City: the paradox

In Wales on Sunday yesterday, football finance expert Dr Bill Gerrard said we're bust like Leeds were , but former Cardiff Council leader Russell Goodway said the current situation is just a 'wobble' and fans should keep faith with Sam. Can both be right?

Well, possibly. Any accountant reading our accounts will rapidly tell you that we are spending above our income and without the stadium deal we are broke. In fact, that seems to be what the auditors themselves are saying. However, if our only debtor is Sam Hammam and/or his family, then it may be that the club could survive until a stadium is built.

Stay with me for a moment, if you think this sounds unlikely.

The debt due to Citibank fell due within 1 year. The £24 million of loan notes issued to pay off the bank are not payable till 2011. If the total debt is held by Sam Hammam or his family, which we do not know from the accounts, then if the club can get its outgoings down below its incoming revenues, it can probably survive on a cash basis for some time. It has even been suggested to me that the club could survive in administration, if Sam/his family hold the debt, as long as the club is generating cash. They would not want to call in their debt before the stadium is completed or another developer comes along who wants to make it happen and is attracted by the planning permission.

The stadium deal holds out promise for a good return ultimately because the planning permission is worth serious money. Once the current developer has delivered the required number of retailers, then it has been suggested that the alleged £16 million gap for the business plan will be found quickly because the stadium will provide the necessary return, with a 125 year lease that is effectively a freehold. This, I guess, is what Russell Goodway is hinting at when he says:

"There's some pretty powerful people behind the veil willing to sustain him if they believe the stadium project is going to get under way,"

"It's all about business confidence and the confidence of the fans."

The immediate problem that we have been through is the delay in the stadium start which has led to accelerating debt that is now out of hand, hence the need to rein in costs. (The approach of the filing date for City accounts may also have brought this into stark perspective).

This may make sense on a business basis. I've had to learn rather more about property development in Cardiff than I ever wanted to know. And this is about property development, not football, that's for sure.

However, none of this helps us as fans. To get the club's outgoings below its incoming revenue will still require player sales to reduce the wages bill and bring the debt down. The question then is how can Sam retain our confidence as fans? That is the missing element in what Russell Goodway says. To get costs under control Sam still has to sell players. How is he going to regain fans' confidence if and when that happens? That is the unanswered question.