Understanding the Derby stadium impasse: community ownership, MSD loans and playing in another city

After months of implying he would not be a problem with the sale of Pride Park, Mel Morris now has the ultimate say in whether Derby County can enter a new era under Chris Kirchner.

On Thursday, the EFL released a statement saying: “A deal to de-administrate Derby County and bring it into the ownership of Mr Chris Kirchner is nearing completion,” citing the source and the adequacy of its funding have been approved.

But with the stadium still owned by Morris, the former chairman continues to influence the club’s future. In that statement, the EFL described the status of Pride Park as “the biggest hurdle to overcome”.

So, the athlete has clarified the state of affairs regarding Derby’s home ground and why Morris Kirchner’s bid could derail.

The problem began in 2018 when Morris sold Pride Park to another of his companies for £81million, fearing he would be fined by the EFL for breaching profit and sustainability rules. That sale saw Derby post a pre-tax profit of £14.6m for 2017-18, which has enabled an aggressive search for talent this summer. Manager Frank Lampard agreed loan deals with former club Chelsea for Mason Mount and Fikayo Tomori, and Derby completed the £5million permanent signing of Martyn Waghorn from Ipswich Town.

When the club failed to win promotion that season, Morris began to seek investment in the club. In January 2021, he said “four or five” serious investors had emerged from a pool of around 25, including MSD Holdings UK, the UK arm of US tech billionaire Michael Dell’s investment firm. Although MSD reportedly wanted to buy an interest in the club, it provided the club with a loan guaranteed against Pride Park in August 2020 in the wake of the COVID-19 pandemic.

Burnley, Southampton and Sunderland have also taken out multi-million pound loans to MSD or their senior partners, also mortgaging their stadiums in the process. As other lenders pulled out of football in response to the pandemic, MSD’s high-yield loans became one of the few alternatives to banks – while banks have traditionally offered much lower-interest lending, they are now increasingly wary of offering financing to football clubs. Of the four clubs, only Southampton disclosed the size of their borrowing from MSD, paying 9.14% interest on a £78.8m loan at £7.2m a year interest.

In January 2020, Quantuma, the club’s administrators, told supporters group Black & White Together that Morris is not currently charging rent for the stadium. Nonetheless, with Morris’s support and approval, MSD had continued to borrow money to cover costs, which were hedged against the stadium. Club accounts later confirmed the further loan was £3.5million, bringing the total owed to £24million. Before Morris suspended payments for Pride Park, the original agreement on the lease was an annual fee of around £1.1million.

With a huge debt to MSD, Morris wants to hand over the stadium to whoever takes the club out of administration.

Here is the dead end.

Kirchner’s offer, which is reportedly in the region of £25m-30m, would rise to a price that would not be profitable for a club relegated to League One from the Championship to buy the stadium. By way of comparison, League One Sunderland, which includes the 50,000-seat Stadium of Light, a full team of players and a Tier 1 academy, was recently valued at a maximum of £30m by football finance expert Kieran Maguire. Never mind in the league where Assem Allam sold Hull City to Turkish businessman Acun Ilicali for a similar price. With Morris valuing Pride Park at around £20m, the whole package would cost Kirchner nearly £50m.

Wigan Athletic found themselves in a similar situation in 2020 after former Hong Kong-based consortium Next Leader Fund placed the club under administration. Like Derby, Wigan could not overcome a points deduction and were relegated from the second to the third division. However, unlike Morris, the Next Leader Fund allowed its administrators, Begbies Traynor, to sell DW Stadium as part of the package for the club, a privilege Quantuma did not have. Morris has reportedly provided written confirmation giving a potential preferred bidder the first option to purchase Pride Park. However, since Kirchner wants to rent and not buy, there is no obvious solution to the stadium problem.

With the EFL needing a lease or ownership of a stadium to accommodate Kirchner’s bid to buy the club, talks have begun about possible alternatives.

A possible short-term solution is that Derby could move away from Pride Park until a deal between Morris and Kirchner is sorted out. With the heart of the East Midlands club being discussed, King Power Stadium in Leicester City or Meadow Lane, home of National League club Notts County. Another possible option is the bet365 stadium, home of Stoke City, although given the distance between the clubs it’s not an ideal option.

Moving out of Pride Park is seen as a last resort – and talks at this stage are tentative – but with a solution needed, finding a new short-term home isn’t out of the question.

While it might fulfill Kirchner’s immediate desire to secure a home for next season, a move to the city would be devastating for local businesses in Derby. Unlike when Coventry City spent time in Birmingham and Northampton, the city rely on the club for matchday income and employment. The Coventry Building Society Arena, then known as the Ricoh Arena, generated a steady income from events and top-flight rugby club Wasps RFC. If the football club gave up Pride Park, it would leave one of the city’s main attractions useless.

To keep Pride Park from gathering dust next season, Derby City Council officials are currently in talks with Morris about an offer to buy the stadium in exchange for a lease with Kirchner. To fund this option, the council would borrow from the Public Loans Works Board, a public corporation that makes loans from the National Loans Fund to public entities, including local governments. This is independent of council tax funding and could be a financially viable option provided the lease covers interest on the loan.

These processes usually take months and with Kirchner taking over tax responsibility for the club from Sunday, both sides have an immediate desire to speed up the process. Alvaston Councilor Alan Graves, the community where Pride Park resides, narrated the athlete he “would support any move to purchase the land to secure Derby County’s future.” Still, there are fears from some councillors, who believe it’s a tough sell to the people of Derby given the current cost of living crisis.

With differing views within City Hall, they could struggle to reach an agreement by the end of the month and delay Kirchner’s bid to buy the club. With the US businessman saying he wants to reach an agreement within the week, time is ticking to secure his takeover, with former Newcastle United owner Mike Ashley raring to go.

(Photo: Nathan Stirk/Getty Images)

About Natalee Broderick

Check Also

EPA Announces $65 Million in WIFIA Loans to Modernize Water Infrastructure in Multnomah County, Oregon

Funding from the Rockwood Water People’s Utility District and the City of Gresham will support …