Cod Almighty | Article
by Tony Butcher
8 June 2021
Who paid for John Fenty to take over Grimsby Town? Tony Butcher delves into the accounts and finds the answer is "not John Fenty"
In 2003 John Fenty took control of GTFC by "buying out" Dudley Ramsden. The method he chose was to replace loans from Ramsden (and himself) totalling £550,000 (together with a personal guarantee of £100,000 held by Ramsden) with a cash injection of £666,429. The Ramsden/Fenty loans had been provided to cover the immediate aftermath of ITV Digital's collapse.
The Fenty buy-out of Ramsden was funded legally in the form of a long-term "sponsorship" of Town by Five Star Fish Limited, paid in full and in advance. For Town this meant a debt of £650,000 was converted into cash income. All that income was included in the Town accounts for 2003.
In December 2004 John Fenty sold Five Star Fish without ensuring that the sponsorship was secured. The new owners immediately revoked the sponsorship, demanding the money back. John Fenty, rather than Town, paid the money back. In 2005 the club accounts noted that arrangements would need to be made to pay the money back without specifying how or who would do so.
In 2007 the club accounts revealed that Town would pay John Fenty pension contributions at the rate of £162,500 a year for four years. This was not included in the accounts as a liability, but a yearly overhead expense. Between 2008 and 2014 the full amount, £650,000, was paid into a pension by Town on behalf of John Fenty.
During the same period John Fenty loaned Town a net figure of £1,194,700 while between 2008 and 2019 the net figure for loans provided by John Fenty is £685,000
Chronology
2003: Fenty takes charge
In 2002-03 Town’s board was split between the Ramsden and Fenty/Furneaux factions. As set out by Mark Stilton in the The Fenty Years, Ramsden was manoeuvred out by John Fenty:
"The pair had a written agreement that they would fund the club equally to a "maximum total of £350,000" and would not use their shareholding to vote either off the board. By November, Fenty was ready to make his move. Having "sold" his shares to Rouse, the gentlemen's agreement on not voting off Ramsden no longer stood. Rouse - now the second highest shareholder - immediately requested that Ramsden (and Graves, who was seen as a "Ramsden man") left the board.
Fenty followed this up by giving Ramsden two options: hand over his shares for free to Fenty who would pay him back his £350,000 director's loan and £100,000 guarantee, or Fenty himself would walk and demand his own £300,000 loan back immediately. Ramsden relented and passed over his shareholding to Fenty. This gave Fenty 62,289 shares which along with those now owned by Rouse, put the two in a controlling position, with around 47 per cent of the shareholding."
The accounts for that season - up to 31 May 2003 - show the directors' loans decreased by £550,000 while "sponsorship" totalling £666,429 was received from Five Star Fish Limited, being a multi-year deal paid in full and advance. This "sponsorship" in effect removed both Fenty and Ramsden’s loans (and dealt with Ramsden’s guarantee) from the GTFC accounts. It also replaced a liability with an asset – income.
At this point the only issue regarding that sponsorship was for the shareholders of Five Star Fish Limited i.e. whether this was in their interests and value for money. As John Fenty was the overwhelming majority shareholder that was simply an issue for him. This was not a "benign" loan, but a disguised gift through a limited company.
It is not unusual in football for owners to mask financial support through inflated sponsorship deals with companies they own, or inflated ground purchases (Sheffield Wednesday, Derby County and Real Madrid are but three examples). As long as John Fenty owned Five Star Fish and it was solvent then this was a clever ruse benefitting GTFC financially. A debt had become an asset.
However...
2005: fixing a hole
In April 2004 John Fenty sold his shares in Five Star Fish Limited.
The new owners/shareholders of that company decided that this long term sponsorship (the vast majority of which had not yet actually kicked in/been used) was not in their interests and revoked the 'deal' - they wanted their money back for something that hadn't even happened yet, let alone working out what benefit the company got from such an inflated, unspecified, sponsorship for a fourth division football club.
In selling Five Star Fish Limited John Fenty had not secured this sponsorship as an irrevocable term within the sale agreement.
