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2006

With City struggling for funding in the first 2 seasons of Supporters' Trust ownerhip, increased funds were needed

The following is largely copies of YCST information issued in 2006. Much of it appeared in "There's Only One Arthur Bottom" at the time and is reproduced as closely to its original format without distorting any of the content. Questions arising from The Trust's initial statement of 27/March/2006 were later addressed.

The Old Stanley and the Old City

No doubt Accrington Stanley supporters tire of being reminded about the demise of the 'Old Stanley' in March 1962. As a result of financial difficulties, the club resigned from the Football League and then, in the following year, folded altogether. That is, at the time, there was no-one prepared to provide the money and/or take on the challenge to help the 'Old Stanley' survive and so the town and the supporters lost their football club. It then took several years until the new Accrington Stanley was formed in 1968 and now, over forty years later, it looks likely that the town of Accrington will once again have a team in the Football League.

Of course, in recent years York City has been the subject of financial difficulties. After a few years of huge losses, the 'Old York City' was the subject of an Administration Order in December 2002. As most City fans probably appreciate, like had happened to the 'Old Stanley' in 1962, York City was very very close to folding altogether – and, if the Club had folded, Bootham Crescent would probably have rapidly been turned into a housing estate.

In February/March 2003, in the absence of anyone else prepared to step in, the Trust formulated a Rescue Package to Save City. Life-long City fan and Trust member Jason McGill stepped forward to provide an essential financial contribution as an integral part of the Rescue Package, and was also one of the few people prepared to volunteer to be a Club Director. Whilst acquiring the football business, the Trust and the new Club Directors also inherited a legacy of debt, onerous contracts, a club with poor relationships with the local council and with certain football bodies, a poorly operated business and, not least, a Club about to be ousted from its home stadium. When the Football Club came out of administration with the help and support of all City supporters, whilst there were just sufficient funds to complete the Rescue Package, the business was effectively under funded by around £200,000.

Working Towards New Funding

As first reported in the last week of February 2006, City's Trust Board is now in discussions with the Club Directors about trying to put in place some new funding to help the Club. As reported previously, the Trust Board has considered funding options during the past eighteen months. Changes in circumstances in recent months mean that the Trust/Club must now work towards putting in place a funding package. As is apparent to our supporters from the experience of the past four years, the potential sources of significant funding are somewhat limited. The discussions continue to include a possible way forward involving changes to the Trust's existing partnership with Jason McGill and JM Packaging Limited that are likely to involve changes to the ownership percentages of the Club.

We will communicate more information to our members in due course. Within the limited time that the volunteers have available, the Trust Board's focus has had to be on putting in place a solution for the benefit of York City. Meanwhile, it is essential for the Club to have the stability and support to help Billy McEwan and the team win as many matches as possible in the final part of the season.

When time and circumstances allow, the Trust will endeavour to provide a response to the many questions that supporters are asking. Supporters who have taken the time to attend the Trust’s meetings in the past will, in particular, better appreciate the complex circumstances in which the Trust/Club has had to operate over the past four years and how we have provided a full and frank account of the issues. In respect of the Rescue Package and then the arrangements to gain ownership of Bootham Crescent, you will probably struggle to find any other similar deals about which so much business information has been made publicly available and explained.

The Financial Context

Good or bad, football and finance is intrinsically linked in the minds of most supporters. In the case of York City, money has been at the centre of the evolving story over the past ten years. For someone to try and gain a better understanding of the current situation, it is essential to have some understanding of the financial context. Whilst it is the Club’s Directors who are responsible for the management of the business, the financial results are communicated to the Trust Board on a regular basis. The Trust has also made the Club’s annual financial statements available each year via the YCST Web Site.

If you wish to see a table setting out the income, costs and profitability of York City over the period from 1996/97 to 2004/05 download the linked file. Ed - As at December 2019 this is a broken link but many YCFC accounts can be accessed here. The YCS article includes a table that summarises the financial results of York City for each of the seasons 1996/97 through to 2004/05. This includes a breakdown of turnover (by match-day, commercial and central sources), costs (by wages and other costs), day-to-day operational profitability (or losses, in all expect 2003/04 season), transfer monies and interest payable / receivable.

Looking back before 1999 – relative financial prudence

  • Whilst in the old Division Two (now League 1), York City was of similar scale to the average Division Three club in terms of income generation, the wages bill and annual operating losses.
  • The Club enjoyed windfall profits from the transfer of a number of young players at a time when the transfer market was bouyant. In the three seasons from 1996/97 to 1998/99, the Club benefited from the net injection of around £2.5 million of profits from player trading. The windfall profits from player sales far exceeded the operating losses from the Club’s day-to-day activities over those three seasons. At that time, the Club had better net funds (cash reserves) than almost any other Football League club.

Seasons 1999/2000 to 2001/02 – a dramatic downturn in the management of City’s finances

