In the Crewe match day programme Steve Waggott, Chief Executive of Coventry City wrote :
“Our first team playing budget is decided by the revenue we generate”.
The salary cap protocol may be a reality but its impact on the Sky Blues would have been significantly less if Joy Seppala had activated the Exclusivity Agreement which specifically gave CCFC first option on purchasing Arena Coventry Limited. This should have been done at the same time SISU acquired ownership of the football club in 2008. Seven years have passed by and not one credible market value offer has been made by Seppala to purchase ACL. She must take full blame for CCFC not receiving matchday and non-matchday revenue streams.
The deliberate withholding of rent and the move to Northampton was a strategy designed to financially distress ACL with a purpose of potentially acquiring that company cheaply via administration. Had this been achieved then ACL would have been replaced by AEG with potential job losses. An extract from Mr. Justice Higginbotham’s Approved Judgement document dated 30 June 2014 (Judicial Review Birmingham High Court 10-12 June 2014 Case Number CO/4432/2013 Section 131 (i) ) adequately explains:
The failure of CCFC/SISU to pay rent – and their refusal to consider paying any rent except on SISU’s terms – put the Council in an invidious commercial position. As it was intended to do, it placed ACL in considerable financial distress, compounded by the indications that CCFC/SISU were unwilling to pay any rent unless and until a commercial deal was struck on their terms, including a significant (at least 50%) share in ACL, and by SISU’s indications that they were fully prepared to put CCFC into administration or liquidation.
SISU continue their litigation strategy while the football club lurches closer to the abyss.
CCFC is in an extremely precarious position and its very existence is at stake. ARVO Master Fund Limited is not part of the ownership structure of Coventry City Football Club. Yet it will play a crucial role in defining the long term future of the Sky Blues. On 30 December 2013 ARVO registered a Debenture Charge against Otium Entertainment Group Limited (Coventry City Football Club) which effectively tied up all of the assets of that company.
The Coventry Telegraph interviewed Joy Seppala and published an article on 26 September 2013. The most telling comment made by her was:
“We have not taken a penny out of the club. I want return (profit) on my investment”.
According to the 2014 accounts the total debt owed to ARVO is £22.4m.
What happens if the ARVO loans are called in ?
Does CCFC possess assets to generate enough capital to pay the ARVO loans back and provide a profit?
Will Seppala use the Debenture to asset strip and sell what remains of CCFC?
Will she liquidate the football club?
Serious questions which require honest answers.
ARVO MASTER FUND LIMITED (Company Number CR-117352)
ARVO is a limited liability company incorporated under the laws of the Cayman Islands. Its registered office is 89 Nexus Way, Grand Cayman KY1 9007, Cayman Islands.
Joy Seppala and Dermot Coleman are directors of the company. This can be verified by the fact Coleman signed the 30/12/2013 Debenture (MR01) on behalf of ARVO and Seppala signed the 25/07/2013 Charge (MR01) on behalf of ARVO. Both documents are lodged with Companies House.
There are several companies which bear the ARVO name. In 2012 the Cayman Islands Monetary Authority listed three:
ARVO Fund, Limited (Licence 5624 dated 29 May 2002) – Registered Fund status.
ARVO Fund 2 Limited (Licence 12452 dated 1 January 2007) – Registered Fund status.
ARVO Master Fund Limited (Licence 616453 dated 20 March 2012) – Master Fund status.
Where a Registered Fund forms part of a master/feeder structure the master fund will need to register under the Cayman Islands Mutual Funds Law (Section 4.3). The following statement is taken from SISU Capital Limited Financial Statements for the year ended 31 March 2011:
SISU Capital Limited Partnership 2
The partnership was formed on 28 February 1998 to manage through its General Partner (SISU Capital Limited) the assets and liabilities of the SISU Capital Fund 2 and the ARVO Master Fund.
