Bristol and West Project

Last updated : 27 January 2005 By Andy Burton
Back in the late summer of 2001, the new stadium was nearing completion. However, money was still required to get the work done, so that games could be moved from Dorchester back to the club’s own stadium. Longer-term finance could not be organised quickly, so the board decided to take on a short-term bridging loan of £280,000 from Bristol and West Finance. This was secured against the stadium, and because it was meant to be a short-term loan, the interest rate was a high one - 1.05% per month. However, it is clear from the loan agreement that it was intended by both sides that a longer-term loan would replace this loan as quickly as possible. The club was looking at a three to six month loan at the most.

Unfortunately, the TV agreement that had been reached by the Football League and ITV Digital was not producing the viewing figures that the latter had been hoping for; in fact the whole exercise was a bit of a disaster for ITV. Luckily for them, the agreement with the Football League gave ITV the right to pull out without penalty. That was a body blow for all clubs, all of whom lost a serious amount of extra income (the amount varied by the division the club was in), but for AFC Bournemouth the situation was worse. Suddenly all Football League clubs were a risk that financial institutions shunned. The chances of getting a longer-term loan to pay off the bridging loan were now zero – or rather less!

This wasn’t just bad news for the club; it was also bad news for Bristol and West Finance. Their business is essentially that of providing short-term loans and they did not relish the prospect of having their loan book cluttered by a loan that had every chance of becoming a long-term asset.

Worse was to follow for both sides. Because of cash flow pressures, the club was not always able to pay interest due on time – and that meant the interest rate rose to 1.55% per month. And Bristol and West Finance saw the loan climb from the original £280,000 to the present £310,000. As a commercial lender, that was not an attractive prospect.

They want the loan paid off, and the club wants to remove this high cost borrowing. Looks like a win-win situation, doesn’t it?

And it’s against this background that the Bristol and West Project has been born. The idea is a simple one. To have a fund raising exercise that is strictly targeted to paying off as much of the Bristol and West debt as is feasible. It has been agreed with the board that the most appropriate way of achieving this goal is to raise the money by way of a second issue of Loan Notes. There will be many similarities with the first issue, but there are some minor – but important – changes, which reflect the different requirements.

The interest that will be paid on the notes will be 6% per annum (before tax is deducted!) and this will be paid annually at the end of each year. The term of the notes will be 10 years, because it is unrealistic to expect the club to be in a position to repay them before this date (they can, of course, if they want to!!). The notes will be secured against the stadium; the reasoning behind this is that football supporters are much more likely to be happy to be without their money as long as they have football to watch. Should anything happen to the club that would permanently mean that football would no longer feature, then there is a very strong chance that investors would get their money back from a liquidator. No-one wants this to happen, but it could be a small comfort if it did!

The plan is to ask for pledges at this stage with a view to these pledges being honoured early in the New Year – but not too close to the celebrations. The advantage to the club is two fold. First a commercial creditor (and being commercial that means they will be less understanding if payments cannot be made on time) will be replaced by more tolerant creditors, who expect to be paid, but will probably have a touch more patience. Second, the interest saving would be a major boost to the club’s cash flow. At present, the annual interest cost is over £41,000; if penalty rates were charged for the whole year (anytime the club is behind on payments), the interest payable rises to nearly £63,000. If the whole amount was replaced with loan notes, then the yearly interest bill would fall to £18,600 – a saving of nearly £23,000 at normal rates every year, or more than £45,000 at penal rates.

Now it may well be that the whole amount is too much to hope for, but even a third paid off would make a major difference to the club’s costs. And that seems a very realistic minimum, given that we have raised more than £40,000 before the launch.

There is one draw back. To keep administration simple, the minimum purchase of loan notes will be £1,000 – and it would be more helpful still if a higher figure could be reached. However, it is virtually certain that the Community Mutual will set up a scheme whereby smaller amounts can be donated to the CM – solely for this purpose. The CM will get the loan note interest, but the donator won’t. More details of this scheme will be published when they have been thrashed out.

The scheme is being administrated by Ralph Beales and Nick Douch, and the point of contact for Exiles is Nick. You can phone him on 01442-824743 or contact him by e-mail on; loads of pledges would be nice, but if you have any queries at all, those would also be very welcome.