  • In 1999 the (then) directors of York City decided to undertake a “restructuring”, such that the ownership of Bootham Crescent was stripped out of the Club and transferred to a new holding company (BCH). City’s financial results took a significant turn for the worst in the 1999/2000 season.
  • Whilst there was some reduction in income generation (largely due to Division Three status following relegation at the end of the 1998/99 season), it was the increases in costs that were of greater significance. The directors escalated the costs as the annual wages bill peaked at £2.2 million (in 2000/01) and other costs also increased significantly (to over £700,000 per season).
  • By 2000/01, the Club’s (then) directors had created a wages bill (of £2.2 million) that was more than double the wages bill from just four seasons earlier in 1996/97. As a result, the Club had one of the worst Wages/Turnover ratios in the history of British football in the 1999/2000 and 2000/01 seasons (at around 150%, whereas a ratio of around 70% would be sustainable).
  • Operating losses exceeded £1 million in each of 1999/2000 and 2000/01, far worse than other Division Three clubs. In the three seasons following the creation of BCH, those responsible for running the Club created losses of over £3 million (from the day-to-day operations – 1999/2000 to 2001/02). The windfall transfer monies had been spent and York City was heading towards insolvency.
  • In April 2002, Batchelor acquired the Club for £1 from BCH. As a result of the unsustainable financial position, in the last quarter of 2002, creditors were not being paid and the Club was plunged into Administration in December 2002. By the end of December 2002 the Club had accumulated debts of around £1 million. Without corrective action, those debts could have grown further by the end of the season – by perhaps a further £0.5m to £0.75m. The financial situation was very bad and many people thought the Club was beyond salvation.
  • The new Club’s first 3 months of trading under Trust-control yielded a loss of £332,000, as inherited costs far exceeded the possible income generation.

Financial changes since 2003

  • On a profit and loss basis, despite two seasons of poor on-pitch results, for 2003/04 and 2004/05 the operating results were breakeven. This compares to the average operating loss for each of the previous five seasons of £0.9m. That's a dramatic turnaround in the management of the Club's finances.
  • Relegation to the National Conference inevitably lead to a significant reduction in income in 2004/05, as overall gate receipts fell by over 40% and central/grant monies halved (despite the single season parachute payment in 2004/05), although commercial income held up well.
  • Wages costs were necessarily significantly reduced in 2003/04, and again for 2004/05 – such that the Club’s total wage bill of around £0.8m is less than half the figure of just two seasons before. As a result, the Wages/Turnover ratio fell to its lowest level in the past ten years. Other costs have also had to be cut, whilst at the same time the Club’s Directors were striving to maintain (and improve) the Club’s existing professional infrastructure.
  • Changes in the player transfer market since 2003 has meant that significant transfer profits has become a rarity for lower division clubs. York City has enjoyed little more than £100,000 from transfer fees since 2003, compared to the windfall profits of around £3m in the late 1990s. And, whereas the old club used to benefit from interest income each year, the new Club now incurs interest as a result of the enforced borrowings.

For normal accounting reasons, the financial results in the table (see link above) do not include the cash outflows to settle certain inherited liabilities (e.g. amounts due to players, the tax authorities, the PFA – in effect, since 'day one', there was a shortfall of around £200,000 to try and recover), nor the cash shortfall of around £100,000 that had to be paid by the Club to complete the arrangements to gain ownership of Bootham Crescent. The vastly improved operating profitability since 2003 has been achieved despite certain matters/events that have been unfavourable to the Club's finances. For example: Batchelor reneging on promised payments of around £43,000; Exceptional redundancy costs of £72,000, that might have been lower if the people concerned had obtained alternative employment; Costs of around £50,000 that had to be paid in respect of the necessary investigations to move the Club to the Huntington Stadium; The team has not been successful in Cup competitions over recent seasons, unable to generate even a small Cup windfall, never mind the riches that the likes of Exeter City and Burton Albion have recently reaped; A reduction in youth grants; and, whilst ownership of Bootham Crescent was something that all supporters wanted, it has brought with it increased repairs and maintenance costs in respect of the Stadium and the Training Ground.

It is apparent to supporters that the Club has had to lead a 'hand to mouth' existence since 2003, whilst at the same time the Trust/Club have been working to maintain the stability required to gain ownership of Bootham Crescent and provide the team with a better chance of on-pitch success to reward our loyal supporters. We hope that this analysis is of both interest and use and we'll communicate more in due course.

Questions Arising From The YCST Statement Of 27/03/2006

The Trust’s recent release (TOOAB 27/03/06) about the financial context appears to have prompted some responses to Arthur. Whilst in a short written piece like this we are unable to respond to all questions and misunderstandings that are arising, we can reassure the members that their fellow supporters on the Trust Board continue to work in the best interests of York City. The purpose of the recent release was, as stated, to provide some (important) financial context. It was not possible for it to be a full and final comment on all matters arising. As stated in the release: "We will communicate more information to our members in due course. Within the limited time that the volunteers have available, the Trust Board's focus has had to be on putting in place a solution for the benefit of York City. Meanwhile, it is essential for the Club to have the stability and support to help Billy McEwan and the team win as many matches as possible in the final part of the season. When time and circumstances allow, the Trust will endeavour to provide a response to the many questions that supporters are asking. Supporters who have taken the time to attend the Trust’s meetings in the past will, in particular, better appreciate the complex circumstances in which the Trust/Club has had to operate over the past four years and how we have provided a full and frank account of the issues. In respect of the Rescue Package and then the arrangements to gain ownership of Bootham Crescent, you will probably struggle to find any other similar deals about which so much business information has been made publicly available and explained."