Here are some business dealings involving ARVO/SISU:
TXU EUROPE LIMITED
The Guardian newspaper reported on 20 November 2002 that TXU Europe Limited, one of Britains biggest power suppliers, had gone into administration, which could force the closure of the Drax power station in north Yorkshire and cause significant job losses. KPMG were appointed administrators/liquidators who submitted proposals for Company Voluntary Arrangements on 11 March 2005. Two creditors, ARVO/SISU and Unum Life Insurance Company of America, rejected the proposals and proceeded with litigation.
A KPMG letter dated 3 May 2005 states:
“The administrators/liquidators and their legal advisors consider that the applications made by Unum and SISU are without merit and will be vigorously opposed”.
The court case in August 2005 lasted ten days and was presided over by The Honourable Mr. Justice Warren. His approved judgement document was issued on 9 September and contained comments about the conduct/statements of the witnesses. Section 138 of the document specifically refers to Joy Seppala. Here are some of Justice Warren’s quotes:
“Ms Seppala was the least satisfactory of all the witnesses. In making my general comments I said that no-one was deliberately lying. But I fear Ms Seppala has a distorted recollection of some events.
“She is also prone to exaggerate – the Respondents would characterise it as lying, but I give her the benefit of the doubt on that”
“I totally reject her description of herself as naive. I am quite sure that she was closely involved in developments as a representative of SISU as a Committee Creditor. But she had many other business matters on her mind and when it came to producing her witness statement and giving her oral evidence, her recollection was not, I think, as accurate as she would like to make out”.
ARVO/SISU lost the case.
LUKOIL (Russian Oil Giant)
SISU/ARVO, holder of 1.3 million shares, were one of several minority shareholders in Chaparral Resources Incorporated. Lukoil’s proposed buyout of the minority shareholders had been marred by allegations of serious wrongdoing and fraud which came to light during litigation. This referred to Lukoil’s carefully planned strategy of depressing Chaparral stock in order to buy the publicly held shares at $5.80 well below fair value, which had been estimated at between $8 and $11. Litigation took place at the Court of Chancery of the State of Delaware, USA. Lukoil agreed to settle the litigation by paying over $36 million to the former Chaparral shareholders. However SISU/ARVO opted for an “appraisal right” payment which gave them approximately $1.80 per share.
LUPUS CAPITAL PLC
Lupus Capital PLC changed its name to Tyman PLC on 1 February 2013. The original company name implied it was a financial institution, when in fact it was an international building products business, supplying materials to the window manufacturing industry worldwide. In June 2009 SISU/ARVO held 5,206,366 five pence shares in Lupus, who confirmed shares issued prior to the name change were unaffected.
NETIA SA
On 1 March 2011 Netia telecommunications company announced that ARVO/SISU held 44,336,534 of their shares. Netia owns the second largest fixed-line network in Poland and is a leading provider of software solutions to enable efficient management and delivery of content to media platforms.
JURIDICA INVESTMENTS LIMITED
Juridica is a limited liability, closed-ended investment company registered in Guernsey. The company was admitted to the Alternative Investment Market on 21 December 2007 with a share issue which raised £80 million (£1 shares offered). Juridica provides strategic capital to the business community and the legal markets for corporate claims. ARVO/SISU made a CFD (Contract For Difference) transaction involving 3,936,695 shares on 3 November 2010. Effectively, CFD’s are financial derivatives which allow traders to take advantage of prices moving up or down. ARVO/SISU made another CFD transaction on 7 March 2013.
If Joy Seppala wins her litigation case against Coventry City Council or Wasps RFC, would she make a corporate claim for compensation through Juridica?
HCH&F HOLDINGS LIMITED
The company’s previous name was Holmes Place Health & Fitness Holdings Limited, a private limited company incorporated on 22 March 2005. HCH&F Holdings registered office is: 1 More London Place, London. Ernst & Young LLP were appointed liquidators of the company on 12 December 2013. ARVO/SISU held jointly 25,130,653 ordinary shares in the company.
