Star date: 5th December 2012

COUNCIL PREPARING SALFORD REDS RESCUE DEAL IN TANGLED WEB OF LOANS AND DEALS

"There appears to be some creative financial manoeuvres here" Salford City Council legal adviser

It looks like Salford Council is preparing to bail out Salford City Reds rugby club again, following notice of a confidential decision to be made on December 11th, details of which have been leaked.

Here, the Salford Star reveals the financial web spinning around Salford Council, the rugby club and its directors. And how public money has been central to it all.

Full story here…

It appears that Salford Council is about to rescue Salford City Reds rugby club again. A notice posted on its website entitled `Urgent Key Decision', states that the Council's action is exempt from being `called in' for scrutiny as "Any delay in the provision of further funds could cause the club to enter administration either voluntarily or by one of its creditors". The club faces a winding up petition on January 7th (see here)

While all the financial terms and deals have been done in secret, under the cloak of "commercial confidentiality", the M.E.N. has reported that Salford City Mayor, Ian Stewart, is set to approve a £750,000 loan with the logic defying reason `to safeguard its investment'.

The Council's `investment' is both the £22million loan for the Salford City Stadium project and a £1million loan to Salford City Reds. 

The remaining bail out is apparently to come from joint Stadium owners Peel Holdings, currently lusting after the Green Belt land across the road from the Stadium (see here), in what some might see as a snidey bit of PR.

According to reports, Peel is set to take over the running of the club. However, under the terms of the £1million loan that Salford Council made to the club, the Reds cannot "effect or enter into any amalgamation, merger, demerger or reconstruction" (see here). So this looks to an outsider like Salford Council loaning the rugby club money to pay off a loan to itself (and creditors), so that the Peel takeover can go ahead.
 
Last month, Mayor Ian Stewart, commenting on the possibility of a Council financial rescue for the club said "I would re-consider my position if they came to me with a viable plan for the future of the club…" It appears that this particular `viable plan' relies on Salford Council's own viability to bail the club out.

This latest rescue for Salford City Reds is part of a tangled web of public money handed over to the club, its Foundation and its directors, and some very strange deals …

• SALFORD CITY REDS - £millions in loans, sponsorship, stadium and mind popping deals

As well as the £1million loan from Salford City Council (click here), there also appears to have been an earlier loan of £350,000 in 2009 (click here).

The terms of the £1million loan are absolutely mind blowing or, as Salford Council's own legal adviser noted in a confidential report from January 2011… "There appears to be some creative financial manoeuvres here".

It centred on the Willows ground where Salford City Reds played before the move to Barton. First of all, the Council bought back the lease on the Willows car park from Willows Variety Centre Ltd (which later went bust), for £250,000. But the Council already owned the freehold to the car park. The money was paid "to enable a recycling of the £250,000 into the Rugby Club, reducing the Club's borrowing needs…".

Meanwhile, Salford Council wanted security on its main loan to the Salford Reds of £1million. Godliman Watson Homes Ltd, which owned the Willows, offered a `third priority legal charge' on the ground. But the ground was already in hock to the Co-op Bank for £2.2million and the Wilkinson Pension Fund for £1.7million and had "clearly no value" left in it.

Instead, the Council entered into a bizarre deal with Godliman Watson Homes (GWH), of which Robert Iain Watson is a Salford Reds Director. The idea was to build houses on the former Willows ground and the Council agreed that "as each new house is developed and sold on the Rugby Ground site, GWH Ltd will use part of each sale receipt to pay an agreed proportion of the outstanding club debt until fully repaid".

The confidential Council report notes that "there are clear risks for the Council in seeking to re-coup its lending to the Rugby Club by linking debt repayment to these property transactions, particularly in weak market conditions".

The report emphasises that "there are clear timescales set for commencement and completion of development, payment of the debt and purchase of the land".

The first payment from the first house sale was supposed to start in 2012 but not a brick has been laid. Meanwhile, under the terms of the loan, the rugby club has to pay £50,000 (presumably from `house sales') every three months until 2017.

With no house sale proceeds that we can see, the Reds are obviously struggling to pay off the debt, hence the financial vicious circle that the Reds and the Council currently find themselves in. And, with everything the club owns apparently hocked, Salford taxpayers might well be wondering where the security for the latest loan is coming from.

The ultimate liability for the original £1million Salford Reds debt to the Council, however, lies with its directors and Godliman Watson Homes who, according to the Council report "could therefore be pursued to insolvency by the Council seeking to re-coup its lending to the Rugby Club if the above proposed development agreement with GWH does not lead to a successful outcome".

Meanwhile, in 2016, GWH was to "purchase the car park from the Council for £515,000 or market value" and pay the Council 10% of the net profit from the car park site. Heading into 2013, the car park site remains derelict too.