Some of the (relevant) information contained in the recent release was:

  • The turnaround in the financial management of the Club. Despite two seasons of poor on-pitch results, since the Rescue Package of March 2003, for the 2003/04 and 2004/05 seasons the operating results were breakeven. That compares to an average annual operating loss of circa £900,000 for each of the previous five seasons (98/99 to 02/03).
  • Meanwhile, since March 2003, the Club has had to pay off some of the liabilities inherited from the old regimes (c. £200k). In addition, there was the shortfall of over £100,000 to be paid on gaining ownership of BC in February 2005.
  • The significant (negative) financial impact of relegation to the Conference – gate receipts down 40% and central/grant monies halved (and, in the Conference, for 2006/07 the central monies could be less than 10% of the 2004/05 level).
  • Over the past 3 years, there have been various matters that might have worked out more favourably for the Club – for example, if Batchelor had paid up the £40k+ he owed; if the individuals concerned had obtained alternative employment in respect of c. £72k of exceptional redundancy costs; if there had not been £50k of fees incurred to investigate the (abortive) plans to move to Huntington; if youth system grants had not been reduced in 05/06; if the Club had achieved some Cup success in the past 3 years; if the transfer market was more buoyant (like pre-2000) and a windfall had been generated; if certain repairs and maintenance costs in respect of BC and the Training Ground were not necessary.
  • As reported previously, the Trust Board has considered funding options over the past eighteen months – including options involving raising funds from 'public offers' (e.g. like the 'Save City' crisis appeal of Q1 2003 and the 'Help buy back Bootham Crescent' appeal of 2004). The cash shortfalls have to be financed from someone. As is apparent from the experience of the past 4-5 years, the apparent sources of significant finance are very limited.

From the time of the very first public meeting in January 2002, at every twist and turn of the York City saga, the people who have volunteered to lead the Trust’s work – and, subsequently, those supporters who have taken on the responsibility of being Club Directors - have often been the subject of accusations and criticism from amongst their fellow City supporters. Regardless, the Trust Board’s primary aim – which is not necessarily shared by everyone interested in the Club - has always been to try and provide the stability and support for the Club to survive as a community asset and the team to prosper on-the-pitch.

Both the Trust and the Club are small entities run by volunteers – albeit the Club is hugely important to the supporters and to the local media. City fans have achieved a lot over the past few years. Inevitably, there can be lots of suggestions about things that could be done better by each organisation. In reality, the ability to achieve is limited by the available resources of money, ability and time.

The 'York City story' of the past five years is not an easy one for anyone to follow. The financial, legal, tax and business aspects are far from straightforward and it is inevitable that many people may, to some extent, be frustrated by the complexities involved. There are also a significant number of people in the city who would rather York City was just about on-pitch matters, rather than finance, business, property, etc. The complexities involved and the many inherited issues that have had to be faced are of relevance to the current situation. The Trust’s website contains a lot of information to try and provide people with a better understanding.

Ongoing Negotiations

Information revealed about share deal negotiations. York City Supporters' Trust writes . . .

As announced previously, the Supporters' Trust is involved in discussions with J M Packaging Ltd with a view to introducing a significant amount of additional funding to York City Football Club that, if concluded, will involve a change to the ownership structure of the Club. Currently, the Trust owns 85% of the total issued share capital of the Club and Jason McGill owns 15%. These discussions commenced following consideration by the boards of the Trust and the Club of alternative funding arrangements. Other than J M Packaging, the Trust is not aware of any other party prepared to partner with the Trust in the future ownership and funding of YCFC.

The main objective of these discussions is to work in the best interests of York City Football Club. In part, so as to try to provide stability to help Billy McEwan and his team achieve on the pitch.

At this stage, in respect of a possible partnership involving J M Packaging, a number of principles have been discussed between the parties and their respective legal representatives. At this stage, the discussions are ongoing and no conclusions have been reached. Some of the principles discussed with J M Packaging include:

  • J M Packaging Ltd to potentially subscribe for new shares such that its ownership would be 75% plus one share of York City Football Club Ltd for £950,000 over 5 years. This would bring the overall cash contribution to the Club from Jason McGill / J M Packaging Ltd to over £1 million.
  • The £950,000 to be subscribed for the new shares would potentially consist of the following:
    • £300,000 loan to convert into shares; and
    • Minimum £150,000 cash injection required in respect of the 2005/06 season; and
    • £500,000 cash injection over the next 5 years.
  • For there to be a reasonable rate of return for J M Packaging Ltd on the funds it has provided to the Club. This return would only be paid by the Club following the sale of Bootham Crescent, as part of the move to a new stadium in the city in several years time. The interest rate is to be agreed between the parties.

The partnership with the Trust to continue, cemented by the addition of various new rights to the Trust, for instance in respect of the ground situation and operations.

The £1 million would remain in shares in York City Football Club and the Supporters Trust would have the opportunity to buy the shares back at par.

Because of the situation inherited by the Trust in 2003, the financial, business and legal issues are not straightforward and can be difficult to convey and for people to fully understand. It is very disappointing that Trust Board member Mike Grant has breached confidentiality by leaking information to the Evening Press, without him having a proper understanding of the matters involved. This unilateral action risks jeopardising the future of the Club and the Trust at a very important time in the season, and providing inaccurate information about matters that have yet to be concluded.

Cash For City Shares Offer - The Deal

JM PACKAGING have offered to invest a further £650,000 into York City to become majority shareholders of the football club.

But that amount would be repayable in interest to the Malton-based company on an assumed future sale of Bootham Crescent, according to a proposal communicated to the Supporters' Trust board business sub-committee by JM Packaging's lawyers.

Under the proposal's heads of terms, JM Packaging, who are owned by Minstermen managing director Jason McGill (95 per cent) and his father Rob McGill (5 per cent), would become 76 per cent majority shareholders of the football club in return for a total investment of £950,000.

That figure includes the £300,000 loan already facilitated by JM Packaging, who recently requested what provisions the Trust had in place to meet a January 2007 settlement date which, in turn, led to discussions over the future ownership of the football club.

The Trust, currently, own 85 per cent of shares in the football club with Jason McGill having 15 per cent after making a £50,000 donation.

