Lord Ashcroft to cover shortfall until rights issue

3:27pm Wednesday 23rd December 2009

By Frank Smith

Lord Michael Ashcroft has offered to cover Watford’s cash shortfall until the proposed £7.5m rights issue is completed.

This afternoon a statement was released by the Hornets’ parent company Watford Leisure Plc confirming major shareholder Lord Ashcroft had stopped the club from going into administration on Monday by loaning the club the £4.93m it owed former chairman Jimmy Russo’s company Valley Grown Salads.

It also stated the board supported Fordwat’s proposal to underwrite a £7.5m rights issue.

On November 30, Watford Leisure announced more money needed to be found by December 22 to pay the club’s bills and although there was no reference to yesterday’s deadline in this afternoon’s statement, the Watford Observer understands Lord Ashcroft is willing to provide the cash needed until the rights issue is completed, which it is hoped will be by the end of January.

Lord Ashcroft’s company Fordwat, which holds a 37 per cent shareholding in Watford Leisure, paid VGS the £4.88m it was owed by Watford and around £50,000 in interest and legal costs, as previously agreed, on Monday.

The £4.93m was then loaned against the club on almost identical terms as the VGS agreement.

The interest rate will once again be 4.5 per cent plus Barclay’s base rate, the loan will be repayable on demand and the statement confirmed the Fordwat loan was expected to be secured against Vicarage Road Stadium in “due course”.

The Watford Observer understands an agreement had to be in place by 4pm on Monday after VGS contacted the High Court on Thursday to start administration proceedings, leaving the club 48 working hours to repay the money owed.

The statement confirmed: “The purpose of the Fordwat loan was to prevent the company being placed in administration by VGS.”

The club now have a £4.7m hole to fill before June and Watford Leisure stated more money need to be found by the end of January if the rights issue had not been resolved by then.

The club have moved to ease their immediate cash problems by using the money which has been raised by selling tickets to next summer’s Sir Elton John concert.

Former Watford chairman Sir Elton offered to hold the Vicarage Road concert next May to help raise money for player transfers and the club have assured that money will be “restored” once the rights issue is complete.

Today’s statement read: “The board of Watford Leisure estimates that the company now requires £4.7 million to cover its projected cash flow requirements for the period to 30 June 2010.

“As previously announced, the board supports a proposal from Fordwat to underwrite a £7.5 million rights issue of a debt instrument with either warrants or conversion rights, offered to all shareholders (“Rights Issue”).

“This proposal will take time to refine and put in place. As such the board has determined to utilise all available funds currently held by the company to cover the company’s working capital requirements until the end of January 2010.

“This includes the funds received from ticket sales from the “Playing for Players” concert to be held in June 2010 but with the expectation that these funds will be restored on completion of the rights issue.

“At the end of January further short term funding will be needed to cover working capital requirements until the rights issue can be finalised.

“Trading in Watford Leisure’s shares resumes on AIM with immediate effect.”

It ended by stating “further announcements will be made in due course” but we understand the club are unlikely to make any further comment today.