It's now no secret that Salford City Reds is in dire financial straits. While chairman John Wilkinson and fellow directors refuse to speak to the Salford Star, Wilkinson is quoted in the Manchester Evening News today explaining that the club is seeking new investment as "commercial pressures are ever increasing and that investment is needed to push us up over the crest of a hill…It is fair to say that this season has been something of a trial…"
This season was supposed to be the Reds re-birth, following the move from The Willows to Barton, and the purpose built Salford City Stadium (`Community' removed from the title).
The stadium, a joint venture between Salford City Council and Peel Holdings was built with a £22million loan from the Council, together with a £4million grant from NWDA and Council land worth £6.7million. Salford Reds was the sole tenant, paying, according to League Express, a whopping £750,000 a year, before this was halved to £375,000 when Sale Sharks came on board.
On top of the rent, Salford Reds has to pay back its £1million loan to Salford Council at a rate of £50,000 every three months until March 2017. The first payment began on 30th June this year, and another £50,000 is due to be paid to Salford Council on 30th September, plus £50,000 on 31st December and £50,000 on 31st March 2013. Accrued interest is also being charged at 1% above Bank of England base rate.
The sale of star scrum half, Matty Smith, to Wigan Warriors mystified Reds supporters but happened days after the first payment to Salford Council was due.
The £1million loan is secured on property owned by Godliman Watson Homes and a personal guarantee from directors, plus six Harold Riley paintings, including one with the ironic title Rugby League Ground Leigh 1966, given that the Reds have been kicked out of the stadium for their last home game of the season and have to play at that ground.
The terms of the loan make it incredibly hard for the club to move financially. Under the terms of the contract seen by Salford Star, the Reds will "not create, or agree to create or permit to subsist any mortgage, charge or other encumbrance on or over all or any part of its present or future assets…" And cannot "effect or enter into any amalgamation, merger, demerger or reconstruction".
Salford Council also has the right to have a representative on the board, or an observer at board meetings, while the club has to provide quarterly accounts to the Council. Indeed, Salford Council is now almost running the club via its Economic Futures officer Rob Pickering, alongside Tim Isherwood of Steuer Gregsson.
The Salford Star asked the Council if this was a good use of its officer's time and Councillor David Lancaster replied "We have a natural relationship with Salford City Reds as they are tenants of the stadium we jointly own.
"It is therefore in our interests to see the business succeed, as this will ultimately benefit the stadium" he added "It is for this reason that we are providing the club with some short term business support and advice."
During the summer former Council Leader John Merry, who signed off the stadium deal and loan, posted on the Salford Star website…
"We need to work with the Club to keep them in being and protect not just this investment but the supporters' interests… there are many thousands of Salfordians who support them and want to see it survive…"
Update: 8th September 2012 - Sale Sharks to name Salford City Stadium - click here
Coming soon: How Salford Council has bent over backwards to help the Reds…