David Conn: Reynolds holds key to Darlington's £20m debt

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The saga unravels at Darlington Football Club, where the administrator David Field has provisionally declared debts of £20m - £14m run up by the former chairman George Reynolds, largely in building the 27,000 seater stadium he named after himself. And they have already set one record. Of all the football clubs which have gone into administration owing millions to their suppliers and services, Darlington has the largest unpaid debt to St John Ambulance. At a heroic £9,040.79, this is surely worth an award: a replica stretcher, perhaps.

St John Ambulance is a charity and its members tending to the sick and injured at matches are volunteers, but clubs are asked to pay towards expenses and equipment. At all the clubs in administration, St John are found lining up in long lists of unpaid creditors, but the previous highest was £5,475.50 owed by Bradford City, who, under the former chairman Geoffrey Richmond, went into administration in May 2002 owing £36m. Darlington has come close to doubling that amount

Reynolds, who was at the Reynolds Arena this week taking calls, told me he wasn't sure why the debt was so large:

"It's probably a whole season I didn't pay them," he said. "Thing is, I was putting everything into getting the stadium finished." The statement of Darlington's debts released by Field, of Field Wilson, shows all the familiar losers; local suppliers, like Bondgate, an electrical firm from Bishop Auckland owed over £24,000, £148,162 to Hall Construction, based in Ferryhill, County Durham; public bodies: Durham University, owed £10,035.68, the local police, with over £42,000 outstanding, gas, electricity, telephone, and everything else which makes a football club work.

"It isn't much, though, is it?" said Reynolds, of the list of 169 creditors. It is true that in the overblown scheme of things at Darlington, the unsecured creditors, who, excluding Reynolds, collectively owed £2m, including £461,000 claimed by the Inland Revenue and nearly £300,000 in VAT, are only a tenth of the estimated debts.

Mr Field said it was "probable" that he would take legal action against George Reynolds, who had, according to Field, signed a guarantee to meet Darlington's costs during the administration, but did not meet the £50,000 shortfall on the players' December wages. Instead, the costs will be met following last week's spectacularly successful celebrity match, played in front of 14,000 fans, which raised around £130,000. Reynolds said he had hoped to meet the costs but denied he had signed any guarantee.

The Sterling Consortium, individuals Melvyn Laughton, Sean Verity and Stewart Davies, who have lent money at high rates of interest to other clubs in trouble, loaned Reynolds £4m to finish his stadium, on which they have a mortgage. This means, according to Field, that Sterling will have to be satisfied in full or very substantially if one of several consortia interested is to take over the club. The Supporters Trust has been fundraising furiously to raise £250,000, and working with a consortium led by a local supporter and businessman, Mark Meynell. Tony Taylor, of the Supporters Trust, said: "We hope to put in money as part of the consortium to take over the club, earn a seat on the board and be part of running Darlington as a community and family club."

"We are working on the assumption," Mr Field said, "that unsecured creditors will accept 10p in the pound. That means we think an offer of around £6m - £4m for Sterling, around £2m for the other creditors - will be seriously considered."

That, however, may be an assumption too far, because George Reynolds himself is by far the biggest unsecured creditor. The administrator is working through the accounts to confirm how much Reynolds put into Darlington in loans, but the stadium has cost around £18m, and the £14m, which did not come from Sterling, has to have come from Reynolds. He is in no mood to take a tenth of what it cost him and walk away.

"Would you do that?" he said. "If your house was worth two hundred grand and you had a few court orders, would you walk away for 20 thousand?"

For any settlement to be accepted, the holders of 75 per cent of the debts have to agree to it. Reynolds has spent all his fortune on building the stadium, a 27,000-seat arena which many of the 3,000 crowd never wanted and consider a white elephant. His ego has been bruised by their lack of gratitude, which grew into fear and disdain after he made well-publicised visits to the homes of a couple of his critics and threatened to confront others in the same way. He complained this week that nobody helped him when he paid off the club's debts back in 1999 and built the stadium - "all I've got is a load of hassle" - and he didn't see why he should allow the club to be sold cheaply:

"There are three options: somebody can come and buy it outright, but they'll have to make a good offer. Two: they could buy the club and I keep hold of the stadium. Three: if they offer enough, I'll split the stadium 50-50 with them and I'll concentrate on developing it. But if there isn't a suitable offer, the other option is to close the club, and nobody wants that."

While Field was presenting the £20m bad news to creditors in Darlington last week, Reynolds himself was in Teesside County Court being publicly examined about his running of his own company, George Reynolds UK, as part of an investigation into GRUK's affairs by the company's liquidators, Deloitte & Touche. The company went bust on 1 May last year. Reynolds had sold the company's kitchen worktop business for £32m in 1998, then the chipboard side of it for £6.5m in February 2002, but he was never paid most of that and the company declared huge losses before it went into liquidation with debts of £4.7m.

Anthony de Garr Robinson, the barrister acting for Deloitte & Touche, challenged Reynolds on why he had loaned £6m from his company to the football club, which the company had then written off. He also asked why GRUK, the company, had bought 83 per cent control of Darlington for £666,066, but then apparently sold the shares to George Reynolds himself for only £1. "That is completely wrong," Reynolds said in court, "I will fetch my chequebook stubs."

The liquidators are examining whether there is a case that Reynolds left his company's creditors high and dry partly because he took money out of the company and spent it on Darlington. Reynolds said he was confused and "up a gum tree" when it came to figures. He agreed that he had used the company's money as if it was his, accepting: "We hadn't done it right on the paperwork."

The liquidators' investigations into GRUK's affairs are continuing, but Reynolds says he has nothing to fear. This week he told me that whatever money he took out of his company and put into Darlington - upwards of £6m according to the club's accounts - he had put back into the company himself: "I came out of that hearing with flying colours," he said, "I'm whiter than white."

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