely for the drop into League Division 1. 

What else could corroborate this analysis? 

How about the Companies House Register of Charges.  It explains with crystalline clarity exactly why Bill Kenwright chose to dress this loan up with that somewhat fantastical tale of an advance on Sky money: he simply could not tell Everton Shareholders the truth. 

• These are the facts:  The charge over this £10M loan was registered by Singer and Friedlander in February 2004, and was lifted when the loan was repaid... 14 days after Wayne Rooney signed for Manchester United.
   
• This is what it means: 
  • Despite all the protestations to the contrary, Everton had already made the decision that they would sell Wayne Rooney as early as February 2004; he was the only viable collateral they had left;
  • They needed to effectively put Rooney in hock in order to save the club and ensure its financial viability... at least for a few more months... (until the next fiscal crisis!)
  • We understand from sources very close to the Rooney family that Wayne did not want to leave Everton; these circumstances meant that he was being forced out of the Club he loved.
  • The first tranche of the Rooney transfer money had already been swallowed up by Everton's steadily increasing debts, and this happened way before there was any suggestion from the Club that Wayne Rooney would be allowed to leave
  • Thus started the long and strangely coherent whispering campaign to discredit Wayne Rooney with his local fanbase (the whorehouse revelations; the Sun exclusive interviews; even his own teammates publically "advising" him that he needed to join a bigger club...) and other significant factors (the refusal to speak to the fans; selling up the family box at Goodison; failing to mention "Everton" as he surged to the pinnacle at Euro 2004)
  • Perhaps the saddest aspect of this all: in order to save the Club face he had to submit a transfer request.

So Everton had already decided, some time in the spring of 2004, that they had to cash in on the bonanza that was Wayne Rooney.  Remember, this was well before the Euro's and Wayne Rooney's rapid albeit temporary ascent to being a £50 million player... Indeed, the first time we at ToffeeWeb started to hear rumours of Wayne Rooney going to Manchester United was in February or March of 1004.  Yes, they were rumours, but somehow they presaged the future with an indefinable element of inevitability.  If you took off the blue-tinted specs, you just knew it was really going to happen. 

And then he broke a bone in his foot. 

You can just imagine the sense of panic that must have gripped Bill Kenwright and Michael Dunford.  It even makes you wonder if this was the issue that so rapidly made Trevor Birch change his mind about the real challenge of sipping from on the poisoned chalice of CEO at Everton... 

This sorry, sordid story confirms beyond all doubt that Everton fans and shareholders have been lied to.  Systematically and repeatedly.  When will it ever end?

Michael Kenrick

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