Under the proposal, JM Packaging have offered to cover the expected £150,000 losses this season, extend the existing £S300,000 loan to an assumed future date when Bootham Crescent is sold and meet annual repayments, over the next five years, of £100,000, which are required under the terms of the £2million Football Foundation loan taken out by the club to regain ownership of their home stadium from previous chairman Douglas Craig.

But, under the proposal, JM Packaging's cash injection would be treated as a loan with an interest rate of 12 per cent.

That interest, amounting to £649,000, would then be paid on the assumed sale of Bootham Crescent and the relocation of the football club to a new stadium.

The proposal also states that future investment from JM Packaging would be in the form of a secured loan, which would be secured against Bootham Crescent and repayable upon any event of insolvency at the club.

There is also a condition that adds if planning permission is not obtained within a 12-month period then JM Packaging would "not be obliged to continue to make the facility available".

JM Packaging's lawyers have also asked for their shares to be turned from ordinary shares to preference shares, ahead of those held by the Trust, on the assumed sale of Bootham Crescent but that the Trust would have the ability to buy back the shares from the Trust at their £950,000 par price if JM Packaging want to sell.

If the Trust were to sell their shares for a greater value within three years of buying them back then, under the proposal, it is understood that JM Packaging would receive a split if the Trust were not to invest the difference.

When approached on JM Packaging's proposal, City director Jason McGill said: "There have been one or two proposals that have been put forward and since changed. JM Packaging are prepared to convert the £300,000 loan into part of a £950,000 package that safeguards the football club going forward.

"An interest rate has not been decided and the quoted rate has certainly not been agreed but, as an officer of JM Packaging, for the company to become involved with a football club it has to be done on a commercial basis and, in any negotiations, you have to talk privately before you make a public statement."

'Secret' Craig Causes Fear - Mike Grant

YORK City Supporters' Trust board member Mike Grant has voiced reservations over "onerous" clauses included in the deal concluded between Jason McGill and former chairman Douglas Craig over the transfer of shares in Bootham Crescent Holdings.

Grant has decided against elaborating on the clauses as he feels it would not be in the best interests of the club but added that he was also disappointed with the manner in which the agreement was communicated to the Trust board.

The football club paid Craig £1,084,000 and fellow BCH directors Barry Swallow and Colin Webb £172,661 each to regain ownership of Bootham Crescent after it had been placed into a holding company during Craig's chairmanship.

City were able to buy back their home ground after McGill secured a £2 million loan with the Football Foundation, which requires annual repayments of £100,000, the first of which was due in February but has still not been met.

Grant said: "Early in 2005, the Trust board were asked to approve the legal document which concluded the deal for the club to receive a £2 million loan from the Football Foundation and to purchase 76 per cent of Bootham Crescent Holdings, and hence the ground, for £2.1million, the other £100,000 coming from sponsorship from Nestle. Trust board members were given the document shortly before the Trust board meeting and effectively we were being forced into approving a done deal. All the negotiations with Douglas Craig et al had been carried out by Jason McGill and the Trust board had not been previously updated on any details due to the alleged requirement for confidentiality. Contained within the document were some onerous clauses. I voiced my concerns about these conditions, was told they were non-negotiable and, as there was no alternative but to accept the agreement, the Trust board did so". Grant, of Stamford Bridge, also claims that in December 2004, with City facing a financial crisis, the club board had demanded a unanimous vote of confidence from the Trust board.

Otherwise, according to Grant, the club board would resign en masse and McGill would expect the return of the £50,000 investment that bought him a 15 per cent share in the club.

The Trust board complied with that request and, shortly afterwards, agreed the £300,000 loan at an interest rate of two per cent above base rate.

YEP Sports comment... SUPPORTERS' Trust board member Mike Grant will not be everybody's flavour of the month at York City Football Club today. But the construction company director's decision to disclose details of negotiations between the Trust and football club managing director Jason McGill's company JM Packaging will hopefully allow the issue to be debated in a public manner, befitting of a football club still, for now, owned by its fans. Ultimately, it should be those supporters, who have raised hundreds of thousands of pounds to assist in the survival of their club, that are responsible for the decision as to whether JM Packaging's eventual proposal is in the football club's interests or whether an alternative should be sought. Aspersions have been cast about how the club accumulated debts of £500,000. In terms of the future, the Trust and JM Packaging will now need to communicate their intentions in a clear and convincing manner in order to allay any fears held by a group of supporters still haunted by actions from the past.

Why I Blew The Whistle - Mike Grant

YORK City Supporters' Trust board member Mike Grant believes the club's owners were misled by the football club board over the conditions of JM Packaging's £300,000 loan to the Minstermen. JMP Packaging, whose shares are split between City managing director Jason McGill (95 per cent) and his father Rob McGill (5 per cent), recently requested what provisions the Trust have put in place to repay the loan by its January 2007 settlement date.

But Grant has supplied a copy of a letter from Minstermen financial director Terry Doyle to Neil Prescott of the FA's Financial Advisory Unit, dated March 17, 2005, that indicates Jason McGill gave assurances the loan would only be repayable on the sale of Bootham Crescent, as was reported at the time.

The letter from Doyle, which addressed questions relating to the loan from Prescott, said: "While for legal reasons the loan is technically due on demand and has to remain so as it is effectively an overdraft albeit in a separate company, Mr McGill has given a guarantee to the football club board that he would ultimately seek, if necessary, repayment on the sale of Bootham Crescent under the terms of the loan agreement from the Football Foundation once their charge has been satisfied."

