Investment expert reveals what Sunderland's new Companies House documents really mean for FPP deal
Fresh details have emerged regarding Sunderland’s financial boost from FPP Sunderland - but what do the newly-released documents mean?
A new charge, visible on Companies House, shows that the loan from FPP to Madrox Partners - Stewart Donald’s holding company - is secured against assets such as the Stadium of Light and Academy of Light.
Madrox hold a majority shareholding in the football club and passed the capital from FPP straight into the club accounts after the deal was agreed.
But what exactly does the document mean, and what could the long-term implications of such an agreement be?
We spoke to leading football finance expert Dr Dan Plumley, of Sheffield Hallam University, to find out more in an insightful Q&A:
Q: What exactly does the 45-page document on Companies House state?
A: “Whenever you see these kind of documents, they normally set out the terms and conditions of that agreement between all the parties involved.
“It’s basically a wordy T&Cs document, and it has to be out there in the public domain.”
Q: How common are these arrangements in football and when are they often used?
A: “The main thing it’s used for is often to raise short-term capital.
“We don’t know the owner’s intentions or the investor’s intentions, but if you’re trying to raise money in the short-term then it’s a good way of working capital into the business.
“The question could be, though, why if these people [FPP] have the money do they need to secure the money rather than just loan it?
“I can’t answer that, because you would have to ask them directly what their motives are.
“All we know is what that method is used to do.”
Q: Can such agreements prove to be a positive for clubs?
A: “Yes, providing it’s done properly and the overall financial position is good.
“It’s not an unusual business practice, but it can be trickier with football clubs.”
Q: What are the potential pitfalls of such an agreement?
A: “The caution element to this, where fans are right to be a little bit concerned, is that if the stadium is secured against one of those companies then there is always a ‘what if’ question if there is a change in ownership or something like that.
“My general take on it is that it is not unusual in business, but the challenges with this kind of financing method come when you have poor financial performance, problems with financial performance or changes in ownership.
“Those assets are then used as potential leverage either way.”
Q: Would having a charge like this in place make it harder to sell the club to a party that wasn't FPP?
A: “It would.
“If that football club doesn’t own it’s stadium fully or if a third-party company is involved, it would make the negotiations more difficult because you are dealing with multiple partners.”