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ADMINISTRATION: KEY MONTH FOR DEPORTIVO

22 Jun 2013
Within the next 30 days Deportivo must solve two crucial issues for the survival of the club: to reach a final agreement with the creditors, basic point in the administration process, and also to solve the unpaid wages with the players.

During July, many eyes will be on the training pitch as Deportivo begin the pre-season 2013-14, but a more important battle is taking place outside the pitch, because within the next thirty days the future of the club is at stake. There are two subjects that must be resolved in that period of time; the first is to pay the debts with the players, and as a result of this to seal the agreement with the creditors, which is the headstone in the administration process.

July 5 is the deadline that the players have in order to reclaim the unpaid wages of the season 2012/13; if any players at Primera, Segunda or Segunda B haven’t collected their wages by that day then they have the right to protest before the Players Association (AFE). This instance later inform La Liga and the Spanish Federation, and then the information is checked, revised and the clubs are informed of the amounts they owe.

There’s an agreement between the AFE, LFP and the Spanish Federation in which it is established that, if any club is unable to cover these debts before July 31, then that club is demoted. According to a report of Sportpaper Deporte Campeón, Deportivo owe around €9 million to the players, so if the Galician club doesn’t  pay –or reach an agreement to face the obligations- then the relegation to Segunda B will take place. In any case, so far there isn’t any player of Deportivo that has presented a demand to the AFE, though as it was mentioned before the deadline is July 5.

Anticipating any possible demand, it is known that the judge managing the administration process of Deportivo requested to Lendoiro to ask the LFP to avoid this situation, but the president knows that it’s impossible as the LFP would be failing to complete the agreement with the AFE, so the issue of the players’ wages must be resolved before the deadline -July 31-

But there’s an obstacle that must be sorted first: the situation with the creditors. Deportivo collected €3 million in past weeks as part of the money that was unfrozen from the embargo over the TV incomes. Other €6 million remain unfrozen and, with the fresh money coming from the socios that are renewing their memberships, the club should have enough to pay the wages of the players and the ones of the employees, but a crucial thing in this puzzle is to unfrozen the pending €6 million.

And the only way to do it is to reach an agreement with the creditors about the amounts and payment periods of the €150 million reported in the list of debts. On last week it was reported that Deportivo already presented a plan in which the club assumes the 100% of the debt in the next 20 years with differentiated amounts that depends on the division in which Deportivo plays. Some journalists remain skeptical the club is accepting to pay the 100% of the debt, but so far the club hasn’t released any official statement about the issue.

As soon as there’s an agreement between the club and the creditors then the administration process will enter into a new phase, because from that point things would be easier as the administrators will only focus in the fulfillment of the budgets, while the club will have a more clear view of the future. Of course the agreement will also allow recovering the €6 million that remain sequestered.

There’s no deadline to reach an agreement with the creditors, but it’s understand that the best thing is to do it within the next 30 days, because it will allow to recover the money from the TV contract in order to pay the unpaid wages of the players, that’s why it is accepted the idea that the next month is vital for the survival of Deportivo.

THE WARNING OF UD SALAMANCA
There’s no deadline to reach an agreement with the creditors in an administration process, but the situation cannot stay like that forever, the institution in administration is forced to present a plan to the creditors, and if this plan isn’t accepted, then the debtor is simply “liquidated” in order to pay the debts.

That’s exactly what happened on this week to an historic Spanish club: UD Salamanca. A club founded 90 years ago -12 of those years spent at Primera División- Los Salmantinos were competing at Segunda División B and were unable to face a debt of €23 million. They were in administration since last year.

Since there was no agreement with the creditors the judge managing the case decided to liquidate the club, this means an auction in order to sell the club’s assets and get the money to pay the obligations. On Thursday there was an auction in which they were asking for €14.7 million for the El Helmántico stadium, plus €400,000 for the spot in the league and €200,000 for the players’ rights. There was no buyer and the situation remains the same.

So, the case of Salamanca is a warning to Deportivo, because the same fate awaits in case of not reaching an agreement with the creditors. Still, the amounts are bigger in the case of the Galician club, also the losses for the creditors. And since the auction of the club’s assets will be unable to cover the debts, then it is clear that the creditors and Deportivo are destined to reach an agreement.

ARCHIVE NEWS JUN/13

ZAPPING

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