Ipswich Town reveals its debt position

According to media reports, Norwich Union risks facing a ‘write-off’ of a loan of over GBP 25m made to Championship club that may be ‘never repaid’. The club contracted the debt with Morley Fund Management, a subsidiary of Norwich Union, in 2001 to fund extensive rebuilding work at their Postman Road ground. When the loan was made the club was also providing funds to then manager George Burley to consolidate their position in the Premier League. Two new stands were built at either end of the ground, but at the end of the 2001/2002 season the club was relegated and a year later were placed in administration.

As part of the Company Voluntary Arrangement (CVA) made that allowed the club to come out of administration, the club was able to renegotiate the terms of their interest repayments to Morley. At a meeting of Ipswich Town Independent Supporters' Trust, chief executive Derek Bowden revealed the club's debts with Morley now stood at GBP 25m, GBP 28m including accumulated interest. "The debt to Norwich Union may never be repaid if we stay in the Championship, but the interest repayments will continue to be paid and are currently GBP 1.5m per year," said Bowden. The minutes of the meeting also revealed the status of the club’s other debts.

Individual loan stock currently represents 5-6% of the clubs total debt and that last season loans from high net worth individuals allowed David Unsworth and James Scowcroft to come in and strengthen the squad. Bowden also stated that as a result the club did not pay all of their wages. The club also owes Barclays Bank around GBP 3.5m which is repayable over 13 years if the club remains in the Championship or over four years if promoted and GBP 1m to the Bank of Scotland for the Playford Road training facilities. On the loan made by Morley, Bowden told the supporters trust, “this loan should not produce any long-term instability for the club as the ground, against which the loan is secured, has little value beyond that of a sports stadium and is leased from Ipswich Borough Council.”

Fiona Baker, head of corporate communication for Morley Fund Management, told that the original loan decision stood up to scrutiny, irrespective of its place in the age-old Ipswich-Norwich rivalry. "As you'd expect the investment decisions we make on behalf of our clients are based on the commercial outlook at the time, not on the color of our shirts," she said. Club chief executive also told the supporters trust that the club did not rule out repaying debts through “a benefactor who will invest in shares, as has happened with eight of the last nine promoted clubs.” But according to the minutes of the meeting he stated that: “This would have to be the 'right' person or consortium. An investment of GBP 4-5m would make a real difference, although at that level the investor would own a controlling interest in the club. An investor who could secure the long-term interest of the club would be welcomed.”

At present there is a 15% limit on anyone person holding in excess of 15% of the shares which was included as part of the share issue prospectus. If a suitable investor appeared Bowden said the directors would call an Extraordinary General Meeting, although he said, “strictly speaking the board do not need shareholders permission to vary this.”