Construction company director Grant, 57, feels that the Trust board have "let down" its members by not bringing to a wider attention the serious financial situation at the club but, after much "agonising", he has now decided to go public independently and also offers mitigation, concerning the £300,000 loan, for previous silence. He said: "York City Football Club has been an important part of my life for the past 13 years and I have agonised over whether I should make this information public, but the bottom line is that I am elected to serve the best interests of the members of the Supporters' Trust, who own 85 per cent of the club and this is what I must do. I feel that we on the Trust board have continually fed out statements which can be summed up by the one issued last summer `situation difficult but manageable' and I am as guilty as anyone in not pressing the warning bell earlier. I have considered resigning because of this but, in mitigation, the major driver in the need to find external investment comes from the requirement to repay JM Packaging the £S300,000 next January and on this issue in my opinion the Trust board were quite definitely misled. We were told this was to be a long-term arrangement akin to an overdraft facility. Had I known that it had to be repaid in January 2007, I would not have supported the motion to accept it as there was no way it could have been repaid by that date and would have suggested we went for one of the other options, albeit at a higher rate of interest. When the question of repayment next January arose, I asked Jason McGill for an explanation as this was not my understanding of the situation. He told me that the January 2007 date had been inserted into the loan agreement since day one at the insistence of York City Football Club's lawyers."

In response, McGill pointed out that under the proposal, communicated to the Supporters' Trust board sub-business committee, JM Packaging would not be seeking repayment of the loan until a future sale of Bootham Crescent. He said: "The date of January 2007 was put into the loan agreement which was signed by the Trust board and Mike Grant would have been aware of that. The football club needs funding and, going forward without that funding, would have seen the football club cease to exist. JM Packaging are prepared to convert the £300,000 loan into a package that safeguards the football club going forward and it would then not need to be repaid by January. The Trust have been aware of the loan for 12 months and the financial state of the club since 2003 and, as yet, nobody has come forward with provisions to pay it in that time and everybody has had the chance to put an alternative package on the table."

But Grant maintains he did not sign an agreement that detailed January 2007 as a settlement date as did fellow Supporters' Trust board member Kirsten Ovenden when asked today.

Grant said: "I dispute that such a loan agreement was signed by the Trust board. It is right to say the Trust have been aware of the loan for 12 months but we were under the impression it was a long-term loan repayable on the sale of Bootham Crescent with no requirement to be paid by January 2007."

Ownership Talks

YORK City Supporters' Trust have admitted some principles of a future ownership partnership with JM Packaging have been discussed but that talks are still at a preliminary stage and no conclusions have been reached.

In a statement, the Trust confirmed that a reasonable rate of return for JM Packaging on the funds it has provided to the club is under consideration and that the Trust would like any deal to see a partnership with the Trust continue and cemented by the addition of various new rights for the Trust in respect of the ground situation and operations.

The Trust is also keen, in the event of any ownership structure change, to maintain a right to buy back its majority shareholding at a par price.

A Trust spokesman said: "The main objective of these discussions is to work in the best interests of York City Football Club, in part, so as to try to provide stability to help Billy McEwan and his team.

"Other than JM Packaging, the Trust is not aware of any other party prepared to partner the Trust in the future ownership and funding of York City Football Club."

YCSTStatement - 12/April/2006

The Trust noted,The last few weeks have been a frustrating time for some supporters and a very challenging time for your fellow supporters on the Trust Board. The majority of the Trust Board has now been working for the benefit of York City for over 4 years. It is not much fun! Many of the key issues over the past 4 years have been relatively complicated business, finance and legal matters and all against a backdrop of the Club leading a 'hand to mouth' existence. Over the past year or so, we have lost several Trust Board members due to the pressure of other commitments and the number of members prepared to put themselves forward to serve on the Trust Board has been small. Over the past month or so we’ve had to focus our efforts on finding the best solution for York City (for the running and funding of the Club). Unfortunately, we're sorry that this has meant we've not had time to respond as quickly as we would have liked to the many questions that supporters have raised. A couple of weeks ago we provided an extensive release about the financial context for the Club, the significant improvement in the financial results compared to the past, and examples of the various matters have not worked in favour of the Trust/Club over the past 3 years. We've now also released a 'Q&A' style newsletter providing a response to the questions that have been raised at YCST Newsletter 11/April/2006. Ed - As at December 2019 this is a broken link. We hope that these two documents will be useful to supporters to aid understanding. Both are available from the YCST Web Site (but are published in this special edition of TOOAB). We have also been striving to provide some stability for the team to have the best possible chance of success on-the-pitch this season. Please be assured that we’re working in the best interests of York City. Like you, we love the Club and we want to see it prosper and progress.

Below is the brief statement released by the Trust on 12 April 2006:

City’s Trust is continuing their discussions in the best interests of York City, to try and put in place arrangements whereby JM Packaging provides £1 million funding to the Club, whilst the Trust still retains a major role going forward.

Trust Chairman and Club Director Steve Beck commented "Going forward, we need someone to run the Club and help fund the Club. If we can agree an arrangement with JM Packaging then those objectives will be fulfilled. From the outset, the Trust’s role has been to work in the best interests of York City. Due to circumstances in 2003, the Trust was thrust into a position of majority ownership of the Club. We’re now looking for the Trust to continue to play a major role, and to protect the value of Bootham Crescent, but without the burden of majority ownership."

When an appropriate position has been reached, the Trust intends to put the proposal to members at a Special General Meeting.

The Trust's partnership with life-long City fan Jason McGill extends back to the early part of 2003, when Jason provided essential funding and input to enable York City to be saved. Since then, Jason has invested a huge amount of time and effort to help lead the Club through what was always going to be an extremely challenging period. During that time, Jason has also provided additional funding for the Club. Looking forward, there are more challenging times ahead for the Club to sustain and build its infrastructure and the major challenge of working towards the development of a new stadium in York. That is why the Trust has invited Jason to lead those efforts and also, through JM Packaging, to provide close to £1 million of additional funding to help the Club achieve its ambitions. As part of the arrangements, the Trust intends to continue to have a major role to help York City prosper and progress, including Club Board representation and certain special minority shareholder rights, including protections in respect of Bootham Crescent.

