Saracens - alternatives to the reckless loan

When the proposal to lend £23.9m to Saracens Ltd (later changed to Saracens Copthall LLP) was considered in July 2018 'alternative options' was a section in the committee papers, as it always is.

The meeting was given a shockingly short set of options by the Deputy Chief Executive, Cath Shaw, either yes or no to making the loan. According to Mr Reasonable she is paid £151,433 a year. You would think that someone paid that much would be able to find some other intelligent or creative alternatives. Of course the leader of the council wants this loan to go through, as he cast his deciding vote in favour of the loan when the committee vote was tied 5-5 in October 2018 and so if she wants to progress in her career, maybe to CEO one day, it is best not to rock the boat. Mr Mustard, or you, will have to come up with some alternatives.

1. Let multi-millionaires fund the loan.

The joke is that the two main men behind Saracens are both fabulously wealthy (which is fine by Mr Mustard who is happy with his lot) and could find this sort of money down the back of the sofa in order to fund their sporting plaything if they so chose. A quick trawl of the internet finds these sort of numbers to give you a scale of their wealth which puts them into the Sunday Times top 1000 rich list.




This is how Mr Mustard thinks the stadium should be funded.

2. Lend just a small portion of the money, say £1m

A 100% loan is risky for one lender to provide & so a consortium of lenders should be found. Other parties who will benefit could provide part of the loan. The Saracens Sports Foundation is active across North London (a dozen more local authorities to ask there) in Hertfordshire (approach St Albans City Council, Hertfordshire County Council etc) in Luton (who have a town council). The club itself has at least 10,000 fans as the average attendance is 9,400 and they don't all go to every game. Why aren't they being offered the chance to invest? Mr Mustard knows two keen fans. Both of them could easily stump £2,290 each and get a seat named after them & some other benefits.

Middlesex University could jointly procure the stand and stump up a capital sum which reflects its percentage share of the usage and then pay zero rent.

3. Pay for the social benefits

The following social benefits are what we are going to get from lending to Saracens Copthall LLP to build a new stand apparently.



A new community garden will be lovely but could be built regardless of a new stand.

What is the cost of the educational opportunities which are being sought? as the council could simply pay for them. They should also be putting the requirement out to tender (it seems to be taken for granted that Saracens alone can provide these). Providing these new social offerings doesn't need a new stand, there is a perfectly good East stand there already. There is plenty of green space around for exercise programmes which again the new stand isn't needed for. There are also plenty of other sports grounds within the borough which could be used and the council itself is building two brand new leisure centres. Can you guess where one of them is?
 

yes, it's at Copthall!

It looks to have all the facilities you could desire to help improve people's fitness and wellbeing.

Thus we see that the council plan to lend out £22.9m without the public knowing the value of social benefits they will garner as a result (cue frantic work by some poor employee of Barnet Council who now has to go and try and put a figure to this).

4. Charge a decent interest rate

Mr Mustard thinks that given the risk the loan rate of 6% is too generous. He did the collect out on a finance company in the City of London which made loans to customers who normal banks wouldn't touch. They charged 10% interest. They went bust and it was one of Mr Mustard's toughest ever assignments to get all the money back, which he didn't manage as it wasn't possible.

You may have others alternative ideas which Mr Mustard may not have thought of. Do enter them in the comment box below.

Yours frugally

Mr Mustard 

Saracens Ltd pay Saracens Copthall LLP

As ever there is a complex corporate structure when property is involved. The above, from the published accounts, shows the state of play at June 2012 of Saracens Ltd which is the trading company of the club.

Move forward 5 years and the financial situation is worse. When will the losses end?

In the July committee report the council said this:

That may well be the case but doesn't now matter as the loan vehicle was changed in the October report to Saracens Copthall LLP. It was also a cosmetic move with assets and liabilities being moved from one pocket to another without any fundamental change in underlying profitability.

The council planned to ask for assurances.

Sounds marvellous doesn't it, an assurance from rich shareholders. The trouble is that if you go back up to the statements made in the published publicly available accounts an assurance (a letter of support) isn't legally binding, it's like a weak promise that you can legally walk away from.

What the council needs to obtain in the way of assurance is a proper personal guarantee for the entire length of the loan, for the full amount of the loan and which cannot be rescinded and from a person with sufficient financial standing to make good their undertaking if it comes to it. In Mr Wray's case he is 70 years old so we need a guarantee that will run until he is 100. Not an attractive proposition is it?

If the council can't get cast irons guarantees the loan should not be made and if they can get cast iron guarantees then the backers should put their own money in, they are the ones with skin in the game, not council tax payers.

Yours frugally

Mr Mustard