Derby County administration Q&A: The debt, the mess, the timeline, the future

Derby County administration Q&A: The debt, the mess, the timeline, the future

“Every battle needs a leader and Rooney is that man,” says Ed Dawes, Derby County commentator for BBC Radio DerbyDerby County, champions of England twice in the 1970s, Championship play-off finalists in 2014 and 2019, the club of Brian Clough, Dave Mackay and Roy McFarland, have gone into administration.

The news was confirmed in a short statement released on the club’s website on Wednesday.

It is a decision that brings an automatic 12-point deduction, sending Wayne Rooney’s side to the foot of the Championship on minus two points – six behind old rivals Nottingham Forest, who move up a place.

But it was not a surprise. Derby announced late on Friday that this was their intention, even if, at that point, Rooney was unaware.

And in truth, although the timing of that initial statement was a shock, anyone with even a broad knowledge of the Rams finances knew this was a possibility, something which, beyond the club’s status, will inevitably lead to redundancies and local people not getting money they are owed.

Morris sorry over Derby administrationHow did Derby reach this point?Mel Morris first got involved with Derby in May 2014, when he bought a 22% stake in the club.

A locally born businessman, Morris became the sole owner in September 2015, pledging to “steer this club into a sustainable position in the Premier League”.

In 2014, Derby had lost the Championship play-off final to QPR, who eventually agreed a £42m settlement with the Football League for breaching its Financial Fair Play rules.

By that point, Morris had already realised getting to the Premier League would be expensive.

Derby lost £14.7m in 2016 and £7.9m in 2017. And they were heading for further heavy losses in 2018, which would have breached the EFL’s profit and sustainability rules allowing a cumulative £39m loss over a three-year period, until they confirmed Morris had bought the Pride Park stadium from the club for £80m.

In January 2020, after a review of the sale, Derby were charged by the EFL for financial breaches up to 2018.

Had Derby beaten Aston Villa in the 2019 Championship play-off final, it would not have been a problem. Indeed, given the EFL cannot enforce any action against Premier League clubs for financial breaches, it may be the charge would never even have been brought.

But they lost. Frank Lampard left, Phillip Cocu replaced him as manager and Rooney signed as a player.

The extent of losses beyond 2018 is not known because accounts are still to be published following an agreement between Derby and HMRC that they could be held back until the EFL case was concluded.

But it is accepted by all parties they contain further significant losses.

Could there be further punishment for Derby?After a protracted case, in which Derby were initially cleared, but then fined £100,000 following an EFL appeal and ordered to refile their accounts, the club were ruled to have used a method of valuing players – amortisation – that was not allowed.

Morris continues to insist this decision is flawed, but has accepted it.

However, the accounts are still to be resubmitted as Derby and the EFL have been in negotiations over an agreed settlement to cover all outstanding accounts to the summer of 2021.

It is understood a nine-point deduction has been agreed, with a further three-point deduction suspended for a period of two years, during which Derby must adhere to an agreed business plan.

It is not known whether this settlement will be enforced as the administrators are unlikely to agree to the plan, and any new owner would have to submit their own to the EFL as part of their purchase.

Why haven’t Derby been sold?In 2019, Morris said it was his intention to sell the club.

In August 2020, Derby confirmed they had taken a loan with MSD Holdings UK Ltd. MSD is owned by American billionaire Michael Dell and also has interests in Premier League clubs Burnley and Southampton.

It has been established a consortium headed by Swiss financier Henry Gabay made a substantial payment to Derby as a loan, with the intention of completing a formal purchase of the club at some point in 2020.

The consortium began to have doubts once the EFL brought its charge. Once the impact of the coronavirus pandemic became apparent, it backed out completely. The loan was subsequently repaid.

Twice after that, Derby confirmed an agreement was in place for Morris to sell the club.

In November 2020, a deal was struck with Derventio Holdings, a company set up by Abu Dhabi-based BZI, which was run by Sheikh Khaled, a cousin of Manchester City owner Sheikh Mansour.

In April 2021, an agreement was reached with Erik Alonso, who had been working with Sheffield Wednesday owner Dejphon Chansiri.

Both times proof of funds was not established to a level sufficient to satisfy the EFL’s owners and directors’ test, and both deals collapsed.

Morris had been talking to other potential purchasers, but realised there was no prospect of an immediate sale.

Having lost, by his own estimation, £200m of his own money on Derby, he felt he had no option other than to put the club into administration.

What will administration bring?A conservative estimate of Derby’s debts put them between £50m-£70m, including an outstanding amount owed to Arsenal for Polish defender Krystian Bielik, who they signed in a £10m deal in 2019.

They also owe HMRC in excess of £20m. In addition, they are losing about £1.5m a month. Player wages, the most significant outgoing at any club, are due this week.

A source with detailed knowledge of the administrative process says the first task for the administrator will be to work out how to pay the salaries, as players can leave for nothing if they are not paid within 28 days. Late payment of wages can also trigger a three-point deduction, although this can be suspended.

At Wigan, the EFL club that went into administration in June 2020, they were able to raise funds by selling players. Derby’s problem is the transfer window does not open for another three months. In theory they could sell players now and ask for payment immediately but they couldn’t be registered or play for anyone else.

After that, the administrators will need to establish the full financial picture to show to prospective buyers. They will speak to supporters, local council and the EFL. Crucially, they will try to reduce losses by cutting expenditure wherever practically possible. This will almost certainly mean redundancies and some agreements with external companies being cancelled.

If the club do not pay 25% of the money they owe to non-football creditors, they will be liable to a 15-point deduction.

Derby were already under a transfer embargo, which severely restricted Rooney’s ability to bring in new players last summer. Even if they sell players in January, they could only replace them with players on short-term contracts.

And what about Rooney?In addition to the obvious financial issues, there are also significant compensation payments to former manager Phillip Cocu and defender Richard Keogh to pay.

Cocu was dismissed in November 2020, with an estimated payout of £4m due. Keogh won his appeal external-linkin May against his dismissal for misconduct, which cost Derby another £2.3m.

And then there is Rooney.

Although the bulk of his wages are paid by club sponsor 32Red, in his recent BBC interview in which he apologised to fans, Morris said the club were paying Rooney “a competitive salary”.

Given his status as a former England captain and his country’s record goalscorer, it is assumed Rooney’s wages are high.

The 35-year-old said at the weekend he had no intention to quit. His contract runs to the summer of 2023.

What about Derby’s future?Speaking to BBC Sport, Wycombe owner Rob Couhig, whose side were relegated to League One last season but would have stayed up had Derby been deducted points last season, offered a bleak assessment of the situation.

“People say somebody will come in and buy it because it is Derby,” he said. “But how many points will Derby be faced with being deducted this year? More saliently, they are going to be faced with further deductions next year.

“In likelihood you would be buying a League Two team with an accumulated £50m debt. There are only so many people in the world who are out there and willing to do that.”

There are some fans who fear no-one will commit to such an undertaking and the club could be liquidated. Others feel that is an impossibility, not least because a creditor like MSD would lose so much money.

Supporters are rallying to the cause. Incredibly, Derby sold their initial allocation and then some and will take 2,000 to Bramall Lane for Saturday’s game against Sheffield United. On 29 September, they entertain Reading at Pride Park.

Some close to the situation feel the latest development in the Derby’s unhappy recent past at least allows the club to clarify their position, debunk some of the conspiracies around them and begin to move forward.

But today, amid so much uncertainty, that feels a very long way off.

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