On 24th April 2002 Motherwell appointed Administrators to run the club. This allowed the company to "continue trading and formulate and prepare a company voluntary arrangement (CVA)". Below is an explanation of what this meant to the club's finances.
By April 2004 the people (creditors) who were owed money by Motherwell recognised they weren't going to get all the money they were owed. The total amount owed came to £9,111,896.
Two levels of creditors were agreed. The first were termed "preferential" and they got every penny they were owed. It is likely, but not expressly stated, that this was the Inland Revenue. They were given £71,957.
The second class of creditors were labelled "ordinary". Rather then getting the £9m or so they were owed they agreed to take 20p for every pound they were owed. This meant the claims reduced to £1,825,580.
The net outcome of all of this was that the owed amount dropped from the £9.1m to roughly £1.9m.
The original £9.1m was owed to a variety of people. This largest single person owed was John Boyle who had given total loans of £7.2m to the club. After him the next biggest bunch owed were the players. They were owed just under £1m. After that it was what was called "Trade". This essentially anyone who sold Motherwell something and had been promised payment. This would cover everything from other clubs who had sold players, to the local pie shop that had sold the club wares for match day. The "Trade" were collectively owed £556,366. The last group was the Tax and Social Security people, and they were owed just under £350,000.
John Boyle had his loans split in to two chunks. One was for £5.8m and this was lumped in with everyone else and deemed "ordinary". This became part of the debt that was to be paid off at 20p in the pound. The remaining £1.4m was deemed to be long-term debt and he would be paid for that as normal. The interest on that loan is at 5%.
The £5.8m Boyle had loaned has been reduced to under £1.2m by the 20p in the pound reduction. He has essentially written off £4.6m of the money Motherwell owed him. The other people who lost out, so the Trade and the Players have had their money reduced from about £1.5m to £300,000.
This whole exercise is clearly very good for the club. Boyle has essentially written off most of what he loaned the club, while at the same time getting everyone else to write off 80% of what they were owed.
There were other ways Boyle could have approached this. One is the way David Murray, and more recently the Lithuanian banks at Hearts have done it. They have converted their loans to their clubs in to shares in the business. Realistically this means they will only get their money back if/when their clubs are bought out. Doing this only reduced the debts the clubs owed to those who swapped their debt for shares. It made no difference to what other creditors were owed.
The graphs below shows the effect the write-offs had on the club debt. A poor, or steadily worsening position was transformed.
The second graph shows all the assets of the club, against all the liabilities of
the club. The figures again show that the club has been run prudently since the
horrors of 2003.
The difference this has made to the on-going position of the club is shown well on the explanation of interest payments.
Being in administration cost the club £407,000 in payments to accountants to run the club.
