Hammam in the Guardian

This article comes from David Conn in the Guardian
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Sam Hammam hoped to make a killing as Cardiff chairman, but club debt foiled his plan.

David Conn
November 8, 2006 12:28 AM
Sam Hammam loves emotional guff, so his departure from six crazy years as Cardiff City's owner had to be soaked in melodrama. Tears were shed, he told us, but a noble sacrifice made for the good of his Cardiff "family" - then exit stage right, home to London. Yet his curtain call must not obscure what went before: this was a huge personal defeat for Hammam. He made one of football's most rakish financial killings from Wimbledon, but with City drowning in debt Peter Ridsdale, now the chairman, forced Hammam out when the club is closer than ever to the payday of promotion to the Premiership and a stadium deal to die for.

In place of Hammam, hedge funds now hope to coin around £45m profit from the stadium, possible promotion and a stock market flotation, while Hammam can only watch from what he has left, two seats in the directors' box. This is not what he planned when he arrived as the saviour at a down-in-the-dumps City in August 2000, invoking the "Welsh nation" to rally the just-relegated club to the Premiership and beyond into Europe.

Hammam poured forth some Welsh nationalist blather about dragons and daffodils in a document, "Follow the Dream", but, in among it, he had a shrewd plan. He made around £36m from Wimbledon, first by selling the Plough Lane ground to Safeway for £8m, then the club itself to two Norwegian investors, Kjell Inge Rokke and Bjorn Gjelsten, who believed they could move it to Dublin and cash in by becoming an Irish Premier League "franchise".

But the Football Association of Ireland refused permission, the Norwegians eventually stopped funding the losses, Wimbledon sank into administration and then became a somewhat lesser franchise for Milton Keynes instead. The majority of fans, who formed AFC Wimbledon and began again from scratch, never forgave Hammam for, in particular, selling Plough Lane with no alternative in place.

In the Football League, though, Hammam was much in demand, a man with cash in a game whose boom has somehow mired the clubs deeper than ever in debt. He had his pick of clubs to buy but decided on Cardiff - because there he saw another national franchise, a potential Premiership club for Wales.

For all the rhetoric, however, Hammam stringently limited his financial commitment. He promised to put in about £3m: £1.5m to pay the debts, £1m to cover further losses and £500,000 for new players.

Cardiff were promoted in 2001, then splurged, paying £1m, a club record, for Graham Kavanagh from Stoke, then £1.7m for the striker Peter Thorne. Hammam inherited a fine youth side, including the striker Robert Earnshaw and the centre-half Danny Gabbidon, but it took until 2003, with more money spent, for City to reach the First Division via the play-offs.
By then the wage bill, £8.3m, exceeded the club's entire earnings. The debts, £1.5m when Hammam arrived, had ballooned to almost £23m. His plan for the Bluebirds turned out not to be a blueprint at all; Cardiff had risen by borrowing excessively.

Hammam was also taking money out; that year, City paid £300,000 to his company, Rudgwick, as a "management service charge". By May 2004, the date of the last published accounts - they are currently eight months late - Cardiff's debts had risen to £31m, including £21.8m owed to Citibank. The club had nevertheless paid Rudgwick a further £583,333.

The fans finally woke up from Hammam's dream in August 2004, when Earnshaw, by then a Wales international, was sold. The following month Hammam borrowed £24m in "loan notes", from sources he has always refused to identify, to pay off Citibank. The crisis came seven months later when Kavanagh was abruptly sold to Wigan to pay the previous month's wage bill. Gabbidon soon departed, staff were laid off and the Welsh dragon had to simper to the Professional Footballers' Association for a loan.

Ridsdale, Leeds United's chairman when they borrowed an ultimately catastrophic £82m, was recruited by Hammam last year specifically to replace the £24m loan notes with other finance. Desperately keen to restore his own reputation, Ridsdale understood the key was the new stadium development, proposed to replace the rundown Leckwith athletics ground. The local council, which owns both Leckwith and Ninian Park, is making an enormously generous contribution, donating around £40m of public money from selling both sites for the new stadium and surrounding retail. The football club is providing £4m from selling its lease on Ninian Park, will attract a £2.8m grant from the Football Stadium Improvement Fund, and be asked to put in only a further £9m.

Hammam, however, failed to complete so sweet a deal because he could not satisfy the council that the club could meet its financial commitments. The council was satisfied nothing was improper about the source of the £24m, but insisted on knowing to whom the money was owed. Beyond a Swiss bank which was the point of contact, Hammam would never tell.
That impasse was broken last week with Hammam's resignation from the board. Cardiff, it is understood, were paying the Inland Revenue an overdue £1.6m bill in instalments, and latterly the stadium developer, PMG, had provided £3m in sponsorship. PMG is understood to have been unwilling to pay a final £1m without a change in the club's structure to secure the stadium deal. Without that money the club would struggle to pay the Revenue, and probably fall into administration. Hammam appears to have had little choice but agree the deal, or he could have lost everything and the loan note holders taken a very deep cut.

Keith Harris, the former Football League chairman turned serial club dealmaker, is lining up hedge funds to put £9m in for new shares, amounting to 90% of the club. The note holders will be paid a further £9m from the naming rights on the new stadium, reducing their debt to £6m, and the club will be able to borrow again to finance its share of the stadium deal. Hammam is not being paid for his shares - his 83% share in the club will be diluted to around 8%.

Ridsdale has promised the stadium deal will now be signed quickly, and once the club occupies its new home, it will make more money whether it stays in the Championship or lands the Premiership jackpot. The plan, openly stated - but still optimistic - is to float and attract a valuation of, say, £60m, which would make the hedge funds' stake worth £54m from a £9m investment. Cardiff city council, whose leader meets Harris today, may yet insist on some payback for the huge public investment which is enabling such "super profits" to be contemplated.

Since Ridsdale's initial positive, conciliatory statement and Hammam's tearful adieu, neither has spoken publicly, but one fact nevertheless shines through. For Sam Hammam, footballing Midas of the 1990s, the Welsh dream is over.

Numbers game

£100,000
Price Hammam is reported to have paid Ron Noades to purchase the Wimbledon club in 1981

14
Years Wimbledon played in the top flight between 1986-2000

£8m
Amount made by Hammam when he sold Plough Lane to Safeway in 1994

£28m
Made by Hammam when he sold his shares in Wimbledon in two tranches in 1997 and 2000

£3m
Invested by Hammam in Cardiff City in 2000

£900,000
Paid by Cardiff City for 'management services' to Hammam's company, Rudgwick

£31m
Debts Hammam left behind in Cardiff, as at the 2004 accounts