ZINCOX RESOURCES (KOREA) LIMITED
ZincOx is a private limited company based in Bagshot, Surrey, and was incorporated on 18 March 2009. It specialises in the recycling of electric arc furnace dust for use in the manufacture of steel. It commenced operation of its Korean Recycling Plant 1 at Pohang, South Korea, in January 2012. The facility cost £70m. In October 2010 the Cleantech Magazine wrote:
Andrew Woollett has had a tough few years. Not only did the ZincOx Resources Executive Chairman have to endure a number of disappointments as he tried to launch his first waste zinc recycling facility, he also had to fight off an attempt by rebel shareholders to remove him and five of his colleagues, from the board earlier this year. The existing board won the vote easily at the general meeting, which was not even attended by the investors who had requisitioned the meeting.
On 7 February 2012 ARVO/SISU reduced their ordinary shareholding in ZincOx by 302,500 via a TR-1 transaction. The number of shares remaining was 3,442,083.
Was Joy Seppala one of the shareholders who tried to remove Andrew Woollett?
NIGERIAN BANKS INVESTMENT
On 19 December 2014 the New Black Magazine reported on Nigerian banks beginning to attract foreign investors:
To many people, Nigeria and credible banking are strange bedfellows given the extent to which the country’s reputation was damaged by the advanced fee fraud, commonly known as 419. So much so that most foreign governments regularly warn their citizens and businesses to desist from any dealing with Nigeria or its banks. Faced with pressure from foreign agencies, the Olusegun Obasanjo led government is introducing some reforms. These include the appointment of a fraud-czar and granting the country’s Central Bank greater freedom to sanitise the sector.
Merger talks between banks and efforts to attract potential foreign investors have led to feaverish activities in and outside the Nigerian Stock Exchange. The New York based Emerging Markets Management and the London based SISU Capital/ARVO Master Fund are some of the prominent overseas hedge-funds now investing in Nigerian banks. More than 60 banks have already formed various merger groups, while the rest have already reached or surpassed the US $190 million capital base stipulation.
The SISU/ARVO investment portfolio is diverse. How good or bad have those investments performed?
ADMINISTRATION OF COVENTRY CITY FOOTBALL CLUB LIMITED
The Statement of Administrator’s Proposals document dated 15 May 2013 confirms ARVO appointed Paul Appleton and Stephen Katz of David Rubin & Partners LLP, as Joint Administrators, under the terms of its security and pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986. This document also contains the following statement under Rule 2.33(2B) of the Insolvency rules 1986:
“By a letter of engagement between David Rubin & Partners LLP and ARVO, dated 19 March 2013, ARVO agreed to pay for our firm’s costs for assistance and advice on a prospective Administration of the Company(Coventry City Football Club Limited), together with the costs of Stephenson Harwood LLP and Macca Media Limited. These costs have been discharged from funds provided by SISU on behalf of ARVO”.
SISU have provided the funding but could ARVO recover the money paid via their Debenture charge against Otium?
If they can, will CCFC (Otium) ultimately bear the burden of those costs?
ARVO DEBENTURE 13 DECEMBER 2013
The debenture was prepared by Speechley Bircham LLP and submitted to Companies House on 3 January 2014. Here are some extracts:
Page 2 Introduction
Section A: The Lender (ARVO) has made a sterling denominated secured loan facility available to Coventry City Football Club Holdings Limited (the Borrower), pursuant to and subject to the terms and conditions of a loan agreement dated 19 December 2011 between the Borrower, Coventry City Football Club Limited (as guarantor) and the Lender (ARVO) (the Borrower Loan Agreement) and with the benefit of a debenture dated 19 March 2012 entered into by the Borrower in favour of the Lender (the CCH Debenture).
Section B: The Chargor (Otium) has acquired substantially all of the Borrower’s (CCFC Holdings) assets and requested the Lender (ARVO) to release the CCH Debenture to the extent required to permit such assets to be transferred from the Borrower (CCFC Holdings) to the Chargor (Otium).
Section C: As a condition to the Lender (ARVO) providing such release, the Chargor (Otium) agreed pursuant to a guarantee dated 30 July 2013 (the Guarantee) to provide a guarantee to the Lender (ARVO) of the Borrower’s payment obligations to the Lender under the Borrower Loan Agreement and to provide replacement security to the Lender (when requested by the Lender) to secure the Chargor’s obligations to the Lender under the Guarantee.
