Well worth taking gamble on appeal

DERBY County’s appeal against the 12-point deduction for going into administration could be a gamble worth taking, according to football finance expert Kieran Maguire.

The Rams’ appeal against the EFL punishment will be heard by an independent panel at a sports arbitration hearing.

Their case may come down to a legal technicality called “force majeure”, which would back up Derby‘s claim that the coronavirus pandemic was the main cause of their current plight.

Maguire explained the concept on his Price of Football podcast.

“I think the argument from the administrators will be that it was all due to Covid and nothing to do with Mel Morris’ fairly cavalier approach to running the club when it comes to finances,” he said.

“I spoke to a lawyer as well as there is something called force majeure, which I believe is an external factor beyond the expectation of man or beast.

“He said we’ve had Ebola and Sars. The EFL will say that scientists have said that at some point in time there would be a global health crisis.

“It’s a punt, an expensive one, but if it comes off there will be high fives and trebles all round for the administrators and fans.”

Whatever the outcome, it is important for Derby that the appeal is resolved quickly as it will have an impact on the value of the club and any subsequent takeover.

Derby have been warned that the appeal will come at a cost if they are unsuccessful - but the potential financial benefits of a win could make it worth the risk.

Wigan were unsuccessful with a similar appeal last year after being put into administration and there are lessons to be learned there for the Rams, says Maguire.

“This has come as one of the decisions from the administrators. If you’re going to appeal (the 12 points) and it’s unsuccessful then you have to pay the costs of the EFL as well,” he said.

“I went into the administrators report for Wigan and that cost around £400,000. It’s a bit of a gamble but if Derby are successful they’ll get an extra £6m or £7m in TV money, they’ll get a better deal with their front of shirt sponsor next season as they’re less likely to be in League One.

”Also, if you’re trying to sell Derby County as a Championship club it’s a more attractive proposition than League One as you’re only one step from the Premier League.

“I suspect the administrators have done their sums. Will they be successful? Wigan weren’t but the circumstances were slightly different.

“I’ve spoken to an insolvency practitioner and asked what they would do. They said it’s a £400,000 cost for a potential £6m or £7m gain.”

Maguire has also warned whoever takes over as the new owners of the

Rams they will be in for a rough ride. “The challenge for whoever buys Derby County - and I think people are far more positive than they were a couple of weeks ago that someone will - there are two issues,” he explained.

“There’s the purchase price and there’s the cost of operating in the Championship. It’s a car crash of a division.

“You have the clubs coming down, the clubs coming up and the hardy perennials. The average loss I worked out is £476,000 a week.”

While the administrators this week said they have had no contact with Mike Ashley about a takeover, Maguire noted the former Newcastle United owner has a track record of buying businesses in similar financial distress.

“Is Mike Ashley willing to underwrite those losses or would he try to run it as he ran Newcastle, on a financial even keel?” he added. “It’s very difficult to get out of that division going upwards. It’s a lot easier to get out going to League One. “He’ll be looking for value. Is there value in an industry where 80 per cent of the companies are losing money?

“Historically, he’s taken on struggling brands and sold them on cheaply. Is there the equivalent in football? I’m not so sure.”

If it comes off there will be high fives and trebles all round for the administrators and fans.