Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence

Annex 17

Letter, 4 September 2000, from Sport England to DCMS


  Following our recent discussions, I am writing with a further briefing on the issues related to the removal of athletics from the Wembley project, and the proposed payment of £20 million from the FA. As you are aware, we have been working and continue to work on the basis that the Secretary of State had agreed with the FA that £20 million would be repaid over a five year period, in return for the removal of athletics obligations, as set out in his letter to Ken Bates of 7 January. As you are aware we have been pressing this point on the FA since earlier in the year.

  However, it is clear that the FA/WNSL maintain that key commercial restraints, for example, naming rights, anchor tenant and number of corporate seats were also to be relaxed as part of their agreement with the Secretary of State.

  In this context, there appear to be three options.


  Our preference remains that the issue should be resolved prior to entry into the forthcoming financial agreements related to the project. The process would be as follows:

    —  WNSL would apply for a relaxation of the athletics obligations within the Lottery Funding Agreement in return for a payment of £20 million scheduled for payment over five years from December 2000. (Please note that it is the responsibility of the applicant to initiate changes to the purpose of the project).

    —  We would then formally consult with the key parties involved, notably UK Athletics, the British Olympic Association, and DCMS.

    —  The proposal, and response to the consultation exercise would then be presented to the Council for decision.

    —  If approved, changes to the LFA would be implemented prior to entry into the financing agreements. There are a number of other technical issues related to the mechanics of the payment, which would also need to be addressed at this stage.


  However, should the FA/WNSL maintain that in return for the £20 million payment commercial restraints should also be relaxed, we assume that they would apply on this basis. Based on this option, we envisage a similar process of consultation leading to presentation to Council for decision. I must advise, however, that it remains far from certain whether the Council would approve the relaxation of commercial restraints, given that they represent fundamental objectives in respect of the identity, use and financing of the stadium. This is the basis on which the co-financing agreement among ourselves, Chase Manhattan and WNSL has been drafted.

  Furthermore, as we have discussed, we are keen to ensure that commercial rights such as naming rights are retained by the Council as a potential contingency during any future period of financial difficulty.

  In the event that the Council was not prepared to accept the relaxation of the restraints it would then be open for WNSL/FA to agree Option A, or pursue alternative courses of action. Should no agreement be reached, then there is clear potential for delay.


  This option involves moving forward with the financing agreements now, and then addressing the athletics issues and the £20 million payment at a later date. There are certain advantages to this approach, notably:

    —  Every effort could be directed to ensuring the financing agreements are signed, and the project progressed, at the earliest opportunity without the potential for delay whilst the £20 million issue is resolved.

    —  The issues could be addressed once the project is committed and moving forward.

    —  It is not yet critical to the cash flow of the Lee Valley Project.

  However, against this it should be borne in mind that the main impetus to resolve this issue is prior to entry into the financial agreements. Once the agreements are signed, there are then few negotiating levers with WNSL/FA. The main negotiating lever now is our first charge over the stadium—the project will not proceed unless this is subordinated to Chase. It must be appreciated, therefore, that this option involves a high degree of risk that the £20 million payment may never be paid, with among other matters, consequent funding shortfalls for the Lee Valley project.

  We are pursuing discussions with WNSL and the FA to seek resolution to this issue, on the basis of Option A. However, their preference is for Options B or C. I will keep you updated on progress as discussions move forward. However, in the meantime, I would welcome your view on the options outlined in this letter.

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