Southampton Leisure Holdings plc, the parent company of
Southampton Football Club, has gone into
administration.
At a press conference on Thursday, the Administrators revealed
that the Championship club could struggle to complete its fixtures
this season. Specialists Begbies Traynor have been appointed as
administrators.
Southampton still owe £24m on their St Mary's Stadium, which
opened in 2001, and another £4m to Barclays Bank.
They have three home games remaining, their only realistic
source of income, which means that after the match against Burnley
on April 25 there will be no more revenue coming in to service the
debt.
The move into administration has caused controversy with the
parent company officially described as a separate entity to the
football club itself, which means Saints should avoid the statutory
10-point penalty under insolvency rules.
But despite the insistence that the football club is not
affected, the administrators' comments clearly suggest
otherwise.
Derby County followed a similar route in 2003 and avoided any
points penalty. There is no confirmation that Southampton will also
avoid a deduction but if the Football League are unable to take
action it seems likely they will again be forced to tighten up
their regulations.
In 2007 they were forced to act after Leeds United and Boston
United entered administration in the last week of the season to
avoid a penalty for the following campaign. As with the Derby
example, the Football League failed to learn from previous mistakes
as Cambridge United had pulled the same move years beforehand.
Should the Football League order a ten-point penalty it will not
be taken off until the end of the season when the club's
Championship league position would be taken into account. Should it
have no bearing on their divisional status it would be applied for
2009/10. But should they finish outside the bottom three it would
result in the club being dumped into the relegation zone, though
they would start next season in League One on a level playing
field.
Dr John Beech, from the Centre for the International Business of
Sport at Coventry University, an expert on insolvency in football,
said: "Will they have 10 points deducted? That remains to be seen.
Football League Regulation 12.3.1b states that the ten points will
be deducted in cases where a club (my emphasis) "have an
administration order made in respect of that Club".
"In this case, the club itself hasn't - it's the parent company
that has gone into Administration. If they decide they cannot
impose a 10 points deduction because of this, we can expect to see
the loophole closed shortly, albeit too late to apply it to
Southampton.
"Extending the catchment of the Regulations to parent companies
may prove problematic. For example, in 1992 Birmingham City was
brought down by the collapse of the BCCI bank, also owned by the
Kumar brothers. Few would argue that the club should, in similar
circumstances, be penalised with a points deduction. Deliberate
structuring of companies to avoid points deductions is another
matter however."
Chief executive Rupert Lowe Lowe, chairman Michael Wilde and
director Andrew Cowen have all resigned from the company with
immediate effect, although a statement from SLH said the club is
"unaffected by these insolvency proceedings''.
In a statement, joint-administrator Mark Fry said: "Southampton
Football Club has a long history in English football and could be
an extremely attractive investment for the right buyer.
"We are working hard to preserve the value of the football club
and produce a positive outcome for all stakeholders, and I ask that
fans continue to show their support for the team for the remainder
of the season as we seek to show the best face possible to
potential investors.''
Saints are currently three points from safety and face
rock-bottom Charlton at St Mary's on Saturday - and the news that
they may not be deducted 10 points is unlikely to sit well with the
teams around them in the relegation scrap.
