Yorkshire months away from administration after racism scandal
Yorkshire are just months away from being plunged into administration as the cricket racism scandal continues to engulf the club.
The county's own accounts warn that unless refinancing is in place soon the club will not be able to meet its debt repayment of £500,000 due in October to the trust owned by former chairman Colin Graves.
Yorkshire, according to sources, is “effectively trading insolvently” and is struggling to attract new investors concerned by the ongoing fall out from its racism charges. A verdict is expected next week but all parties have been told sanctions hearings will take place from April 17 to May 24, so the club will start the season not knowing its fate.
The club held its annual general meeting on Friday where Lord Kamelsh Patel will formally end his role as chairman after a 16-month reign that has seen the club payout £3.5 million in legal fees and severance payments to 16 employers sacked when he took over the club. It also includes a mammoth £734,283 spent on a whistleblowing hotline and governance reviews of the club.
Stephen Vaughan, the Yorkshire chief executive told the club’s annual general meeting that the club is not at risk: “We have just had our accounts signed off as a going concern. We have regular professional advice on the matter. People are rabble rousing and trying to cause trouble. We are not wrongfully trading.”
Telegraph Sport understands Graves and the Labour peer Lord Mann are working on separate attempts to put consortiums together to refinance the club’s debt. Interviews for the chairman’s role begin next week with interim chair Dame Tanni Grey-Thompson standing in while a permanent appointment is made.
Next year the Graves' Trust's entire £14.9 million loan to the club matures and it is understood attempts to refinance that debt have so far failed although the club told Telegraph Sport it is working “with a number of potential sources of finance” to solve its problems.
“To put it in to plain financial language the report and accounts statement of 2022 says that without a refinancing of its debts or other additional funding the club will not currently be able to meet its liabilities as they fall due in the foreseeable future’ effectively means that YCCC are trading insolvently,” said Andrew Umbers, partner at Oakwell Sports Advisory.
In December the club appointed FRP Advisory, corporate refinancing and restructuring specialists, to attract £20 million of new investment. FRP were appointed as administrators of Wasps rugby union club when it went bust last year with Stephen Vaughan, now chief executive of Yorkshire, in charge.
A 21-page document by FRP and Yorkshire circulated to potential investors, and seen by Telegraph Sport, details how the club plans to raise £20 million which comprises of £15 million to pay off the Graves Trust and £5 million of working capital to assist Yorkshire to grow its business with the hosting of rock concerts for the first time at Headingley part of the club’s future plans.
“According to Oakwell, this (£20m) represents a 67 per cent loan to value,” said Umbers. “If they can’t refinance, what happens? Administration? Theoretically, it seems inevitable because this is financially much larger than the ECB bail out that happened with Durham in 2016. Ironically, it will be up to the Colin Graves Trust that has the first charge over all the assets of Yorkshire.”
Oakwell employed Graves as an advisor in 2021 when he stood down as chair of the England & Wales Cricket Board, although he no longer has any involvement with the company. Oakwell has in the past urged the ECB to sell stakes in the Hundred to private equity companies to raise revenue and advised on £1bn of deals in rugby union.
Yorkshire's plight echoes Wasps and Worcester rugby clubs, which have both gone into administration in recent months. Wasps could not refinance their retail bond of £36 million or grow revenue, the club spiraled into administration.
“Oakwell estimates that premier league rugby clubs have debts of around £270 million,” Umbers said. “Of this approximately £100 million is owed to the government as part of the winter and spring covid bail out programmes in sport. And the remainder, about £170 million, are shareholder loans and other forms of debt. The net debt of first-class counties stands at about £145m.
“Like Wasps or Worcester which were very dependent on central revenue distributions from Premiership Rugby, so are the first-class counties from the ECB. Yorkshire, for example, relies on around 30 percent of its revenues from the ECB.
“The ECB, in turn, has agreed its broadcasting revenues until 2028 at the same levels as the previous cycle. Indeed, ECB future revenues, at around £300 million, are likely to be flat moving forwards in Oakwell’s opinion. Notwithstanding immense inflation on international players, and indirect costs of labour, we would not expect ECB distributions to the counties to be anything other than flat over the next four years.”
Yorkshire responded in a statement: “Our 2022 accounts set out the financial position of the club in standard accounting language, in similar terms to our 2021 accounts. Working alongside professional advisers, the board is currently considering financing options that will address both the short and long-term funding needs of the club.
"As part of that process, the club has approached prospective lenders, and has commissioned its advisers to assist in taking the transaction to the lending market in order to access the widest possible pool of potential loan capital. This work is continuing, with a number of potential sources of finance and active conversations being undertaken, to lay the foundations for the club not just to survive, but thrive in the long term."
