Podcast Episode 3 – David Low


Wottpi says: April 25, 2014 at 3:22 pm Would be interesting …

Comment on Podcast Episode 3 – David Low by easyJambo.

wottpi says: April 25, 2014 at 3:22 pm

Would be interesting to know for Easy and Ally Jambo what type of cash was needed to keep Hearts going this last wee while and what pro rata amounts may be required to keep Sevco afloat if admin happened midway through next season.
Hearts lost two thirds of their ST income for this season (£1.6M or 20% of our income) prior to going into administration on 19th June last season (Rangers look as if they could do likewise). Outgoings were cut to the bone. Contracts were allowed to run down over the summer. 13 staff and 5 players were also made redundant. A number of higher paid players and execs have also taken pay cuts.

Total wage bill (football and non football staff) for June to December was £1.24M so the annual bill should be around £2.5M.
The last comparable and available figure was for season 2011/12 and amounted to £8.2M (was probably around £5M last season) so that shows the extent of the cost cutting.

Other income streams have been good. Attendances have be up around 10%. Money from the SFA and SPFL will be in line with the previous season. We have also collected around £250K in transfer / compensation fees.

In the middle of December BDO had a surplus of £720K. They have been able to eke out that amount plus ongoing gate receipts, TV revenues, advertising and sponsorship money to get us through to the end of the season.

STs have not yet gone on sale (a good sign – it was mid March last season). Shirt sales will be high for the coming season with their 1914/15 remembrance kit (no Wonga logo). However the club will still need funding during the close season. That should come from FoH who have already collected over £1M in pledges over the last 8 months.

It shows what can be done if there is a will to do it.

easyJambo Also Commented

Podcast Episode 3 – David Low
John Clark says: May 4, 2014 at 10:33 pm
Thanks JC I’ll look at it later

Podcast Episode 3 – David Low
RyanGosling says: May 4, 2014 at 8:19 pm

Easyjambo I’ve seen this being discussed here before and the question it always raises for me is what was the need for the newco? If the newco bought all the assets and paid all the debts and passed the last resolution you highlighted showing that they were the same entity, why not just pay off the debts and carry on? Was it because liquidation proceedings were already under way?
Basically, the oldoco owners were unable to pay their debts (approx £1,400), therefore the club was unable to trade and going out of business.

I don’t know for sure why the newco solution was chosen rather than just taking over the oldco, but it may just be the way that insolvencies worked at that time (e.g. were CVAs available ???). The more important thing to me looking back at the historical reference is that the newco obviously wanted to be the same as the oldco, hence the invocation of section 161 of the Company Act of 1862. Otherwise the newco could have done a Sevco and distanced itself from the liabilities of the oldco.

Cambellsmoney – I’m sure your legal/insolvency experience means that your interpretation is correct. (from what you say I assume that “be and the same” therefore means the the agreement was unchanged from that which was submitted to the EGM) However, the agreement was between the Oldco and Newco, with the reconstruction implemented under the company law of the time, as referenced above.

I tried to find the text of the 1862 Act, but could only find the following reference.

http://i.imgur.com/qT2YekB.jpg (start at “In order to carry out a reconstruction under s 161)

My question would be that if there was not a desire to “be and the same” (Company), then why go to the bother of taking on the debts and liabilities of the oldco.

Maybe the answer lies in the SFA’s or Scottish League’s rules in 1905. Is there anyone on the blog who was around at the time, and might have a copy? 🙂

Podcast Episode 3 – David Low
burghbhoy says: May 4, 2014 at 4:49 pm

I am not a troll. As my twitter account @bryce9a is testament to, i enjoy discussing this particular issue and simply wished to discuss the matters fairly, without my contributions being immediately tarnished by the anti-Rangers prejudice.
Hi bryce9a – Welcome back

In your justification for your same club/history argument you highlighted that Hearts had been liquidated in 1905.

You were kind enough, at the time, to show an extract from the Edinburgh Gazette from the period which showed two resolutions that were passed at an EGM on 28th Mar 1905, Resolution 1 – a voluntary winding up order, Resolution 2 – the appointment of liquidators.

However I am sure that you are aware that there was another resolution passed at that meeting which was also recorded in the Edinburgh Gazette, but for some reason you chose not to share it with us.

Could it be that Resolution 3 provided details of the legal mechanism by which Hearts oldco and newco would be deemed the same?

Just for the record :
Resolution 3 – That the draft Agreement submitted to this meeting and expressed to be between the old company on one part, and the new company of the other part, BE AND THE SAME (my emphasis) is hereby approved, and that the said liquidator be and is hereby authorised , pursuant of section 161 of the Company Act 1862, to enter into the Agreement, in the terms of the said Draft, and to carry the same into effect, with such (if any) modifications as he may think expedient.

