Thursday 11 April 2013

Dunfermline ramifications

Further to last month's blog post Dunfermline on the Brink, the Court of Session has today confirmed that Dunfermline are in full administration.  The league table has now been updated to include the 15 point penalty Dunfermline were given by the SFL the day before yesterday.  Dunfermline face a further penalty of 10 points and a fine of £150,000 if they fail to exit administration by a Company Voluntary Agreement (CVA) by the start of next season.

First of all, is this fair? The SFL has no "points tariff", no fixed penalty (unlike the SPL) for clubs going into administration. Dunfermline are the fifth SFL club to enter administration, and only the second to suffer a points deduction - Morton and Clydebank in 2000 received no points penalty, nor did Livingston in 2009, while Dundee were docked 25 points in 2010.  Much is made of it being Dundee's second offence, but it was their first in the SFL, as they were in the SPL when they first went into administration in 2003.  The fact is, the SFL take breaches of rules very seriously, and have a record of issuing draconian punishments - when Accies were penalised 15 points in 2000 for failing to fulfil one fixture on time, it seemed excessive (I don't think I was biased, especially considering the context of Morton and Clydebank that season).  In this instance, a penalty of 10 to 15 points was widely predicted, but is it just?

It's hard to fix a penalty for this sort of thing.  It isn't "cheating" to manage your financial affairs badly, but it could be construed as a deliberate means of obtaining an unfair advantage. The added penalty for an administrative delay into next season is more difficult to understand, even more so the financial penalty ("you've spent beyond your means - here, have some more debt").  The same financial lack-of-logic applied to the fine Accies received in 2000. Bear in mind that if Dunfermline fail to achieve a CVA, and go into liquidation, further penalties may await them.

Second, what is the impact on Dunfermline, Accies, and the rest of the SFL?

Dunfermline are now favourites for the play-off place (I discount the possibility of their automatic relegation, as I can't believe Airdrie will pick up the nine points, at least, they would need.)  If they go down, it will impact on them financially, but if they stay up it's hard to see them competing effectively next season.  Further pain, in financial and footballing terms, awaits them, assuming they can survive at all (my bet is they will, but it's not a certainty at the moment).

As of today, Accies have avoided the play-offs, unless Dunfermline successfully appeal their points penalty.  That won't happen, judging by precedent.  Airdrie's inevitable relegation has been postponed, but surely not for long.  Dumbarton and Cowdenbeath's contest for the play-off place has been joined by a third club, and my guess is both of them will be saved at Dunfermline's expense.

It's sad to see these events overtake Dunfermline.  Even sadder is the knowledge that this will not be the last such instance.  We all know that many other Scottish clubs - such as Aberdeen, Dundee, Kilmarnock and Hearts - have been living beyond their means and have large debts, arguably unmanageable.  Football clubs rarely disappear altogether - see Soccernomics for a full discussion of this - and no Scottish club has done so since Third Lanark, nearly half a century ago, but this may be of little comfort in the times ahead.

16 comments:

  1. I still think league reconstruction is more than less likely so in terms of the impact on points deduction/play offs etc does it not mean that Dunfermline will stay in the First as will Airdrie? If thats the case then all they lose is league money at the end of the season.

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  2. Ian, you're right that reconstruction may impact on the consequences, but I'm not sure I share your confidence that it is "more than less likely" to happen, so I've based my calculations on the status quo. We'll see...

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  3. STV reporting that the SFA have severely censured Dunfermline for failing to pay Accies £6000 Scottish Cup gate money and they are banned from the competition until they pays us. Pretty good as long as they survive as I cant imagine they would want to be excluded from a potential money spinning competition.

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  4. I'm at a loss to understand how the SFA can/should influence the prioritisation of a failed company's debts. Clearly this works in Accies favour (in this instance, anyway), but why should we have any precedence over any other small business that may be owed a similar sum - or indeed any larger creditor? Some other unpaid supplier of Dunfermline could be going out of business, or laying off employees due to Dunfermline paying us, while they have to settle for a few pence in the pound. Or, alternatively, Dunfermline may be excluded from the Scottish Cup. I honestly wonder whether anyone within the games's governing body thinks through the implications of such penalties, or the context outside the world of football.