New investors may see cricket as a toxic asset
By Nick Hoult
It was down towards the East Stand at Headingley in 2019 that Ben Stokes struck the cut shot that brought a glorious end to the greatest innings in Ashes history.
On Friday, the Long Room in that East Stand will host the club’s annual general meeting when Lord Patel will formally stand down as chairman after one of the most tumultuous periods in the club’s history, and a fight for the soul of Yorkshire will begin in earnest as rivals line up to lead the club into the future.
As things stand, that future is bleak. The club is desperate to refinance its £15 millions debt to the Colin Graves family trust. If it does not meet a £500,000 repayment this October it will face administration. Next year the club has to settle the rest of its debt – £14.5 million – to the Colin Graves family trust.
The Trust has first charge over all of Yorkshire’s assets if it does not honour its repayments. Patel leaves the club having overseen losses of £3.5 million in payoffs and legal fees after the sacking of 16 members of staff. It also includes an eye-watering £734,283 spent on a whistleblowing hotline and governance reviews of the club.
Patel is not expected to be at the AGM in person, instead Baroness Tanni Grey-Thompson as interim chair will lead what could be a stormy meeting with members angry about the financial state of the club.
As things stand, the AGM will be held with a verdict from the Rafiq disciplinary case hanging over the club and likely to be delivered next week.
So far it is understood attempts to attract new investors willing to pay off the debt to the Colin Graves Trust by the financial specialists recruited by Yorkshire, FRP Advisory, have not borne fruit. Individuals in Dubai and India have been approached but turned down the chance to invest. It is understood one consortium is close to reaching around £10m in financing, still a long way short of the £20m the club are seeking.
The club has until October to find the money but in reality will have to declare whether or not it has been successful by July to leave time for legal checks and due diligence.
It is only the £4 million income from this summer’s Ashes Test that has kept the club afloat. But next year Headingley misses out on an England Test and that is when it is due to repay the £15m to the Graves Trust.
The Labour peer Lord Mann is one of several individuals trying to bring together a consortium to invest and Graves too is keen on returning as chairman, bringing with him new investors.
Interviews for the new chair role are expected to start in the next couple of weeks with around six candidates on the shortlist with London based headhunters Perrett Laver reading the recruitment process.
Potential investors have been put off by the racism scandal. There is also the unknown element of an outstanding legal case against the club by Wayne Morton, the club’s former head of sports science, who is suing them for £500,000 for breach of contract in the High Court following the abrupt sacking of the club’s coaching and medical staff. Yorkshire are contesting the claim.
The club is also awaiting the outcome of disciplinary proceedings after pleading guilty at the recent racism hearings. The Cricket Disciplinary Commission can levy fines and points deductions but does not have the power to strip Headingley of international status (only the ECB can do that). Yorkshire have set aside £200,000 to cover CDC costs.
An independent game-wide review into racism and discrimination in cricket is also due to reveal its findings imminently, complicating the search for new investors who may see cricket as a toxic sport at the moment.
The club could seek mezzanine debt refinancing, a combination of handing over equity and loan in return for investment, but the interest rates payable would rocket to between 10-15 percent of the 4.75 Yorkshire currently pays the Graves trust. All profits would be wiped out.
Yorkshire does not have a Test match in 2024 or 2027 and 2028, which will put a serious dent in revenues. The ECB is said to currently pay around £550,000 in compensation to counties in fallow Test years, but it is not known whether this figure is subject to negotiations with the board as £1m is stated in the FRP document.
The FRP prospectus reveals the club brought in £4m in advance Ashes ticket sales, makes around £400,000 from the Roses Blast match but negligible income from all other domestic cricket. The club receives £1.5 million from the ECB annual dividend to the counties, £1.3 million for the Hundred plus £85,000 staging fee for each of the Hundred matches at Headingley and were paid around £700,000 last year in England player appearances by homegrown cricketers Joe Root, Harry Brook, Jonny Bairstow and Adil Rashid.
The FRP document says the “commercial side” of the club is “underdeveloped” and outlines the club’s plan to host concerts starting with two in 2024 and rising to eight in 2027 bringing in around £250,000 per gig but the club faces a fight for permission to become a host venue for outside music events and possible objections from local residents.
The FRP document states that “income will be flat from international cricket” highlighting how exposed counties are to the fortunes of Test and white ball cricket, which is under threat from franchise tournaments.
The club is hopeful of raising money through a new naming rights sponsor to Headingley, which they state in the FRP document will bring in another £800,000 revenue. It also talks of blue sky projects such as hosting a mini IPL tournament, although the BCCI are yet to show any serious interest in staging matches in England.
A lot has happened since Stokes played that cut shot. Headingley will host another Ashes Test in July. A match as glorious as that one in 2019 would boost investment potential. ECB sources are confident the club can be saved and put back on its feet. But another difficult summer beckons this time with the club’s hollowed-out finances the worry.