Financially-stricken Durham have secured a financial rescue package from Durham County Council which will further help to secure the future of professional cricket in England’s most northerly outpost.
Durham County Council has agreed to convert loans of £3.74m into shares, so freeing the county from interest payments on long-standing debts.
Under the ECB-brokered settlement, Durham County Council has agreed to convert its debts into redeemable preference shares. The ECB has restructured Durham as a community interest company, which enables it to distribute up to 35% of profits – should they become available – to shareholders.
The council has received interest payments of around £700,000 on their loans since 2009 – variously charging 4.7% and 7% annually on the loans. The council’s own calculations state that with interest rates at record lows they would only have made £140,000 interest in the same period by conventional investments.
The agreement follows the ECB’s own £3.8m rescue package, which included writing off nearly £2m of its own loans to the county.
The bail-out came with punitive measures: the sacking of the Durham board, relegation from Division One of the Championship and penalty points in all three competitions at the start of next season.
But Durham can stage ODIs and T20Is and it is here. combined with stringent cost cutting and a growth in their mediocre T20 attendances, where it is hoped future profitability lies.
The terms of the ECB rescue package were enforced by the ECB after Durham’s long-standing failures to attract investment into the club brought their financial problems to a head this year. Payments to service debt interest payments, were running at nearly £1m a year.
Council representatives were told if they also failed to agree to the rescue there was “a significant risk” that the club would enter administration, leaving the bulk of their loan lost. Durham County Council already owns the land the club’s Riverside ground is built on, and leases it to the club.
A cursory Durham’s statement said: “The club’s difficult financial position was brought to a head earlier in the year by the unexpected calling in of a long term loan and the challenge of securing, in time, private development investment.
“The club is pleased that this has been achieved without the need for significant public debt write off as has been the case elsewhere in cricket.”
Durham’s secrecy has long been illustrated by their refusal to reveal the identity of two long-term financial backers in the Middle East who are no longer involved with the club.
Durham County Council has shown rather more detailed commitment to local democracy than the cricket club it has now helped to save.
A comprehensive report to the council’s cabinet – available here http://democracy.durham.gov.uk/documents/s67278/Cabinet%20Report%20FINAL%206.pdf states: “DCCC had hoped that commercial and residential developments on the site could have provided much needed financial security but it was unlikely that these benefits could be realised quickly enough.
“Over the last three years the council has worked with DCCC to significantly reduce their costs with circa £1million in costs taken out of the business – mainly from a significant reduction on player costs.
“Similarly, the council has worked closely with the club to drive forward commercial development of the site including a hotel and conference centre which would help derive additional income for the club.
“Without additional financial support from the ECB via an ‘all creditor’ agreement and a restructuring of loans or a significant injection of capital from an alternate source, the club could not continue to run on a solvent basis and across the summer appointed an insolvency practitioner to advise the Board on options available to it.
“The appointed insolvency practitioner (RSM UK) undertook soft market testing to gauge interest in purchasing the club across the summer, although they were unable to find suitable buyers.
There has been less support so far in writing off or converting debts into equity from other creditors.
Both CR Financial Solutions, a London-based company which focuses on real estate, bought out Durham’s outstanding bank debt of £788,000, and the North East Local Enterprise Partnership, is owed £771,000. Both have been unresponsive. The club’s outgoing directors depart with collective debts of £415,000 still owed to them.
The ECB is expected to take on the bank debt from CR Financial Solutions, so protecting the future of the ground, and further increasing its own indebtedness.
It has already agreed to write off nearly £2m of loans and, as part of the deal, has withdrawn Durham’s Test match status, a convenient solution to the recognition that the dash for growth over the past decade or so has left more grounds seeking Test fixtures than are sustainable.
David Hopps is a general editor at ESPNcricinfo @davidkhopps
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Source: ESPN Crickinfo