Tottenham board split by plan to raise fresh funds

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The Independent Online

Plans to raise extra cash to buy players have split the Tottenham Hotspur board and raised the possibility of the club being taken private, it emerged yesterday.

Spurs, tired of living in the shadows of north London rivals Arsenal, has been trying to put together a fund-raising for at least three months, but its chairman, Daniel Levy, admitted earlier this week the plans had been put on hold.

Among possibilities discussed by the board was a convertible bond issue that would have been underwritten by Enic, the sports investment business run by Mr Levy.

The figure of £15m was suggested, with Enic picking up the entitlements of other investors reluctant to put up more cash given the current adverse sentiment towards football businesses.

Whatever the terms for converting the bonds into shares, Enic would inevitably acquire a powerful lever for ultimately making a full bid for the company. Enic already holds 29.9 per cent of Tottenham Hotspur, below the 30 per cent threshold the Takeover Code requires for an offer to buy out all other shareholders.

Enic took its stake up from 3 per cent to its present level three years ago when it bought out former chairman Sir Alan Sugar. It paid 61.5p a share at that time, way above the present stock market valuation of 25p, but would not be obliged to make an offer at the higher level since more than 12 months have elapsed. Sources are reluctant to reveal what went on in the boardroom before the idea of a bond issue was shelved, but it is likely that at least some of the directors other than Mr Levy baulked at allowing Enic even greater control of the club.

The issue may have contributed to the departure of finance director, Paul Viner, last week and to the delay in presenting annual results, which were finally published on Monday just before the stock exchange deadline. Mr Viner was immediately replaced by Matthew Collecott, former finance director of Enic.

Spurs also considered raising money by issuing shares to new and existing shareholders. Apart from paying for players, it would have provided long-term working capital to replace existing short-term funding. A share issue would have improved the balance sheet, offsetting a decrease in net assets and an increase in net debt. But Mr Levy said: "Even without the market turmoil of recent years, it is not surprising that new equity issues in our sector would be unlikely to find favour among financial institutions."

The rise in the share price from a low of 17p in June makes a rights issue more attractive but it would have to be at a deep discount.

He avoided ruling out some form of fund-raising. "We will continue to explore appropriate options," he said.

Spurs reported a pre-tax loss of £7m last season. Net debt rose from £7.6m to £10.6m.