How Dejphon Chansiri holds one key to Sheffield Wednesday escaping 15-point sanction
Outgoing owner Dejphon Chansiri could hold the key to Sheffield Wednesday avoiding a 15-point sanction heading into next season.
The viability of Wednesday’s future has dominated the conversation around the club in the last week after disciplinary sanctions proposed to be placed on the Owls were confirmed to its preferred bidders Arise by the EFL.
These sanctions include a 15-point deduction with which to start next season, the retention of a transfer fee restriction until the summer window of 2027 and a fresh proposal of recruitment constraints - which include a £7k-per-week cap on individual salaries and a £7m limit on total wage spend. It has been stressed that the latter constraints are open to discussion.
The issue around the 15-point sanction in particular centres on the understanding that the sale price agreed with Arise will not satisfy the EFL’s ‘minimum dividend’ rule that suggests clubs will be punished should they not pay unsecured creditors 25% of what they are owed. In Wednesday’s case, a large majority of that fee is owed to outgoing owner Dejphon Chansiri, who in the view of 25 pence on the pound is owed in the region £15.6m due to the £62.5m claim he has submitted on the basis of director loan.
Insolvency rules decree that one unsecured creditor can not be granted a better deal than another and Chansiri, who along with other creditors looks set to receive an overwhelming cut on the realisation of his dues, could choose to drop his claim and effectively ensure the Owls are not in breach of the minimum dividend rule that looks more than likely to land them with the points deduction. Chansiri often spoke about how he would ‘show how to be a good fan’ once his association with the club ended.
The hypothetical has precedents, most notably in the case of former Derby County owner Mel Morris, who wrote off somewhere in the region of £100m of loans in their administration proceedings. This move allowed the Rams to comply with the minimum dividend rule and avoid a 15-point deduction. Since the rule was formally introduced in 2015, no club has fallen short of it.
Stefan Borson is a football finance expert and acts as Head of Sport at law firm McCarthy Denning. Speaking to The Star, he explained that it would make sense for Chansiri to drop his claim to a certain level given it would appear the deal as it stands offers him no immediate financial benefit for not doing so.
The long-held suggestion has been, however, that a deal could be struck in the background to encourage him to drop his claim - whether that be striking a deal to purchase his unsecured debt or effectively overpaying on the Sheffield 3 side of the administration to improve his realisation. The Star gathers the stadium manoeuvre could prove tricky in terms of balancing the value of the overall deal as administrators are duty-bound to ensure both sides of the deal represent fair value.
“There have to be conversations with Chansiri,” Borson said. “He is not getting his full unsecured money at this stage from any party. That's clear. So the best he can expect is some kind of deal where he gets some of his unsecured monies back.
“He is actually in a position, because of the structure of Sheffield Wednesday and the stadium, where there can be a level of mix and match to get him into a favourable position versus getting near zero, which is his likely position right now.
“So he's effectively going to have to write some off. Now, what he could actually do is a deal with Arise, where Arise effectively boost the payment he receives on the stadium side, which is outside of the EFL's control and writes off the unsecured debt on the football side. That gives him a better return on his unsecured position on the stadium side. The preferred bidder could also effectively buy the debt from Chansiri and waive it themselves. There’s a way where all parties can take a win from where things are now.”
Should Arise be interested in cutting a deal it would mean Chansiri - who was the only named director at Wednesday in a period that is under investigation for ‘director and de facto director conduct’ - does hold cards with which he could hope for a better deal should Arise look to explore their options.
It should be stressed that is not known at this stage where Arise stand on offering any deal, whether Chansiri has yet been formally contacted for discussion or whether any appeal through arbitration would stand a chance of success. Arise are understood to have engaged top football lawyer Nick De Marco and there may be a world in which the deduction is appealed in arbitration down the line.
“However it's structured, you'd have to get Chansiri in a position where he's prepared to take a massive haircut,” Borson continued. “So whether you call it a write-off, whether you call it doing some clever deal with Sheffield 3, whatever it is, you’re still going to need Chansiri to agree to it.
“He's not getting his 25p in the pound. He's not getting it in any scenario. So now he may as well help the club because he's not getting 25p in the pound. But how about you getting, in real terms, 10p in the pound?
“It just seems to me that when you balance it, as stubborn as he is, and as unreasonable as he may be known to have been, first of all, he does have smart people around him. And so any figure - let's say £1m - is better than zero. Just on any basis, that makes sense.”
Despite passionate conversation around the wording of the EFL’s insolvency policy and whether the authority would have the ability to show lenience in Wednesday’s case, it’s understood the authority’s stance on the 15-point deduction is firm as they seek to balance the interests of the 72 League clubs. That leaves two clear options; a deal with Chansiri or arbitration.
“Chansiri could very easily write the whole thing off tomorrow if he wanted to,” Borson said. “He's not getting the full money anyway. So for him, it's neither here nor there. And if Chansiri did that tomorrow, which is of no business to any other League One club, then the EFL don't have any need to penalise on the minus 15. I do think that the EFL has a legitimate concern about the rest of the clubs, the guidance, the business plan, and the restrictions.
“It can't just waive all the guidance and other rules and say, oh, “we just don't carry on because of the terrible situation around Sheffield Wednesday, because they're a big club, they should be free to do whatever they want.” That is just not the real world.”