YCST

At a time when the team has been performing well on-the-pitch, the situation regarding the Club’s finances and potential ownership changes has been occupying a huge amount of time for the Trust Board. It has also generated lots of questions from supporters. Below, we provide a response to many of the questions that have been asked. At the same time as the YCST statement in April 2006, the YCST issued a series of Q&A.

Q01:Why does the Club need more financing?

A01:Since the time of the Rescue Package in March 2003, it will be apparent to our supporters that the Club’s finances have always been a struggle. There has been a major turnaround in the financial results, despite relegation to the Conference, but unfortunately this has been insufficient to make up the inherited debts and to try and sustain a Football League club infrastructure with a first team, reserve team, youth team, centre of excellence and a professional full time staff of 35 employees.
Over the past 3 years there have been various matters that might have worked out more favourably for the Club. For example, if Batchelor had paid up the £40k+ he owed; if the individuals concerned had obtained alternative employment in respect of c. £72k of exceptional redundancy costs; if there had not been £50k of fees incurred to investigate the (abortive) plans to move to Huntington; if youth system grants had not been reduced by £69k in 05/06; if the Club had achieved some Cup success in the past 3 years; if the transfer market was more buoyant (like pre-2000) and a windfall had been generated; if certain repairs and maintenance costs in respect of BC and the Training Ground were not necessary.
The discussions are not just about looking to the past. Looking forward, additional funding can help sustain the infrastructure to provide the chance for the Club to succeed and develop further.

Q02: Why was the £300,000 loan from JMP to the Club put in place in January 2005?

A02: Whilst the Club’s profit and loss results for 2003/04 and 2004/05 were at an overall breakeven level (compared to the average annual operating loss of c. £900,000, for each of the previous 5 seasons), the inherited liabilities and onerous contracts meant there was a cash shortfall of around £200,000. In addition, there was a shortfall of over £100,000 in respect of what the Club had to pay to gain ownership of Bootham Crescent. The ‘Bootham Crescent Loan Notes’ appeal, launched in June 2004, had raised less than £10,000.
As results on-the-pitch fell below expectations and the deal for Bootham Crescent neared completion, it was apparent to the Trust and Club Boards that further funds would be needed in 2005. Like for other smaller clubs, York City was unable to obtain loan financing from banks or normal commercial sources. There were also sensitivities surrounding the finalisation of the arrangements for the Club to gain ownership of Bootham Crescent.
Therefore, in January 2005 a £300,000 loan facility was put in place from JM Packaging Limited to the Club. To facilitate the loan to the Club, JMP borrowed £300,000 from their own Bank.
For the avoidance of doubt, the £300,000 loan facility put in place in January 2005 is a separate arrangement to the funding provided by Jason McGill as an integral part of the Rescue Package back in March/April 2003. In 2003, Jason had provided a cash injection of £50,000 as part of the fundraising and also acquired a house that had been used by youth trainees that effectively provided another £300,000 as part of the Rescue Package. The house was rented to the Club at half the cost of the mortgage and Jason McGill therefore contributed a further £12,000 to service the loan.

Q03: What were the terms of the £300,000 loan to the Club?

A03: The loan arrangement to the Club was considered by the Club Directors and the Trust Board. Regardless, there were no workable alternative options available.
The Club pays interest on the loan at 2% over the Bank’s base rate, which is the rate charged to JMP by the Bank. Whilst the loan is secured by a charge on the Club’s property, at this point in time, without planning permission on Bootham Crescent, there is actually insufficient value to cover much more than the £2 million loan from the Football Stadia Improvement Fund (which is secured on the property by a first charge).
In January 2005, it was anticipated that the £300,000 loan arrangement from JMP would be available to the Club on a long-term basis (if necessary, until BC was sold), all other things being equal. That is, regardless of any repayment clause, all other things being equal, the loan was expected to roll-forward.

Q04: Why is the loan now (potentially) repayable?

A04: Due to changes in circumstances since January 2005, JMP have now indicated to the Club (and the Trust) that the loan may be repayable in January 2007.
The £S300,000 facility was initially established on an overdraft basis, interest bearing, but in October 2005 it was converted at the Bank’s insistence into a capital repayment loan, but with a repayment holiday until January 2007.
The repayment date for the existing loan is not the only reason for the discussions about the Club’s financing. There is also some additional financing (approximately £150,000) required for the 2005/06 season, plus a recognition that further financial contributions are required in future over and above the Club’s normal revenue streams to help sustain the Club’s infrastructure. Jason/JMP has already provided more financial input and management time input than anyone else. It is not unreasonable for Jason/JMP to want a greater proportion of the ownership of the Club in return for the future commitment they may be prepared to provide.
Some people recognise that this change of circumstances provides a reasonable basis for JMP to not necessarily roll forward the loan indefinitely, whereas others feel that the JMP should roll forward the loan regardless of the change in circumstances. This appears to have led to the opinion expressed by Mike Grant that he feels the Trust Board were misled.
The discussions with JMP (see below) include conversion of the £300,000 loan into shares (i.e. the £300,000 would not be repayable by the Club, but would instead become committed funds in York City by JMP).
Jason McGill has also indicated to the Trust that if alternative arrangements could be put in place for the Trust to find someone else to fund and run the Club, then arrangements could be discussed about the settlement of the JMP loan.