Now what are the provisions of section 161 of the Company Act 1862?
Well it dealt with the reconstruction of companies, and provided that the THREE resolutions as above are passed, the agreement would allow the transfer of all the assets of the oldco to the newco, along with an undertaking by the newco to take on all the debts and liabilities of the oldco, pay all the associated winding up and liquidators costs for the oldco, and pay off the interests of any dissenting shareholders of the oldco.

What did Hearts do?
Well I sure that it is not a surprise to you that the liquidator and Hearts newco did everything required of them under section 161 of the Company Act of 1862, and took on and paid off all the debts of the oldco in a short period of time.

In short, under the law at the time Hearts were able to “be and the same” by taking on the debts and liabilities in their entirety.

As a result I am comfortable to look back at Hearts history as having continuity back to 1874.

I’m unaware of any other football club having made such a commitment in recent times.

Recent Comments by easyJambo

It Is Better To Offer No Excuse Than A Bad One
Allyjambo January 2, 2018 at 14:38
My one overriding memory of the Ibrox disaster was that of the five schoolkids aged between 13 and 15, all from the village of Markinch in Fife, who lost their lives.  I lived just a few miles away and was only 15 myself, at the time.

I remember those losses having a huge impact on the local Fife schools and communities.   

It Is Better To Offer No Excuse Than A Bad One
HOMUNCULUS DECEMBER 28, 2017 at 15:38
It doesn’t matter if it is paid to a trust or your aunt Agatha, you still have to pay the tax. I have no idea why they use the name Agatha, but they do. 
“Aunt Agatha” was used by the RFC QC Andrew Thornhill during the appeals process when discussing the redirection of earnings to a third party.

On a separate point about the share price.  The sale of Ashley’s shares to Club 1872 and Julian Wolhardt was used by King’s QC at the CoS, as an example of shares trading above the 20p price.

The TOP’s QC, however, countered that by claiming that Ashley wasn’t interested in the share price, but was insistent that he received £2m for his shares. To that end, it was pointed out that the price per share paid wasn’t 27p, 27.5p or 28p, but something to the second or third decimal place that ensured that the sum received was not £1,999,999 but a fraction over the £2m figure.  I can’t recall the exact fraction used, but the counter argument put forward seemed entirely plausible.

It Is Better To Offer No Excuse Than A Bad One
Homunculus December 27, 2017 at 22:39
EASYJAMBO DECEMBER 27, 2017 at 22:32
Is there a way of calculating how the issue of new shares reduces the value of the existing ones, or is it not as simple as that. I don’t imagine for a second it is. 
I cannot believe that the sale of new shares does not effect the value of those held by existing shareholders. That would surely be market capitalisation gone mad. 
It’s not as simple as the share price being reduced inversely proportionate to the number of additional shares issued.

The capital value (no of shares x share price) of the club is presently around £16m at 20p a share (80m x 20p), but given that the club also has £16m of debts, you could argue that a debt free club would be worth £32m (or 40p a share).

The value of the shares going forward would depend of the amount of debt written off and the number of shares issued in order to achieve that. e.g. if they double the number of shares to 160m in exchange for writing off half the debt.  The capital value of the club might go up to £24m, as it only has £8m debt, but the value of each shares would probably fall to 15p. (160m x 15p = £24m)

If however, they manage to double the share numbers, write off half the debt, but also raise £4m in new money, then the capital value of the club should go up by £4m (the new money). So you could see the capital value rise to £28m, but still with £8m debt. The share price might then be 17.5p (160m x 17.5p = £28m)

I hope that makes sense. It does to me, but the nuances of share numbers, to debt, to capital raised can easily be lost, if you don’t have an appreciation of where they are at just now, and where they might end up.

It Is Better To Offer No Excuse Than A Bad One
shug December 27, 2017 at 22:05
Great hard fought match tonight.
Sadly, that was two hours of my life I won’t get back.  There was nothing great about it and it was more of a borefest akin to many derbies of yesteryear.  Tom English described it perfectly as “Thud and Blunder”

It Is Better To Offer No Excuse Than A Bad One
Homunculus December 27, 2017 at 18:21
I take it all that has happened is that they passed the resolution allowing them to issue new shares. Those new shares have now been created.
This is them simply notifying Companies House that they have done that, Companies House records show how many shares have been issued.
That has to be done before they can actually sell them to anyone.
Purely a procedural matter I would have though. 
It’s not got as far as creating the shares. It’s merely confirmation that the Board has the authority to issue shares up to the specified limit.  That authority expires on the date of the next AGM.

The allotment of up to a nominal value of £1,086,376.01, means that new shares equivalent to 1.333 times those currently available can now be issued.  I’m sure that there will be a good reason for the number of new shares being set at that specific level, but I can’t think of one. 

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