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  5. I would suspect that a competing creditor could challenge successfully a preference in favour of a football club which is not recognised in law.

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  6. Re Kilmarnock and Hearts, it would take them literally generations to trade their way out of debt, and so they continue to overspend to avoid the armageddon of relegation, which is where SPL2 comes in.

    Without SPL2, medium ranked clubs already heavily in debt will go under- which in turn will damage the quality of the SPL, and therefore adversely affect the top clubs. With it, it may still be too late.

    Ross County don't care because they have managed their finances well, and St Mirren likewise because they were rescued by their ground sale.

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  7. "I'm at a loss to understand how the SFA can/should influence the prioritisation of a failed company's debts. "

    I don't think they are Ken. What they have done is effectively said to the future owners of DAFC, who presumably have agreed a CVA with creditors and start off with a clean slate is, OK now you want to play in our competition then pay up. This is outside in a sense the administration process. I'm not even sure if it should be classified as a debt as Accies didn't supply goods or services. The 6k was ours from the beginning and DAFC stole it!!!!

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    1. I doubt the law would see it that way, Ian. Dunfermline sold tickets for the tie, and entered into a contract to share the net proceeds with us. The unsettled contract is a debt like any other, and the SFA's bid to ensure we get the full amount can only be fulfilled at the expense of other creditors. It's not fair, but non-payment of debts is not fair on all the other creditors either. I don't have a perfect solution, but I think the SFA (and Accies) should accept that we get whatever the CVA yields. By all means, Dunfermline should be punished, but by something like a year's ban from the Scottish Cup, not an indefinite ban that's designed to get them to pay us. That's circumvention of the law.

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    2. The football authorities effectively prioritised Rangers' debt by enforcing payments due to other football clubs. There seems to me to be a parallel in this case. Quite how other creditors feel about this can only be imagined. It is all pretty shameful and, to me, reflects very poorly on the whole football community.

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  8. "Ross County don't care because they have managed their finances well"

    Id love to know how much their Chairman is bankrolling them because if he stopped then I think they would be unable to sustain their current level. I'm not comparing them to Gretna as I agree they are well run I just don't believe they have the resources without that additional input. Kilmarnock on the other hand would be in deep doo doo if the banks came calling as their Chair as far as I am aware is not a millionaire. They seem to survive because then can service the debt which is secured against the ground and other assets such as their hotel.

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  9. "I still think league reconstruction is more than less likely"

    Not now, surely? SPL has voted against (10-2 for, but that = against), and the tone of both the SPL statement and Stewart Milne's interview on Sky seems to suggest the deal is now dead. I suppose it may resurface in some form, at some point, but as of now it looks less rather than more likely.

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    1. I personally believe that yesterday's vote was a huge mistake.

      St Mirren and Ross County must come out and publicly state the reasons why they each believed that voting for no change at all was the most appropriate option for the long term future of their club and the rest of Scottish football.

      Until they do so, many of us are left baffled as to what their masterplan for Scottish football looks like. Short term self interest won't sustain them as football clubs if the rest of Scottish football were to implode.

      It's also very disappointing that they both appear to have forgotten the years that they each spent in the lower divisions struggling to make ends meet while trying to develop a team that can challenge for promotion to the top league.

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    2. Alan, I don't think the onus is on St Mirreen and Ross County, both of whom issued statements explaining their positions before the vote. I'm more interested in why these proposals were an all-or-nothing, now-or-never package, and why the SPL has never explained this. For example, why can't we have financial redistribution or a single league body, without the 12-12-18 structure (which personally, I think is absurd). I think this is a topic for a whole new blog post...

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  10. I wonder why I never win the lottery!! Anyway I wonder if SPL 2 will raise its head

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  11. I don't see how it is avoidable. Th alternative is brutal financial cut backs or oblivion for most SFL 1 Clubs

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