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Sevco’s European License Issue Hurtles Them Towards Extinction

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Yesterday I wrote about the Sevco European licence issue, after The Daily Record had flagged it. I knew there would be a backlash, both to the Internet Bampots take on it, as well as the “SFA source”  and it didn’t take long before Sevco’s buddies in the mainstream media had been drafted to do spin control.

STV produced an article explaining why a European ban won’t happen … at least not next season.

Let’s split the article into two parts.

For the first, STV seems to think that the license for next season is fine, and that UEFA will only start to take action the following one.

Okay.

Let’s say they are right, and give STV the benefit of a Very Big Doubt here.

Let’s say the way UEFA regulations work, perhaps this license will simply be waived through, although the club is in breach of the requirements and was last season as well. Let’s surmise that UEFA really does have a system so backward that they will allow a breach to stand for a whole year before they do anything about it.

Furthermore, let’s agree with the second part of STV’s article, that when the disciplinary procedures start that the club will get something other than a ban, a big fine, something like that. The best case scenario, in other words, in which Sevco will not be banned next season or even the one after that.

Let’s say it’s true.

(And neither of those things is true … E-Tims has, this morning, torpedoed both of them with an astounding rebuttal piece, which you can read here.)

Even if STV’s writer is correct … has he thought this through?

Because I have and UEFA’s regulatory committee is required to.

Sevco is screwed either way.

First, when UEFA gets them in front of the Financial Control Committee they will, as I’ve said, ask for a business plan, amongst other things. The SFA is quite willing, as we all know, to allow Sevco to produce vague and inconsistent nonsense for their own licensing purposes, but UEFA will take a harder line.

The example STV mentioned – to make Sevconites feel better – was Galatassary, as if what happened to that club was a minor blip. They violated FFP and were initially fined, in the region of £200,000. But UEFA didn’t stop at a fine. They gave the club financial targets they had to hit the following year. When they didn’t the ban followed. On top of that they were placed under severe financial restrictions in domestic spending, to run concurrent with their ban.

It wasn’t exactly a slap on the wrist.

Sevco is notoriously bad at hitting targets. They would blow past UEFA’s number in no time at all, and offer the usual vague and soft excuses for it, and UEFA would not be listening. Their answer will be the same over and over again; “Spend less money.”

Sevco is caught here.

Let’s do Big Picture for a second.

If you watched their game last night, you’ll know that they were beaten, easily, by a Hearts side whose manager isn’t even committed to the cause. They are in third place right now, and fourth placed Aberdeen have two games in hand.

They face Aberdeen next, and then Hearts again.

Following that, they have us before the month ends.

It’s not inconceivable that their chances of qualifying for Europe will rest somewhere between slim and none before the New Year.

They have two choices, should they be faced with such a calamity; to back Warburton or sack him.

Either way, it’s going to cost them. A lot.

If they fire him they need to pay him off, and a new manager will have to get funds for the team. An entire team, as none of the dreck out on the park last night is going to do at all.

As I said on Facebook, it really is something hearing commentators with a love of Ibrox trying to sound excited about players from Accrington Stanley. Even commentators on Accrington Stanley games don’t get that animated.

How ironic it would be if players of that calibre are what they risked a European license to sign.

So, any new boss would have to spend money, at a time when there’s none.

Warburton himself can’t be trusted to get the current team to a European place, so he’ll need to sign more players in order to give the club the best chance of getting there, and all the while, UEFA will be watching.

The license problem has already been flagged, so if Sevco continues to spend recklessly you know what message that would send.

But let’s look closer.

Say Sevco spends the money, and gets to Europe.

Say UEFA grants them the license with the caveats mentioned above; that the club submits a detailed plan and meets targets for financial projections, as Galatassary were meant to. With those targets in mind, how are they supposed to assemble a team capable of making even a token run?

They will be unseeded; that means their chances of getting through even the early rounds won’t be great.

With their present team you would bet on just about any continental side taking five off them.

Then it becomes a juggling contest; do they spend what’s needed to get past the early rounds, if they can, and risk the full-on European ban? Without European football income they’d have spent a fortune signing players who’s wage costs they’d have to meet … without European football.

Even if they are allowed in the competition, UEFA’s financial targets hamstring them from ever being able to build a competitive team.

And if they risk it anyway, hoping that the European income boosts finances enough to get over the FFP line and then get knocked out early …. catastrophe. A rising wage bill, soaring costs and the inevitable European ban on top of it, like out-of-date icing on a cake gone bad.

