Forest's debt to Nigel Doughty

There is a slightly ambiguous title to this page, so let's clear it up straight away. Far from being indebted to Doughty in any way, this page is about DEBT; a massive financial debt on which Doughty is charging interest of well over £1m a year.

Introduction
Although they will not lie about it, the club are happy to keep quiet regarding the misconception that Forest are now virtually debt free. You could even go so far as to say they are deliberately misleading the fans by suggesting that the club has virtually no short term external debts, knowing full well that the average fan will not know that is only a small portion of a club's total liabilities.

Infact in the latest available accounts (2005-2006) Forest have total liabilities of £32,983,000. Of that debt, £26.5m is owed to Nigel Doughty himself.

That is a huge amount of debt, which has largely been built up over the last 8 years, under Doughty's control.

- When Doughty first purchased shares in the club, Forest had net assets of £8.5m. That figure is now a net liability of £24m.
- Since 99-00, total liabilities have also risen 226%, from £14.6m to £33m.

Interest Charged on Loans
Whilst few people are aware of the financial position of the club and the vast debts, even fewer are aware the Nigel Doughty is charging the club interest on those debts, above the Bank of England base rate.

In 2005-06, the Bank of England base rate was between 4.75 and 4.5%, whereas we believe the amount of interest charged by Nigel Doughty to Nottingham Forest is between 5.543% and 12.517%.

Calculations
Now, these figures have been the source of debate on our forums so if you can either confirm or counter them, please do so in this thread

We took the following information from the club's accounts dated 05-06.

Firstly, on page 17 note 15, Creditors: amounts falling due after more than one year, as of 31 May 2006, a total of £30.3 million was outstanding. £3.3 million is outstanding to Nottingham City Council (relating to the renegotiated Trent End Bond) and due for repayment within two to five years. And £26.5 million was owed to CFFN. Note 15 goes on to say, ''The CFFN loan is secured by a debenture over all the company’s (Nottingham Forest) assets. Interest is accrued at market determined rates and is repayable along with the principal on 31 May 2008.''

Secondly, on page 22 note 29, Related party transactions, it states, ''NE Doughty, the company’s controlling shareholder, is also the controlling shareholder of CFFN Limited. CFFN Limited has advanced a loan to the company in the year totalling £13,600,000 (2005: £4,400,000). The balance (outstanding to CFFN) at 31 May 2006 was £24,409,000 (2005: £10,809,000) on which interest of £2,083,000 (2005: £730,000) has been incurred but not paid. The CFFN loan is secured by a debenture over all the company’s assets. At 31 May 2005, NE Doughty had guaranteed part of the club’s bank overdraft. This was settled by an advance of the above loan in the year.''

Compiled in table format, that information is as follows.

If the loan was created on the first day of the financial year, the interest charged is around 5.5% (£1,353,000 / £24,409,000)

If it was brought in on the last day of the year, the interest charged is around 12.5% (£1,353,000 / £10,809,000)

In reality the rate of interest charged at the time is likely to be somewhere between these two figures.

It is also worth noting that as the interest rate is calculated at "market determined rates", the figure will now be around 1% higher, due to increases in the Bank of England base rate (currently 5.5%). This will mean an increase in anual interest payments of at least £300k per anum (if the interest charged was initially 5.5%, the lowest possible figure).

Summary
Some may say Doughty has every right to charge interest on the loans, however perhaps charging more than is necessary is slightly inappropriate, given the debts are in place largely because of monumental mismanagement under his leadership.

Either way, we just want to make everyone aware of the situation - the club is far from debt free and Doughty is charging the club substantial interest every year.