When Czech Position asked on May 12 whether representatives of Czech investment group Natland were seeking to take control of Slavia Prague’s new Eden stadium, the question was given a curt brush off. Spokesman Rostislav Starý said that the company did not own any stadia in the country — and was not planning to anytime soon.
Natland, about to become the majority owner in the famous Prague football club, continued: “The stadium is only important for us from the perspective of a long-term rental agreement for the company SK Slavia Prague football. I can rule out that we would even try to get control of the stadium,” Starý added.
According to Czech business daily Hospodářské noviny (HN), that situation appears to have been stood on its head with the newspaper reporting on October 7 that the stadium could soon fall into Natland’s hands. What happened in the meantime to change the mind of the financial and investment group is not clear; perhaps there was an offer they could not refuse. The strategy of the offshore-based group is not easy to fathom.
The real goal
But an understanding of the wider financial maneuverings surrounding Slavia’s home stadium would lead to a slightly different conclusion: Natland is not seeking to win control of the stadium itself but the company that owns the stadium, E Side Property.
HN’s version of events is that Natland should be on the receiving end of the stadium thanks to unpaid debts of businessman Vladimír Kroužecký, a former director of the controversial investment company Key Investments, into which a series of local Prague councils (Prague 6, 10 and 13) as well a local authorities outside Prague were persuaded to sink their taxpayers money. Key Investments was linked to Slavia Prague long before the arrival of Natland and the football club’s latest owner and former Civic Democrat (ODS) transport minister, Aleš Řebíček, on the scene.
While in no way ruling that that the stadium will at some stage fall into Natland’s or Řebíček’s hands — and there is an inherent risk to a football club that does not own its home venue — a fast path to ownership for either of them is not so simple.
The only type of transaction that could possibly go though would be an agreed sale to Natland of the whole of E Side Property for a symbolic price — along with its outstanding debts.
The stadium is owned by the British company E Side Property via its Czech administrative structure. According to documents held by Czech Position, a 2008 agreement giving E Side Property control of the stadium also establishes its Kč 180 million debt to the multinational German construction company Hochtief, which build the Eden stadium, and Kč 420 million to banks that financed the project.
But ownership of the stadium could not even “fall” simply into the hands of these two creditors. They could, if they chose to exercise their legal rights, try to push for a sale of the stadium with the agreement of the majority owner — but given that Hochtief still questions E Side Property’s right to ownership of the stadium that path looks distinctly problematic.
From this perspective, the only type of transaction that could possibly go though would be an agreed sale to Natland of the whole of E Side Property for a symbolic price on condition that Natland picks up the tab for its outstanding debts as well.
The broader picture of such a deal would, for example, also cover the bonds issued by E Side Property. The company accounts for 2010 show that these bonds have already been purchased to the tune of Kč 245 million by someone.
Up till now the only thing that has been certain about E Side Property bonds is that Kč 167 million worth of them are owned by the local Prague 6 and Prague 10 councils. Key Investments bought E Side Property bonds for Prague 6 daughter company SNEO and also for the west Bohemian town of Sokolov. Who else owns the bonds is not clear. Owners of E Side Property bonds also labor under the burden of not knowing under what precise conditions and with what promises all the bonds were issued.
Czech Position has been given information that the agreement covering the transfer of E Side Property to Natland includes the condition that some settlement be found with the bond holders, at least those Prague town halls who own them. According to our information, Natland should pay the interest on the bonds, a move that confirms the intention of the investment group to take over the whole company. If Natland only had the stadium, there would simply be no sense in it paying outstanding interest on E Side Property bonds.
The players in the sage over the Eden stadium, E Side Property and its problematic bonds also have to bear another fact in mind: that the whole furore over Key Investments and its risky investments on behalf of Prague and other town halls could sooner or later once come under the media spotlight. For them, the sooner the whole problem can be dealt with and de-fused the better. If E SideProperty were taken over by a new and solvent owner, the issue of the problem bonds could disappear.
If E Side Property were taken over by a new and solvent owner, the issue of the problem bonds could disappear.
It would be interesting to compare whatever price Natland might now be willing to pay for the E Side Property with the Kč 286 million that Prague 10 council leaders were willing to pay in the spring of 2009 for a third of a share in the company.
Those sort of details are not likely to be coming soon. But for the Prague Civic Democrat (ODS) and Social Democrat (ČSSD) councilors that bought and got burnt by the E Side Property bonds bought for them by Key Investments, the essential fact is that they could be able to draw a line under this embarrassing chapter of municipal incompetence.