Star date: 21st January 2020

STADIUM DEBT TO RISE TO £31.84MILLION AS NEW LOANS SOUGHT

Salford City Council and Peel Holdings, the joint venture partners of the City of Salford Community Stadium Ltd, or the AJ Bell stadium, are poised to provide a further £1.32million in loans to keep the company afloat, bringing the estimated total outstanding debt to £31.84million by the end of March this year.

This is the debt after a plot of land near the Stadium was sold to Aldi for £1.183million, and a report discloses that any interest that Salford Council makes on the loans does not go into providing services but instead is squirreled into a reserve fund "to compensate the council for the risk of default"...

Full details here...

There was absolute disbelief when Salford City Mayor, Paul Dennett, stood up at last week's full meeting of the Council and declared that the Council's City of Salford Community Stadium, or CoSCos - a joint venture with Peel Holdings - was "actually a great success" and a "really good news story".*

A few minutes after he had made this statement he also declared that the Stadium company would be seeking more working capital loans just to keep afloat. Today, the report detailing the loans required and the total financial position of the company was published. And it certainly doesn't appear to be a 'good news story' or a 'great success'...no matter how much the politicians and officers care to spin it...

The stadium company is asking for £1.32million in new loans - £660,000 each from Salford Council and Peel..."The stadium is broadly at a break even position on a  trading basis. However, until such time as all of the land around the stadium is sold, allowing the repayment of existing development and working capital loans, there will continue to be a requirement for further working capital funding" states the Council report.

As of the end of March 2019, the report reveals that the total outstanding balance of debt for the Stadium company was £31.178million - £25.141million owed to Salford Council and £6.037million owed to Peel Holdings.

Since then, land around the Stadium has been sold to Aldi for £1.183million, and £549,000 of the original debt has been repaid to the Council. But when the new loans are added plus £120,000 in further loans from last year and the 'accrued interest' on Council borrowing for the loans, the forecast debt to Salford Council by the end of March this year is £24.606million - plus £7.23million owed to Peel, making a grand total of £31.84million outstanding debt. That's an increase of £662,000 on previous totals, even though the actual debt to the Council will fall by £535,000.

Both the City Mayor, councillors and officers insist that the Council actually makes money from the loans because it borrows cheaply and lends (to its own company) at a market rate. Yet the report shows that none of this 'surplus' has gone to providing much needed public services – it is merely squirreled away to cover the risk of the Stadium company defaulting on its loans!

"It is important to note that the 'surplus' made by the interest rate differential serves to compensate the council for the risk of default" states the report "The interest is    therefore held in a reserve until such time as the risk position crystallises, rather than being released into the general fund. The reserve covers the possibility of sale values falling short of the amount required to repay the debt..."

The current 'reserve' to cover outstanding debt was a massive £9.368million as of end of March 2019! And there was still a total of £15.773million 'balance of risk' as the total debt was £25.141million. A great 'news story', indeed....

*For a full background see previous Salford Star articles...

Salford City Mayor Says £2million Loss Stadium Is 'A Great Success' – click here

Salford Community Stadium Announces Almost £2million Loss – click here