Thirteen months later, the GTFC accounts for the year ending 31 May 2005 reported (note 17, page 18) that the Five Star Fish Limited sponsorship had "lapsed" and would need to be repaid. These accounts do not include a corresponding quantified liability for this repayment, it is merely a note that this sum would need to be repaid:
"During 2003, as a direct consequence of the immediate financial problems caused by the collapse of ITV Digital, an agreement was entered into between Five Star Fish Limited and the company which resulted in the receipt of £650,000 in respect of advance sponsorship which was included in the company’s financial statements for that year. Following the sale of this business the advance sponsorship agreement has lapsed and it will be necessary to make arrangements for this sum to be repaid"
The accounts do not explicitly confirm how these moneys were repaid to Five Star Fish Limited but the inference from the 2007 accounts is that John Fenty had arranged for repayment himself and that GTFC was accepting that he was the substitute creditor - that GTFC now owed John Fenty £650,000.
The director loans account in 2005 and 2006 do not include an uplift reflecting the inclusion of this 'debt.'
2007: water into wine
The GTFC accounts for the year ending 31 May 2007 reported (at note 21, Page 23) that:
"As reported in previous years the company's finances at the time of the ITV Digital collapse required significant financial loans, which was provided through Five Star Fish Limited, which was at that time controlled by JS Fenty. Subsequent to this Mr Fenty sold his interests in Five Star Fish Limited and due to the club's inability to repay the loan it was converted into a sponsorship agreement, which has been disclosed in the accounts as a contingent liability in previous years. An agreement has been reached whereby this indebtedness of £650,000 will be repaid to J Fenty over a period of four years by way of pension contributions when the company is able to meet this commitment"
What had been income was now officially a debt to John Fenty. Rather than securing this 'advance' in the sale of Five Star Fish Limited, or utilising some of the proceeds of sale† to the benefit of GTFC, John Fenty decided he should be reimbursed in full. The "lapsed" sponsorship amounts to 4 per cent of his reported wealth as a result of selling Five Star Fish Limited.
The 2007 accounts are not consistent with the previous reports and accounts. The Five Star Fish Limited moneys were booked in as income (sponsorship) not as a liability (loans) during the period John Fenty owned that company (up to April 2004). It was the new owners who revoked this sponsorship - they did not convert it to sponsorship, it was already in the Town accounts as that. The Five Star Fish Limited sponsorship replaced director loans from John Fenty and Dudley Ramsden, which were the moneys used to support Town after ITV Digital collapsed.
The mechanism for repaying the sponsorship moneys received in advance was stated to be that GTFC would pay John Fenty pension contributions of £162,500 per year for four years. Thus what had started as income provided by a limited company owned by John Fenty as part of his scheme to remove Dudley Ramsden becomes a liability to John Fenty personally.
In further context this is the year that £573,796 was written off as wasted costs after the demise of the Great Coates new ground project.
After 2008: the gifts that keep on giving
Between 2008-2014 all £650,000 was paid to John Fenty in the form of "pension contributions". This means the 'debt' did not appear on the balance sheet, this is simply an outflow of money in a form that had 'tax efficient' personal benefits.
Additionally, in effect, any new loans after 2008 from John Fenty include recycled monies.
Between 2008 and 2020 director loans increased by a net figure of £685,000. The difference between the net DLA and the repayment to John Fenty is £35,000, which represent the amount introduced from 2008 when including the pension payments (see Figure 2).
Conclusion
John Fenty chose to purchase Town utilising funds provided to Town by Five Star Fish Limited in the form of corporate sponsorship. He then sold Five Star Fish without securing the on-going sponsorship. The new owners demanded these moneys back and John Fenty chose to reclaim the money from Town rather than personally take on the "lapsed" sponsorship or regard the transaction as a gift or cost of the sale of Five Star Fish.
The net effect was that Town ultimately funded the purchase of Town by John Fenty and these moneys were recycled within future director loans. Post 2008 (when the pension contributions were first paid) John Fenty's net contribution to GTFC, per the accounts, was £35,000.
Figure 1: GTFC Accounts 2000-2020
Figure 2: Net Contribution 2008-2020
†As a result of the sale of Five Star Fish Limited the directors recommended a final dividend to the shareholders totalling £21,602,905. On a pro rata basis John Fenty would be entitled to £18,449,565.20. That does not mean he received that amount in cash, only that it is the gross value of his interest in the proceeds of sale. It was widely reported that his net worth after the sale was £14m.