Section D: The Lender (ARVO) has now requested the Chargor (Otium) to provide additional security to the Lender to secure the Chargor’s obligations to the Lender under the Guarantee together with any other present or future obligations or liabilities of the Chargor (Otium) to the Lender and this debenture is being entered into by the Chargor and the Lender pursuant to that request.
Page 3 Definitions
“Administrator” means any administrator of the Chargor (Otium) appointed by the Lender (ARVO).
“Enforcement Event” means the occurrence of any demand for repayment under a Finance Document.
“Finance Document” means the Guarantee, the Charge over Shares, the Chargor Loan Agreement and any other document designated in writing as a Finance Document by the Chargor and the Lender.
“Secured Liabilities” means all present and future monies, debts, obligations and liabilities owed by the Chargor (Otium) to the Lender (ARVO), under or in connection with the Finance Documents or otherwise on any account howsoever arising, whether actual or contingent and whether owed jointly or severally , as principal or surety or in any other capacity whatsoever, together with all interest accruing on such monies and liabilities.
Page 7 Fixed Security
3.1.5 charges to the Lender (ARVO) by way of first fixed charge its interest in:
(a) all fittings, plant, equipment, machinery, tools, vehicles, furniture and other tangible movable property.Page 22 Miscellaneous
21.2 Continuing Security – This deed shall remain in full force and effect as a continuing security for the Secured Liabilities, despite any settlement of account, or intermediate payment, or other matter or thing, unless and until the Lender (ARVO) discharges this deed in writing.
Page 25 Schedule
Freehold or Leasehold Property
All that freehold land and buildings on the South East side of Leamington Road, Ryton-on-Dunsmore, Coventry and registered at the Land Registry with Title Number WK234099.
The Debenture is signed by Tim Fisher, director, Otium Entertainment Group and Dermot Coleman, director, ARVO Master Fund Limited. It takes charge of assets like office equipment, training equipment and all the land and buildings associated with the Ryton Training Ground. All these assets can be sold.
CCFC being in financial trouble and saddled with debentures is nothing new. Here is an extract from the book: One Man’s Vision – History of Coventry City Supporters Club 1920 to 2007:
The club faced almost certain bankruptcy in March 1922. Acting President David Cooke came to City’s rescue. Cooke was born in Coventry in 1865 and became a very successful tobacco merchant. He was elected to the CCFC Board in 1908. Cooke once said: “What money I possess, I have made in Coventry and if I can do anything to promote the interests of Coventry City Football Club, together with the recreation of men, I feel I should do it”.
During his long association with the Bantams, he donated £20,000 of his own money to the club he loved. He also donated a Daimler car and 1200 shares. In 1917 he became tenant of Highfield Road by paying three and a half years rent. He also paid the club’s expenses and deposit upon its election to the Football League in 1919. In March 1922 he cancelled the club’s unsecured liability owed to him amounting to £12,500 and handed back to the club 700 five shilling shares so they could be re-sold. He also cancelled £1335 worth of Debentures. The Midland Daily Telegraph commented on 11 March 1922:
“No greater incentive could be afforded than the magnificent spirit of sportsmanship displayed by that champion of the Bantams, David Cooke. What a sacrifice he has made to secure the success of the club he holds so dear at heart. What he has done has been with one aim, to retain the prestige and status of the club in the football world, without hope of reward, unless it be the unstinted gratitude of every follower of Coventry City. Searching the annals of English football, it is difficult to find a parallel, it is impossible, for not a record can be found of £14,000 being given by one gentleman, in order to save a club he has set his heart upon being successful. The debt of gratitude reaches such dimensions difficulty must be experienced in adequately expressing it”.
Cooke set a precedent. What chance of Joy Seppala doing the same? I think we all know the answer to that question.
CCFC’s fight to avoid dropping into the fourth tier of English football was a desperate one.
One which would pale into insignificance compared to the action required to save our club from going out of existence completely, should the ARVO loans be called in.
Come On The Old Five 