Q05: Why is the Trust now considering a change of ownership of the Club?

A05: The discussions about a change to the arrangements between the Trust and JMP commenced in the first quarter of 2006, following consideration by the boards of the Trust and the Club of alternative funding arrangements (also see below). Other than J M Packaging, the Trust is not aware of any other party prepared to partner with the Trust in the future ownership, running and funding of York City.
Going forward, we need someone to both run the Club and help fund the Club. We need to put in place arrangements to meet those objectives.
It has become clear to the Trust that the Club would require additional funds for the 2005/06 season. The Club’s projected results to the end of the season are adverse to budget, mainly as a result of certain revenue sources that have not come to fruition (due to reasons outside of the Club’s control) and certain costs that were higher than originally budgeted (due to a combination of reasons, including costs to sustain the club’s infrastructure and the playing budget for delivering a much more successful season on-the-pitch).
To some extent, it has also become apparent that the Trust’s majority ownership position creates a significant burden for the Trust Board members. There has been a relatively small (and diminishing) number of City supporters prepared to volunteer to help deal with the business, legal, governance and financial aspects of a Trust-owned professional football club. Whilst it is intended that the Trust will retain a major role in the future of the Club, the burden on the Trust will be less.
The main objective of these discussions is to work in the best interests of York City Football Club. In part, so as to try to provide stability to help Billy McEwan and his team achieve on the pitch. The majority of the Trust Board considers that the discussions with Jason/JMP are in the best interests of York City. This is based on working with Jason since the first quarter of 2003, he’s a lifelong supporter, he played an essential role (in both financial and negotiating terms) to help the Rescue Package complete in March 2003, he led the work and negotiations for the Club to re-gain ownership of Bootham Crescent, he provides business experience and leadership to the Club Board, has attracted various major sponsorship deals for the Club and commits a huge amount of time for the benefit of York City.

Q06: Is relinquishing control contrary to the objectives of the Trust?

A06: No. The Trust was not established to be the majority owner of the Club. It started with an overall mission: “We will work to ensure the continuation of professional football in York. And, we will work to secure representation for supporters in the future ownership and operation of York City Football Club.”
In 2003, with York City on the brink of extinction and in the absence of any other parties prepared to save the Club, the Trust led the formulation and implementation of a Rescue Package. The Trust was thrust into a position of majority ownership, although that was not something it ever set out to achieve.
If concluded, what will be the new arrangements between the Trust and JMP?
At this stage, the discussions are ongoing and no conclusions have been reached.
At this stage, a number of principles have been discussed between the parties and their respective legal representatives. Some of the principles discussed with J M Packaging include:

  • J M Packaging Ltd to potentially subscribe £950,000 for new shares such that its ownership would be 75% plus one share of York City Football Club Ltd. This would bring the overall cash contribution to the Club from Jason McGill / J M Packaging Ltd to over £1 million.
  • The £950,000 to be subscribed for the new shares would potentially consist of the following:
    • £300,000 loan to convert into shares; and
    • Minimum £150,000 cash injection required in respect of the 2005/06 season; and
    • £500,000 cash injection over the next 5 years.

For there to be a reasonable rate of return for J M Packaging Ltd on the funds it has provided to the Club. This return would only be paid by the Club following the sale of Bootham Crescent, as part of the move to a new stadium in the City in several years time. The interest rate is to be agreed between the parties.
The partnership with the Trust to continue, cemented by the addition of various new rights to the Trust, for instance in respect of the ground situation and operations.
The £1 million would remain in shares in York City Football Club and the Supporters Trust would have the opportunity to buy the shares back at par.

Q07: Why is a rate of return being considered?

A07: Jason McGill is not a multi-millionaire and JMP is not a large company who can afford to simply gift the money to York City. If their money was not being used for the benefit of York City, as a limited company they would invest it elsewhere. As is the case at many other clubs, the main providers of finance receive a return for the money they have invested. Investing in a football club is a relatively risky business, especially a club of York City’s size.
At this stage, no agreement has been reached in respect of the return to JMP for the £950,000 of additional funds to be provided. The principle discussed is that the return would not be paid by the Club until the sale of BC, as part of the move to a new stadium in the city in several years time. Otherwise, there is no intention for Jason to take a salary for his time input or to otherwise receive money from the Club.
What protections can be put in place in respect of Bootham Crescent?
We want to protect the value of BC for the future benefit of York City and Jason agrees with us.
There was an upfront agreement in principle that both Jason/JMP and the Trust wanted to try and put in place mechanisms to help protect the value of the Bootham Crescent site for the future benefit of York City. Various principles have been discussed and, if an arrangement is made with JMP, then these will be incorporated within the legal documentation. These will be special rights held by the Trust. The Trust will also retain other special rights and Club Board representation. Unlike a ‘normal company’, football clubs have certain special clauses in their Articles of Association such that, in the event of a winding up, the surplus proceeds from the sale of assets do not go to shareholders. Therefore, the shareholders of York City do not have the benefit of access to the surplus assets, if any, on a winding up.
During the process to regain ownership of BC, the Trust Board was updated and kept informed of progress and details. The Trust Board also provided support to the Club Directors to complete the complex arrangements.

Q08: What alternatives (to the potential arrangement with JMP) have been considered?

