How Spurs plan to hit £15m goal

Enic claims the scheme effectively hands Spurs an interestfree loan for the next three years. Here Standard Sport explains the key elements.

What is the point?

Both the board and the fans believe that the club should, at the very least, be competing for a European place on a regular basis. Most observers agree the existing squad at White Hart Lane is not good enough to achieve this aim so the board have decided to raise new money for better players. Spurs' largest shareholder, Enic, is prepared to invest up to £15m, but, in return, it wants an increased stake in the club.

How does it work?

All existing Spurs shareholders have the chance to contribute to the £15m transfer kitty by buying into the CRP share issue.

The more shareholders that apply, the less money Enic, which is underwriting the scheme, will have to put in. People holding fewer than 2,500 shares can buy one CRP share for £250. Larger stakeholders qualify for one CRP share for every 2,500 shares which they hold.
CRP shareholders will earn no interest on their investment until 31 October 2007. After that, they will either get one per cent above the Bank of England base rate or have the chance to convert the CRP share into 1,562 ordinary shares. This means the shareholders will have paid 16p per share - considerably less than the current market price of 23.5p.

Who wins?
It very much depends on the level of the Spurs share price in October 2007, but there is a good chance that Enic will emerge as the big winners.
Although Sir Alan Sugar and Polys Haji-Ioannou - Tottenham's other two significant shareholders with 13.1 per cent and nine per cent respectively - are expected to take up their allocation of CRP shares, there is unlikely to be much interest from smaller shareholders.
As a result, Enic will swallow up the outstanding CRP shares which, on conversion, could push its overall stake above 50 per cent. The maximum Enic
could be left with is 66.9 per cent. In anticipation of this, Spurs will this week ask shareholders to approve a waiver of the City rule which requires any party seeking a stake of more than 30 per cent to make a formal takeover bid.
The CRP issue appears to be a shrewd move by Enic. When Levy's company bought its 29.9 per cent in 2001 from Sugar, it paid 80p a share.

The effect of the CRP shares will dramatically reduce the average cost of Enic's shares to being significantly lower, putting the company in a much stronger position should it eventually wish to sell out.
Other big winners include Giovanni Trapattoni - or whoever else arrives as their new manager - who will have a big slush fund for new players and Sugar, who is set to make yet more profit from Spurs.

Who loses?

All of the above, if Spurs lose their Premiership status. Football clubs go down as well as up so the CRP issue is essentially a punt. Everyone buying into it believes the share price will be higher than 16p in October 2007, but if things go badly on the pitch and Spurs get relegated, the financial implications would be hideous.
In any case, smaller shareholders who do not take up the offer are set to lose out.
When the CRP shares are converted, their existing stakes will be worth less because of the effects of dilution but since many were only bought as an emotional attachment, rather than investment, this may not matter to them.