I think it is important that I first clarify the EFL’s position regarding the issue of deadlines which you raise in your letter.
The EFL will permit a club to play in its competition while in administration for a maximum of 18 months. However, a club will not be permitted to start two consecutive seasons in administration. Given Derby County entered administration in September 2021, after the beginning of the 2021/22 season, it is the 18-month deadline that is more relevant here and will require the club to exit administration by March 2023 at the very latest.
That said, an administrator can only continue to trade a business if they have the necessary funding to do so. Therefore, there are fundamentally two options.
1. The administrator can restructure a business to ensure it can operate on a break-even basis until a new buyer can be identified. This will often involve stripping cost out of the business to ensure that its outgoings do not exceed its income.
2. Alternatively, the administrator can seek to utilise an external source of funding to cover the trading shortfall. Often this will be the preferred bidder as they go through the purchase process. While this avoids the challenges associated with cutting costs from the business (and the potential that it will devalue it to some degree) it is an approach that is inherently riskier, particularly if a funder is not forthcoming or if the administration process becomes protracted. In this case the administrators have funded the ongoing trading losses with further advances from an external funder which has security on the stadium. This of course has created a liability that the administrators need a prospective purchaser to repay as part of the sale consideration. This debt has obviously grown with every passing month of administration trading.
As it stands the administrators of DCFC will need to provide the Board of the EFL with evidence that the club will meet its commitment to the competition for the 22/23 season (including an exit before March 2023) to avoid the club beginning the season but not completing it.
Our desire to understand this situation better and take proactive action to move it forward led to last week’s statement where we announced the amendment of our Notice of Withdrawal conditions.
Since then, the EFL and Quantuma have held daily meetings. However, the administrators have informed us that the confidentiality arrangements agreed with bidders, plus obligations owed by the administrators to individuals under the UK’s General Data Protection Regulations, means they are unable to confirm the identity of any bidder without the express consent from the relevant bidder. In order to explain our position, we have asked for calls with the solicitors acting for those bidders who have refused consent. These calls have not yet taken place.
As you can imagine this is extremely frustrating for us. Firstly, with considerable experience in this area we believe we can help review any proposed exit plans to identify any issues as early as possible so we can then work with them to try and find any potential solutions.
Secondly, we will have significant work to do on verification of compliance with the Owners’ and Directors’ Test as well as an assessment of the ultimate source and sufficiency of funding. This clearly cannot start until we have the necessary information.
In the circumstances therefore, if you require further information this will have to be provided by the administrators.
To return to your original query re deadlines I understand some may say we should be stronger and impose specific deadlines but given our powers derive from the ability to withdraw central funding, impose sporting sanctions and/or ultimately withdraw membership it is difficult to see how this is beneficial to the Club at this time. As we have maintained throughout this process our priority has been doing what is within our power to assist those seeking to take the club out of administration. We continue to remain in the hands of the administrators to deliver a successful sale of the club.
We will continue to push for receipt of the necessary information and are happy to have a further update call with you early next week.
Chief Executive Officer