After months of suggesting he wouldn’t be a problem in the sale of Pride Park, Mel Morris has emerged with the decisive word on whether Derby County can move into a new era under Chris Kirchner.
On Thursday, the EFL issued a statement saying that “an agreement to remove Derby County from the administration and ownership of Mr. Chris Kirchner is nearing completion,” with the source’s approval and sufficiency of his financing.
But with the stadium still under Morris’s ownership, the former chairman continues to influence the future of the club. In that statement, the EFL described the state of Pride Park as “the biggest hurdle to overcome”.
So, the athletic has clarified the state of the game regarding Derby’s home stadium and why Morris could derail Kirchner’s candidacy.
The trouble started in 2018 when Morris, fearing EFL sanctions for breaching profit and sustainability rules, sold Pride Park to another of his companies for £81m. That sale saw Derby post a £14.6m pre-tax profit for 2017-18, facilitating an aggressive search for talent that summer. Manager Frank Lampard reached loan deals with former club Chelsea for Mason Mount and Fikayo Tomori, with Derby completing the £5m permanent signing of Martyn Waghorn from Ipswich Town.
When the club failed to achieve promotion that season, Morris began looking for investment in the club. In January 2021, he said “four or five” serious investors had emerged from a group of around 25, including MSD Holdings UK, the British arm of US tech billionaire Michael Dell’s investment firm. Although MSD reportedly wanted to buy a stake in the club, they gave the club a loan in August 2020 following the COVID-19 pandemic, secured against Pride Park.
Burnley, Southampton and Sunderland have also taken out multi-million pound loans to MSD or their major partners, also mortgaged their stadiums in the process. As other lenders moved away from football in response to the pandemic, MSD’s high-interest loans became one of the few alternatives to banks. While banks traditionally offer much lower interest loans, they are now increasingly wary of offering financing to football clubs. Of the four clubs, only Southampton made the extent of their loan from MSD public, paying 9.14% interest on a £78.8m loan at £7.2m a year interest.
In January 2020, Quantuma, the club’s administrators, told the supporter group Black & White Together that Morris does not currently collect stadium rent. Still, MSD had continued to lend money to help cover the costs, guaranteed against the stadium, with Morris’ assistance and consent. Club accounts later confirmed that the additional loan was £3.5 million, bringing the total owed to £24 million. Before Morris suspended payments on Pride Park, the initial agreement on the lease was for an annual fee of around £1.1 million.
With the large debt he has with MSD, Morris wants to get rid of the stadium to whoever takes the club out of administration.
This is where the impasse lies.
Kirchner’s offer, reportedly in the region of £25-30m, would rise to an unworkable price for a club relegated from the Championship to League One if he were to buy the stadium. For comparison, League One Sunderland, with the 50,000-seat Stadium of Light, a full complement of playing staff and a Category One academy, was recently valued at up to £30m by football finance expert Kieran Maguire. Never mind in the Championship, where Assem Allam sold Hull City for a similar price to Turkish businessman Acun Ilicali. With Morris valuing Pride Park at around £20m, the entire package would cost Kirchner close to £50m.
Wigan Athletic found themselves in a similar situation in 2020, after the former Hong Kong-based Next Leader Fund consortium placed the club into administration. Like Derby, Wigan were unable to overcome a points deduction, suffering relegation from the second to the third tier. Unlike Morris, however, the Next Leader Fund allowed its administrators, Begbies Traynor, to sell DW Stadium as part of the package for the club, a privilege Quantuma has not had. Morris has reportedly provided written confirmation allowing a potential preferred bidder first option to purchase Pride Park. Still, with Kirchner wanting to lease and not buy, there is no obvious answer to the stadium problem.
With the EFL requiring a lease or ownership of a stadium to allow Kirchner’s bid to buy the club to go ahead, discussions considering possible alternatives have begun.
One possible short-term solution is for the Derby to move away from Pride Park until an agreement is reached between Morris and Kirchner. With the club’s heart in the East Midlands, Leicester City’s King Power Stadium or Meadow Lane, the home of Nationwide League club Notts County, have been discussed. Another potential option is the bet365 stadium, home to Stoke City, although this is not an ideal option given the distance between the clubs.
Moving out of Pride Park is considered a last resort, and talks at this stage are preliminary, but with a resolution in need, finding a new home any time soon is not out of the question.
While it might satisfy Kirchner’s immediate wishes to secure a home for next season, moving out of town would be devastating for local businesses in Derby. Unlike when Coventry City spent time in Birmingham and Northampton, the city relies on the club for income and employment on match day. The Coventry Building Society Arena, then known as the Ricoh Arena, earned a steady income through events and the Wasps RFC premier league rugby club. If the football club were to abdicate from Pride Park, it would render one of the city’s main attractions pointless.
To prevent Pride Park from gathering dust next season, Derby City Council representatives are currently in talks with Morris about a bid to buy the stadium to secure a lease with Kirchner. To finance this option, the council would obtain a loan from the Public Loan Works Board, a statutory body that provides loans to public bodies, including local councils, from the National Loan Fund. This is separate from council tax funding and could be a financially viable option as long as the lease covers the interest on the loan.
These processes typically take months to complete, and with Kirchner assuming fiscal responsibility for the club starting Sunday, both sides have an immediate desire to speed up the process. Alvaston Councilman Alan Graves, the district where Pride Park resides, said the athletic he would “support any move to purchase the land to secure the future of Derby County”. Still, there is apprehension from some council members who believe it’s a tough sell to the people of Derby, considering the current cost-of-living crisis.
With differing views within the council chamber, they may struggle to reach a deal by the end of the month, delaying Kirchner’s offer to buy the club. With the American businessman saying he wants a deal within the week, the clock is ticking to secure a takeover of him, with former Newcastle United owner Mike Ashley waiting in the wings.
(Photo: Nathan Stirk/Getty Images)