We’ve kept our heads above water. Should Gold and Sullivan do more?

Our owners deferred their interest payments but why not convert the debt to shares?

West Ham co-owners David Sullivan (top) and David Gold (face shield) at the EPL match West Ham United v Burnley, at the London Stadium, London, UK on 16th January, 2021. English Premier League matches are still being played behind closed doors because of the current COVID-19 Coronavirus pandemic, and government social distancing/lockdown restrictions.

Last month West Ham released accounts for the financial year ending 31 May 2020.

Their publication was conveniently sandwiched between the announcement that Mark Noble had signed a new deal and is leaving the club at the end of next season, and confirmation that popular goalkeeper Lukasz Fabianksi had also signed a one-year contract extension.

Coincidence? No. An age old PR tactic used to ensure other West Ham headlines were more prominent that week. And on the whole it worked.

The 19-20 accounts include the tail end of an ‘unprecedented’ campaign in which the club finished 16th (not so unprecedented) and – like everyone else – saw their finances significantly impacted by COVID-19 which caused the season to be paused until the current financial year.

I want to make clear West Ham’s decision not to furlough staff or reduce their wages should be applauded, and I was proud as punch of my club’s actions when some of their peers – including Tottenham and Liverpool – at- tempted shameless money grabs before embarrassing U-turns.

The accounts’ headline figures show the club’s pre-tax loss increased from £28m to £65m, and revenue dropped £51m (27%) from £191m to £140m.

This was offset by profit on player sales rising £12m to £25m and expenses falling £2m.

West Ham’s wage bill fell £9m (6%) from £136m to £127m thanks to ‘significant’ Covid-related player salary deferrals. But the wage bill will increase accordingly to cover those this financial year. And Moyes, Karren Brady and financial director Andy Mollett also took temporary 30 per cent pay cuts last summer while no games were being played.

Before we get to the annual bone of contention – Gold and Sullivan taking just shy of £2m in interest out of the club each year – let’s hear from renowned football finance expert David Bick.

Having previously advised several top flight clubs on financial matters – including Manchester United – we were delighted to have him on our We Are West Ham podcast last month.

And asked how Gold and Sullivan have handled the pandemic, he said: ‘No better or worse than other clubs. I wouldn’t go out of my way to criticise them for the way they’ve run the club financially in the circumstances.’

Good stuff. Anyway, back to the pair taking money out of the club that they don’t have to every 12 months.

The total shareholder debt amount for 19-20 fell £1m to £53.5m after Gold was repaid £1m in August 2019.

To be clear, that £53.5m is money lent to West Ham United by its main shareholders David Sullivan, David Gold and Albert Tripp Smith.

Of the £53.5m, £44m is Gold and Sullivan’s money with the remaining £9.5m owed to Smith. Only Gold and Sullivan – reportedly worth £450m and in excess of £1billion respectively – charge interest.

You know, the ones who regularly remind fans they are not paid a salary by West Ham.

The rate is four per cent, and Smith’s is interest free. And the 19-20 accounts showed £1.93m interest payable on shareholder loans in the 12 month period. I wouldn’t mind not being paid a salary like that.

In light of the pandemic, Sullivan and Gold deferred their 2020 interest payment. Deferred. Didn’t write it off as the club was having a tough time. Just deferred it.

But they have reportedly trousered around £18m in interest since buying the club so they can probably afford to wait. This is in sharp contrast to more benevolent Premier League club owners, who often provide loans interest-free and convert debt to equity.

Gold and Sullivan’s money is due to be repaid on January 1, 2024 – so the loans will likely be accruing interest until then. But that date can – and has been in the past – be easily pushed back which means the interest accrual is potentially never ending.

There is much confusion surrounding this issue so I asked Bick outright. Would it be easy for Gold and Sullivan to either make the loans interest free or convert the £44m to shares so they stop taking £2m in interest out of our football club each year?

He said: ‘You’ve hit the nail on the head. The straightforward answer to that is yes, it is easy.

‘What has happened quite often when new owners have bought a club, they put a lot of the money in as debt rather than as shares and there’s all sorts of advantages to doing that.

‘And then a number of these owners – like Chelsea’s Roman Abramovich – have converted the debt to shares so that loan is no longer technically payable and the debt is not there anymore. It’s a big boost to the club’s finances.’

Why don’t Gold and Sullivan do that then? Surely it would be a huge PR win in a battle they are certainly losing with fans.

And the ‘We don’t take a salary’ line would carry a bit more clout too.

Bick added: ‘Now that’s up to Gold and Sullivan. This has been the trend at other clubs and it would be very welcome if it hap- pened at West Ham. And the two Davids would get a big tick in the box if they converted the shares.

‘But who knows, it goes to motive. Put yourself in their shoes, you’ve put £44m in cash into the club, normally you put your money anywhere else you expect to get a return out of it. Right now, they’re getting a four per cent return.

‘But you’re not going to pull the wool over people’s eyes anymore. I’m not saying they intentionally do that. But you have to disclose certain things in accounts.

‘And it clearly isn’t sensible from any perspective to go on about not taking a salary when you’re taking nearly £2m in cash out every year in interest payments.

‘So if they’re not going to do anything about that, they’re probably better off saying nothing.’

My thoughts exactly.

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