On top of all these "creative financial manoeuvres" (Salford Council's legal adviser), the Salford City Stadium, built primarily for the Reds to play in, was backed by £32.7million of public money – a £4million grant from North West Development Agency, plus a £22million loan from Salford Council, which set the Stadium up as a joint venture company with Peel Holdings. Salford Council also gave land worth £6.7million towards the project.

Since the Stadium opened, the word `Community' has been dropped from its title, and there is no free community use as the Stadium `has to wash its face financially' (see here).

P.S. The Council also handed over £6000 in sponsorship to the Reds in May 2011. 

• SALFORD CITY REDS FOUNDATION – over £350,000 from Salford Council in two and a half years.

As revealed by the Salford Star in October (see here), during the two years 2010 and 2011, the Salford City Reds Foundation received £261,179 from Salford City Council for various community programmes. From December 2011 to March 2012 the Foundation received another £96,500 from Salford Council for `marketing/publicity' and `grants'.

In 2010 the Foundation also received £38,750 in `unrestricted grants' from the publicly funded Primary Care Trust and University of Salford. 

Meanwhile Salford City Reds accounts show that during 2010 and 2011 the rugby club re-charged the Foundation over £200,000 for "use of facilities, promotional activities, and coaches and players utilised in the charity's activities". The Reds also owed £59,502 for a loan from the Foundation in 2010.

• SALFORD CITY REDS DIRECTORS – public money and mansions for their own businesses…

Robert Iain Watson is a director of Godliman Watson Homes Ltd, which has been rather active/inactive/active around its developments on Great Clowes Street, opposite Albert Park in Broughton. The company recently opened its Spark Studio, a £1.7million office and apartment project, with the majority of the finance coming from public money.

Salford Council weighed in with £135,000 capital grant; Europe (ERDF) added £255,000; the University of Salford paid out £150,000 for a 26 year lease of the offices; and Contour Homes put in £650,000, with £420,000 of that coming from the Government's Homes and Communities Agency. Godliman Watson itself, from what we can gather, merely contributed the `land value'.

Meanwhile, Godliman Watson is waiting on final confirmation for more public funding, this time for 25 houses on its Albert Park View Development.

John Wilkinson, at the time of writing, is still Chairman of Salford City Reds. In February this year the Wilkinson company, Willows Variety Centre Limited, went bust, with debts of over £270,000. One of the unsecured creditors was Salford City Council, owed £3,665.

John Wilkinson's day job company, Wilkinson Star, last year got a £200,000 public money loan from the Europe-backed North West Fund for `additional working capital', and his Wilkinson Welding Academy received £210,000 Skills Agency funding as a sub contractor of Blue Training (UK) Ltd. It was claimed that the Academy would train 1,000 people a year. 

According to a Salford Council officer, Wilkinson Star, together with fellow Reds director, Robert Iain Watson's Godliman Watson Homes, are intending to use more training money to help finance their incredibly controversial conversion of Buile Hill Mansion into a luxury hotel. Or as the officer put it in an email to a Salford resident, there is a "planned inclusion of a training element into the proposed hotel that should generate additional operating income".

The relationship between these Reds directors and Salford City Council concerning the Mansion has been strange to say the least. Despite objections from the local community, Salford Council granted planning permission for the hotel in 2008. In 2009, the hotel plans stopped Buile Hill Park getting a £3million Lottery grant for its refurbishment as "a hotel within a park would impact on its character" (see here).

The Mansion was left untouched by preferred developers Wilkinson and Watson, who, we understand, haven't paid a penny for the Mansion yet (although they have paid for their own development costs). Salford Council has never put the Mansion back on the market and, in 2011, after the three year planning permission had expired, extended it for a further three years. 

Back in June, the Council officer stated that `specialist business partners' had been introduced into the hotel deal and with the "additional operating income" from training, he was "hopeful of further positive developments in the coming months".

That was seven months ago. And still no word. Yet Salford Council is not putting the Mansion either onto the open market, or letting any community organisations have a go at revitalising one of the most important heritage buildings in Salford.

The evidence seems to show that Salford Council has bent over backwards to financially and practically aid Salford City Reds and its directors. And while, as successive leaders of Salford Council have pointed out, it's important to have a Salford rugby club in the Super League, people might well be asking at what cost to residents? The cuts in public services continue…

* John Wilkinson campaigned for the Labour Party at the 2010 election, and financially backed Hazel Blears' doomed bid to become Deputy Leader of the Labour Party in 2007. In 2010, the Wilkinson Academy was officially opened by the then Labour Government Minister, Peter Mandelson.

* Since the summer the Salford Star has extended an open invitation to Salford City Reds directors to be interviewed. They have not responded.