That’s the sort of thing that pushes clubs into administration and liquidation in short order.

STV thinks this can be resolved with “a share issue” or some vague scenario where the directors currently owed convert their debts to “gifts.”

What an idiotic misunderstanding of the intent behind FFP rules.

First, what FFP allows for is not a share issue per se, but a debt switcheroony which would allow their “losses” to reach £25 million just so long as that debt was serviced by an equity agreement.

Let me explain to the layperson what my understanding of that is.

FFP regulations are designed explicitly to prevent sugar daddy owners from bankrolling teams.

The “soft loans” option – and the “gift” option with it – which Sevco is riding right now is precisely the kind of thing the Financial Fair Play rules were created to prevent.

Think about that, for a second.

This is why I’ve flagged this issue over and over again, and why Aberdeen mentioned FFP in their accounts and Hearts have made it into a public matter with their own recent announcements.

UEFA allows a club to make losses of £4.26 million before it’s in breach of FFP guidelines; the exception, where they allow that £25 million over three years, is where wealthy individuals connected to the clubs “invest” cash in return for shares.

Sevco is £18 million in hock to directors already.

If every penny of that debt was converted to shares – meaning those who are owed it would be willing to write the cash off – the current shares held by everyone else would be wiped out overnight.

Furthermore, something else appears to have escaped STV’s consideration.

Sevco is failing FFP by over £11 million.

They couldn’t even convert half that debt to equity without it radically, and permanently, altering the structure of the club. Bear in mind that the Three Bears, and King himself, have deliberately evaded “concert party” regulations which would force them to make an offer for every available share in the company because they’d reach 30%. If they tried the debt for equity switcheroony it would end that illusion in one go.

But even if the debt for equity switch was a viable strategy, and the club was able to convince its shareholders to liquidate their own holdings, it’s a one shot deal. It annihilates their chances of getting “inward investment”, the consequences of which would mount up like snowdrifts.

It wouldn’t even work as a short-term solution; it’s a sticking plaster on the proverbial broken arm.

This club has no concept of financial sanity.

If someone stuck £30 million into the club tomorrow, for free, and even if UEFA counted it as income and allowed it to change the FFP equation, they would be skint again in two years.

Some have expressed concern that the SFA will, in the final analysis, ignore Sevco’s non-compliance and will make excuses to UEFA on their behalf.

It doesn’t work that way, but let’s say that it did.

Let’s say the SFA had the ultimate say on what happened here.

With Resolution 12 still reverberating through officialdom, with other clubs watching, with Aberdeen and Hearts already putting their own compliance with FFP in their account statements, and Celtic on alert and on the case the blazers at Hampden will be forced to play with a straight bat whether they want to or not.

That’s the beauty of all this attention we give them.

The SFA will give UEFA notice that Sevco does not meet the criteria.

They have to.

There’s no choice here with everyone watching.

UEFA will ask what the club intends to do to remedy the situation, and at the very least will impose targets for Sevco to meet, if they don’t decide the business plan doesn’t stack up and bans them outright. Sevco will then have to hit those targets or not qualify the following year.

In the here and now, that kills any chance they have of assembling a team which can mount any realistic challenge for the league or get them beyond even the very early stages of the Europa League, defeating the whole point of the exercise.

This would all be public information, a year in advance, so UEFA’s enforced austerity couldn’t fail to have an impact on season tickets prices and sales.

Sevco can try to ameliorate the damage with a share issue, if they can squeeze one past an AGM. Don’t bet on that either; even Blue Pitch Holdings might suddenly re-discover an interest in the club if that happened, and seek to have their voting ban over-turned.

Even if they got the share issue through and it was a modest success – about the best the club can hope for – that would bring in funds and may put them in the “profit” column for a year. Over a three year rolling term I wouldn’t bet on that helping them either.

This is as bad as it gets for them and it was inevitable too.

One way or another, UEFA’s FFP regulations were always going to come into play here. The whole King “plan” has been based on a false prospectus right from the start, and the Bampots have been saying it all along.

That the SFA has never voluntarily adopted the UEFA standard – as many of us have been urging the clubs force them to do – is all that’s kept the illusion going this long. But that illusion is almost at an end. UEFA’s regulations force this club to confront hard choices, no matter how much the press and the governing body may want to shield them from those.

STV can spin this however they want.

Europe will not save Sevco.

Chasing it might be what finally kills them.

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