Financial questions over sale of Priestfield

by business editor Trevor Sturgess

Gillingham Football Club chairman Paul Scally insists there is no need for fans to worry about the club's proposed purchase of Priestfield Stadium.

Supporters have been baffled by a special resolution calling on shareholders to back the sale by Mr Scally's company Priestfield Developments for £1,050,000 just three years after it bought the ground for nearly £10m.

The Bank of Scotland backed the deal in 2008 and it is assumed the bank have been closely involved in the latest plan.

Fans fear the deal could jeopardise the club's finances and want to know more about it. There has been speculation that an investor may be helping out the club.

However, Mr Scally declined to shed light on the proposal transaction.

He said today: "There is nothing in this to concern our fans, but the time for explanations is actually at the company's annual meeting, when the shareholders will have the opportunity to ask questions."

gills want to scrap meetings

in a separate move, the club controversially wants to scrap annual meetings.

it is asking shareholders to back a special resolution calling for the deletion of two rules “so as to remove the requirement for the company to hold annual general meetings.”

the proposal will fuel fears that the club’s affairs will become less transparent and the directors less accountable to shareholders.

no reason for the proposal has been given.

The surprise move, announced in a letter to shareholders, provoked a storm of speculation.

Alan Liptrott, a Gills supporter and founder of website Gillsconnect, said fans had been taken aback by the club's plan.

"We are trying to work out exactly what Scally's up to," he said.

He had spoken to several people who might know but said no one could come up with an answer.

"I think things are going on in the background that we're not being told about."

Gills marketing manager Murray Evans said Mr Scally would be fully explaining the situation to shareholders at the annual meeting.

A financial expert described it as "highly unusual" questioning why an asset would be sold for 10 per cent of its original price.

He even suggested it might be a "typo".

"I didn't know the property market had dropped that much," he said.

The proposal will be debated at the club's annual meeting on August 5.

Shareholders will be asked to back the resolution "to approve the proposed purchase of Priestfield Stadium for the sum of £1,050,000 from Priestfield Developments Limited".

Club chairman Paul Scally also owns Priestfield Developments which bought the ground in 2008 as part of a restructuring deal to ease the club's debt burden.

The ground was rented back to the club for an apparently nominal sum.

Scores of fans sent online comments. Some wondered whether Mr Scally had found an investor to clear most of the debt. Many were sceptical, fearing that it could damage the club.

One said: "If you sell a property for £10m and buy it back for £1m four years later, something odd is happening, and I'm afraid you don't need to be a Master in Economics to work that out."

Another wrote: "I am now deeply worried by this. What's going on Mr Chairman?"

The ground purchase by Priestfield Developments in 2008 was funded by a £10m loan from the Bank of Scotland which, according to the latest accounts, holds a charge over the property.

" didn't know the property market had dropped that much...” – financial expert

The company would not be able to sell the ground without the bank's agreement.

The expert said shareholders would need a lot more information about the proposal before backing it.

They should be told about any investment and whether the club was taking over any bank debt from the development company.

"It would be more usual for the asset to be sold at its open market value with BoS effectively funding the purchase, which allows Priestfield Developments to clear its own debt so that the cash goes around in a circle."

Shareholders will also want to know how the club is funding the £1m purchase when it made pre-tax losses of £463,000 in 2010.

Since then, it has spent a season in League 2, narrowly missing out on promotion last season.