A08: As is apparent from the experience of the past 4-5 years, the sources of significant funding for York City are limited.
Since the ‘Save City’ saga first started in December 2001, there have been only 3 people who have put in £20,000 or more (one of them being Jason McGill). Otherwise, despite the deep financial crises of 2002 and 2003, and the ongoing appeals for fundraising and assistance, there has not been any serious prospect of significant funds from any other source that has come to the knowledge of the Trust.
In the lead up to the provision of the £300,000 loan facility from JMP in January 2005, there were no alternative options known to the Trust Board. Prior to that, the ‘Bootham Crescent Loan Note Issue 2004’ had raised under £10,000 (from less than 40 contributors).
In Summer/Autumn 2005, the Trust Board again considered financing options in some detail. The Trust’s financing options document included consideration of methods including bank debt, supporter loan finance schemes, public equity offers (private companies are not allowed, by law, to make public offers of shares), naming rights, donations and long term season tickets. The outcome had been a collective agreement by the Trust Board that a form of loan finance scheme was the best option. Under the drafted proposals considered by the Trust Board, it would have allowed people to provide a loan to the Trust/Club, secured against the value of the ground, earning a rate of return and repayable (principle plus interest) at the time BC is sold. Unfortunately, it has not been possible to launch that scheme, as there is currently insufficient value in BC to offer security (given that planning permission is still not in place, contrary to expectations held last year) and, until recently, the scheme did not have clearance from the Financial Services Authority. Regardless, there was also some concern that it would raise insufficient monies to be a long-term fix.
The former directors of York City (Messrs Craig, Swallow and Webb) who have between them benefited by over £2.1 million from Bootham Crescent, have not made any offer to return some of those monies for York City. During the past four years, there have been few serious expressions of interest from other potential sources of finance (individuals) willing to partner with the Trust. Also, the City of York Council is not in a position to provide funding.
As noted above, the situation facing the Trust/Club is not just about the immediate financial situation. It is also about the future funding of the Club and, in addition, we also need someone to be prepared to be appointed as Directors to run the Club. The current situation is not a ‘hostile takeover’. We want what’s best for York City and in March Jason/JMP was invited to extend the partnership with the Trust.

Q09: Will the details contained in the Evening Press article (‘Cash for City shares offer’) on 6 April be the arrangements that will be put in place?

A09: No. Discussions are ongoing and lots of details have been/are being considered.
The details contained in that Press article on 6 April were not even for consideration by the Trust Board and had already been superseded. Therefore, unfortunately, the Press article did not provide accurate information to supporters. If/when the arrangements are sufficiently progressed, we intend to inform the Trust members of the details to provide a proper understanding.

Q10: Why has the Trust not told us more information until now?

A10: Within the limited time that the (few) volunteers have available, the Trust Board’s focus has been on trying to find a solution for the benefit of York City. We had originally anticipated that matters would have progressed quicker than what they have. We wish we had more time to be able to respond to questions that have arisen, but the main focus has been on developing a solution in the best interests of York City. We’re sorry that this apparent lack of information has not been made available to ease the frustrations of some supporters.
Supporters who have been able to attend the Trust’s meetings in the past will, in particular, better appreciate the complex circumstances in which the Trust/Club has had to operate over the past four years and how we have provided a full and frank account of the issues. In respect of the Rescue Package and then the arrangements to gain ownership of Bootham Crescent, you will probably struggle to find any other similar deals about which so much business information has been made publicly available and explained.
Over the past month or so, the Trust has made a few brief statements about the situation. The Trust also released a more extensive article in the match programme on 25 March (and subsequently on the Trust website) that provided some essential financial context for the current situation. We have also included on the website the Club’s latest annual financial statements (and those for BCH).

Q11: What about perceived conflicts of interest on the Trust Board?

A11: Sophie McGill has been actively involved in the Supporters’ Trust since its inception in January 2002. She played a key role in the Save City campaign and has been elected to the Trust Board on two occasions receiving support from the vast majority of members who voted.
Given her role on the Club Board and her family connection with J M Packaging, to help avoid any perceived or actual conflicts of interests, Sophie has chosen to voluntarily exclude herself from recent Trust Board meetings at which matters relating to JMP were discussed.

Q12: Will the members receive more information and will there be a members’ meeting?

A12: Having considered alternative options and if/when discussions with JMP progress towards an appropriate arrangement for going forward, the Trust will communicate matters to supporters.
It is then the Trust’s intention to present the proposals to the Trust membership at a Special General Meeting, at which Trust Members (as at 28 February 2006) will have the opportunity to discuss the matter in more detail and to vote for the best way forward for the Trust and York City.

Q13: How do the Trust Board and Club Board feel about some of the comments that have been made?

A13: Your fellow supporters on the Trust Board share some of the frustrations. The majority of the Trust Board has now been working for the benefit of York City for over 4 years. It is not much fun! Many of the key issues over the past 4 years have been relatively complicated business, finance and legal matters and all against a backdrop of the Club leading a ‘hand to mouth’ existence. Over the past year or so, we have lost several Trust Board members due to the pressure of other commitments and the number of members prepared to put themselves forward to serve on the Trust Board has been small.
The work and pressure to try and provide solutions to issues appears to fall on the shoulders of a small number of City fans. Of course it is fine for people to express their comments and criticisms, but you will still need someone to come up with workable alternatives and solutions.
The Club Board members are also feeling the strain of recent events and have the added pressure of running the Football Club and trying to ensure that business continues as normal. They too are unpaid volunteers who give enormous amounts of time and effort for the benefit of York City Football Club. We have also been striving to provide some stability for the team to have the best possible chance of success on-the-pitch this season. Please be assured that we’re working in the best interests of York City. Like you, we love the Club and we want to see it prosper and progress.

The bulk of this pages can also be referenced in Microsoft Word format 2006 Financial Woe and 2006 JMP Assume Control. Please be aware that some of the links in the original articles to YCST web pages are now broken (web pages no longer exist).