Cats owners reply to £20m ‘write-off’ claim
Sunderland supporters have reacted with significant concern to the news that £20.5 million of parachute payments used by Madrox to purchase the club from Ellis Short has been ‘written off ’ as an ‘exceptional operating response’ in the upcoming accounts.
The reports also raised major questions over the role of JuanSar tor i and concerns over the proposed sale of the club.
We sent a series of questions to Sunderland AFC and asked for comment on the various issues.
Madrox, the company set up as the vehicle to acquire the club and in which Stewart Donald, JuanSar tor i and Charlie Methven are shareholders, responded.
We then asked for clarity on some of the issues raised in a series of follow-up questions.
Today and tomorrow, you can read the questions and responses given.
Questions relating to the ‘exceptional operating expense’:
Q. If the club’s ownership remains committed to paying back the money used to help purchase the club from Ellis Short, for what purpose has the obligation to do so been removed?
Ma dr ox responded :“When entering into the investment with FPP it was a condition of the agreement to do so.
“The terms of that agreement are confidential but clearly for them to invest in Madrox it is cleaner and gives them more comfort if Madrox has no liabilities.
“This, however, does not prevent Madrox from investing funds in Sunderland to replace the parachute payments as promised.
“Indeed, since the writing off of the debt, Madrox has done just that, providing an additional £11,375,000 to the club, thus replacing a large portion of the parachute payments as we promised we would do.
“We are still only two years into our original five-year financial plan and we explained to the fans very early on that these monies would be replaced over time.
“That is exactly what is happening and actually at a faster rate than originally planned.
“With regard to the query over timing, what we can confirm for those who are not accountants or are not familiar with the process of producing financial year end accounts is that we had to write this off in the financial year to 31 July 2019 due to the fact that the accounts were signed off post the FPP financing, so the 'tidy up' exercise we went through in October 2019 had to be reflected in July 2019 to show a true position. This is perfectly normal accounting practice.
“For those fans that are not aware, companies are given a number of months to finalise their figures before they are signed off and published and there is nothing unusual in this process.”
Questions relating to Ma dr ox’ s funding of Sunderland AFC:
Q. The club stated in response to the national newspaper reports that ‘since year end’, Madrox has put £11.5million into the club. Is this all from shareholder funds or does this include the funds injected by the F PP group?
Madrox responded: “The detail around Madrox’s financing is private, but we can confirm there are funds still within Madrox from all our investors that can be deployed as needed for Sunderland AFC or indeed other ventures we are looking at.
“Madrox has a wider investor base than it did when it acquired Sunderland from Ellis Short and a greater capacity to access additional funding when needed.”
Q. The same statement said that Madrox had invested£25 million into the club in total. Again, does this include the FPP funds?
Madrox responded: “We can’ t comment on the individual financial arrangements due to confidentiality with all our investors.
“However, Madrox can confirm that in addition to the £5million deposit paid at completion we have injected into the club £9,075,000 in 18/19 and £11,375,000 in 19/20.”
(We have seen funds injected into the club in 2018/19 and 2019/20. This is before and after the financing deal was struck with the FPP group).
Q. As a result of the above, how much, at this stage, do Madrox believe they owe the club and how much remains owed to the FPP group?
Madrox responded: “Madrox believes and has made it clear that we will replace any parachute monies which they warned may be temporarily used.
“These will be replaced as needed, debt free and interest free as Stewart Donald has promised they would.
“Within the original purchase price of £39.6million it was believed that up to £25 million may be used in parachute payments to contribute to this figure.
“As of today, Madrox has invested funds so that this figure has reduced to just under £11.5million.
“Again, we advised this money would be replaced over time as per our business plan and this is exactly what is happening and will continue to happen until the figure is reducedto zero and the club benefits fully from these funds .”
Q. In response to the above answers, we asked for clarity: Does the ‘wider investor base’ mentioned refer to the FPP group, or are there further investors in Madrox and, by extension, Sunderland AFC?
Madrox responded: “Any investors in Madrox are protected by confidentiality agreements, but should any shareholdings alter the relevant notifications would be issued.”
Q. How exactly is Madrox replacing the funds, ‘debt and interest free’?
Ma dr ox responded :“There are a number of ways such as gifts/ donations or share issues to name but a few and as mentioned we have already placed over £10million back into the club since the write off .“This is without the club incur ring any debt or interest so not only can it be done, it is being done and with substantial funds.”
See tomorrow’s edition for more on Sartori’s involvment.