Answers to questions about succession & debt

Questions received via email:

Understand completely the unwillingness to dilute with only a promise of ‘possible’ future regime change and very much appreciate the caution taken.

Can you now elaborate on what the first 2019 deal look like now to help fans understand the attractiveness of it initially?

A: The proposal tabled to us in 2019 was for a change of control with a new entity (Eden Valley Sports) taking over approximately 90% of the shareholding, leaving us with a little under 10%. The club would continue to be backed financially by EWM, as they had been since early 2017. We asked a series of questions of EWM at the time, to seek re-assurances of how the club would operate after the takeover. The answers lacked a detailed ‘vision’ for the club but we were assured fans would continue to play a role and be listened to, and that there would be more communication than before, the lack of which has been a characteristic of EWM for a long time. At the time these assurances did quell some of the doubts we had at the start of the process. That, and the financial backing that EWM brought, gave us the notion that the club would be secure long-term. The subsequent collapse of EWM and novation of debt to PurePay has brought considerable doubt as to the scope and terms of any future financial support.

Are you also able to be explicit about why EWM and the EFL could not agree on this takeover.

A: Neither the club nor ourselves wish at this stage to go into detail. More info may emerge in future. Right now we have to focus on reaching a suitable arrangement over the debt repayable to PurePay. The statements issued last week were both designed to facilitate a smooth transition to talks to help settle that particular issue.

Also is there a reason why despite giving notice to the holdings board that the trust could not support the revised deal in May that it has taken until now to publish a statement to fans?

A: Our position re: the revised deal has not changed since the end of 2019. We have made reference several times to our opposition to that deal in recent statements. The opportunity to produce a definitive set of statements was complicated by the fact that there had not been a settled position over succession/debt within the Holdings board, and efforts had been going on for a while to achieve a breakthrough. That happened about a week before the statements came out, and after a lot of to-ing and fro-ing, including the taking of legal advice by both Holdings and ourselves (at no cost to CUOSC).

Now that the so called succession has finally been put to bed. I and I’m sure all fans would like to know exactly where the club goes from here. Because right now the future looks far from Rosie. It would be hoped that at the very least the trust should be putting pressure on the owners to publicly put the club up for sale and seek out new owners who can get the club out of the terminal decline that has been ongoing under the present owners.

A: The Trust has been pushing for a change of control for a considerable time and will continue to do so. We will continue to press for a sensible arrangement re:the debt to PurePay, whilst doing anything we can to facilitate new owners and investors. We are aware of potential interest from various sources which we have referred to in the past. This interest we believe can only be firmed up once a settlement of the debt has been agreed. It can be taken as read that it is in the club’s best interests to achieve a breakthrough in these twin aims and so CUOSC will seek to be prominent in any solutions that can be found.

Questions on social media:

Alex McDonald
Why was the club allowed to borrow £2.4 million when Fred waived his loan in order to facilitate a takeover??We’re not getting rid of this lot,not for a long time!CUOSC isn’t fit for purpose imoWhy was the club allowed to borrow £2.4 million when Fred waived his loan in order to facilitate a takeover??We’re not getting rid of this lot,not for a long time!CUOSC isn’t fit for purpose imo

A: The waiving of the remainder of the Story Construction loan (at the end of 2014) was unrelated to the situation that the club found itself in during 2016-17. Without an injection of capital at that time, the club risked going into administration. The support of EWM between March 2017 and May 2019 proved crucial in allowing the club to remain competitive on the pitch and to adjust it’s finances. Since 2019 they have managed to remain self-sufficient without the need for any external support.

Ian Harker
I’d like CUOSC to point to the answers in the supporter survey which support their opinion EWM weren’t a good owner?

A: The lack of communication from EWM (and PurePay) would not fit well with the answers in our questionnaire. From our summary of the results:

“Current communication with fans was seen as moderate (5.1), despite fans seeing this as an important factor of an owner’s role (8.8).
There was a strong feeling that owners should meet with fans on a regular basis (8.3), and face to face meetings were slightly preferred to online.”

This also fails to sit easily with another finding of the survey:

“Openness and transparency from owners came out very highly (9.4) with clarity over the ultimate owner and/or controlling person also seen as important (9).”

The current debt owed to PurePay (formerly to EWM) is secured against club-owned assets including the stadium. Our questionnaire showed an 8.6/10 score AGAINST the idea of the stadium being used as security against debt.

The message from the questionnaire is that owners should be open, transparent and visible. They should be prepared to meet with supporters. The owner of EWM has never communicated directly with the club’s chief executive or ourselves. This has been done through representatives only.

In addition to the above factors, there is the rather obvious one that the EFL and EWM could not agree a deal satisfactory to the EFL’s requirements for a change of control. This would render EWM incapable of taking control no matter what we as supporters think of their potential merits as owners. It should be stressed that CUOSC do not believe the EFL’s requirements are unreasonable.

Keith Elliott
Can we expect a visible advertising campaign to assist in the selling of the club?

A: We have seen the odd club go ‘public’ with ‘for sale’ signs in the past but we tend to regard that as a PR stunt to feed the media and fans rather than as a serious attempt to attract the right sort of buyers. Football clubs are not sold the way houses are. There are various interested sources already and various routes the club have and will continue to go down to locate investment. CUOSC will be involved in that process.

Gerard Gornall
What terms were EWM not happy with from the EFL?
See the answer above.

Steven Routledge
Seriously who would want to buy this club in the state that it’s in?
See above answer to Keith Elliott. There are interested parties.

Tim Vigeon
Can’t see what you bring to the table. You certainly don’t invest any money or am I wrong?

A: CUOSC invested £800,000 into the club between 2001-2006. This was the biggest purchase of shares in recent history. Since then we’ve continued to support the club, most recently via Carlisle REUnited, which has raised over £13,000 to date. Remember CUOSC consists of ordinary fans like yourself. They are the people we usually have to call on to donate to the cause. Many of those supporters already shell out significant sums on season tickets and away travel, etc. It is unrealistic to expect them to fund the sizeable underlying losses incurred by the club. If fans were to own the club outright, there would be little or no scope to incur any losses, so a fan-run CUFC would need to be self-sufficient using whatever means it had at it’s disposal.

Phil Routledge
If the debt is called in, previous statements have suggested that the shareholders will underwrite the debt (thus avoiding the need to sell off the clubs assets). Given that the trust own 25% of the club, are they underwriting 25% of the £2.4m? If so they might need a bit more than the annual quiz night and a car boot sale to raise the £600k.

A: When CUOSC agreed to support the loan facility provided by EWM, we did so on the understanding that we wouldn’t be required to repay it or any portion of it. As with the above answer to Tim Vigeon, it would be unrealistic to expect fans to fund such debts, and it would be very difficult (if not impossible) to borrow the necessary funds. CUOSC exists primarily as a Trust to represent fans on the board, not to provide financial support to cover ongoing losses. We have argued for financial restraint in the past, and continue to press for a more sustainable club, and for football in general to operate in a sustainable fashion without the need for massive debts to be incurred.

Will McAllister
I’m actually surprised to read their ever was a deal. I know the custodians frequently spoke of one in hushed tones but they’re so vague and secretive with everything it was easy to just assume that things never amounted to more than just a couple of emails exchanged between people who might potentially, if things fall into place, consider making some sort of investment.

A: The original deal agreed in 2019 was hammered out over several months. It involved discussions between representatives of ourselves, of EWM, of the other shareholders and from the EFL. This was a deal that would have led to a change of control at the club and hence would have represented a full takeover.