Bolton Wanderers were in court yesterday defending a winding up order. The company, founded in 1895 and one of the founding members of the football league was just moments away from execution. HMRC is owed £2.2m in unpaid taxes and are seeking to liquidate the club. In the end the judge granted an adjournment until 22nd February. The case continues and Bolton’s future hangs by a thread.
In the media commentary about the club a lot is made of how poor performance on the pitch has led to Bolton’s financial woes. But that is only part of the story. Clubs can of course survive in the lower leagues. After all, if being bottom of the Championship led to bankruptcy, then there would be no League One, or League Two.
We take a look at the money and how Bolton managed to put itself on the hook to a mysterious offshore creditor.
Bolton are drowning in debt. According to their latest accounts the club owes around £180m to a company called Moonshift Investments Limited. To put that into perspective the annual revenue of the club was £30.5m in 2014 so they owe almost 6 times their annual income. Not even Northern Rock in 2007 would have given them a mortgage like that.
So who are Moonshift, and why are have they showered the club with cash?
The company has had a long relationship with the club. In 2009 companies house filings reveal that Bolton signed away all of their rights to Premier League fees to Moonshift for security over loans made to the club.
The company also appears to have some economic interest in the players. Over several years the company accounts of Bolton list a ‘player success fee’ as being owned to Moonshift.
Who are the owners of Moonshift? Public statements from club representatives suggest that Eddie Davies is the real owner of the club’s debt, but in the annual accounts of Burnden Leisure Limited, the parent company of Bolton, Eddie Davies is described as having ‘a’ beneficial interest in the company. The use of the indefinite article is here significant. The accounts do not say that Eddie Davies is “the” beneficial owner of Moonshift Investments. There is no way we can check, because the company is registered in the British Virgin Islands.
As an aside a similar confusion is created over the ownership of Bolton itself. Although the club’s website states clearly that Eddie Davies is the majority shareholder of the Bolton Wanderers Football and Athletic Company Limited, the company accounts studiously avoid stating the same. Indeed in court yesterday, mention was only made of ‘the beneficial owner’. For the record, on paper Burnden Leisure Limited is the majority shareholder in Bolton Wanderers Football and Athletic Company. Burnden Leisure is in turn 95% owned by the Fildraw Private Trust of Bermuda.
The BVIs and Bermuda are two of the most secretive corporate jurisdictions in the world. Given that everyone at the club seems happy to put on the record that Eddie owns the club and the debt, there is a real question as to why the companies have taken such measures to obscure their ownership from the official record. For now, we are leaving this discussion there, but the lack of a clear ownership record of Bolton large debt is a concern, given that the owners of Bolton’s debt, Moonshift, are the real power behind the throne.
Bolton’s Cash Crisis
Bolton Wanderers are technically insolvent. According to the 2014 accounts the entire playing squad is worth £3.5m. The Stadium is worth £32.5m. In total the assets of the club are a worth a little over £50m.
This is less than 1/3 of the money it owes to Moonshift Investments. In other words if Moonshift asked for their money back and the club sold absolutely everything they owned they would only be able to pay back less than 1/3 of the money they owe. Regardless of the outcome of the current issue with HMRC, Bolton’s existence is entirely dependent on a company based thousands of miles away in the Caribbean, about which we know very little about. If Moonshift were to pull the plug, it would be the final whistle.
Fans should be asking their club how they allowed themselves to become so dependent on such a mysterious company.
The problem currently facing Bolton is not Moonshift however. The taxman is owed £2.2m and the club have not been able to come to an agreement over when they can pay.
This raises another question. Why is Bolton Wanderers having such difficulty in paying their taxes, to the point where they went to the brink of bankruptcy? The amount owned to the tax man is relatively small, given the large amounts of money that their creditors have already sunk into the club.
The issue here is that as well as having liabilities greater than their assets, Bolton Wanderers continue to make a loss every year. As the company has no spare cash, this means they need to borrow even more every year to meet their commitments (like taxes, wages etc).
It seems that the directors of the club have known that Moonshift was not a bottomless pit since at least July 2014. The company accounts for 2014 contain a long note which states that there is a material uncertainty that the club will be able to continue in business in the absence of further funding from Moonshift. They acknowledge that the amount being spent was greater than the funding available to them and that they were considering action to raise money. This included selling players and mortgaging future season ticket sales to balance the books.
Now, it seems that Moonshift have finally turned off the money taps, causing a cash crisis for the club. As we learned in court, players have not been paid, and the club is desperately trying to sell land it owns and players in order to raise the money needed to pay off the taxman.
Why did this happen? It could be that the people behind the offshore trusts controlling Bolton Wanderers simply grew tired of throwing money at the club, however, the accounts of Burnden Leisure PLC, the immediate parent company of Bolton Wanderers, give us another clue as to what is going on behind the scenes.
The Fildraw Private Trust of Bermuda, the beneficial owner of Bolton appears to have itself been losing vast amounts of money recently. The company lost £19m in 2014 and a huge £124m in 2013.
Perhaps the creditors of Bolton Wanderers simply ran out of money themselves. We can’t say for sure; these are just some of the risks of playing the offshore game.
Photo Credit, Darren Riely on Flickr.