What shareholder letters say about Mark Attanasio's potential City involvement

In a lengthy document that reached shareholders earlier this week, there is a picture that is beginning to be painted about how Attanasio could be involved in the present and the future.

It includes four resolutions - the creation of 'C Preference Shares' with a nominal value up to £10m that expires on 31 December 2022, essentially a three-month investment window for Attanasio to utilise unless that deadline is renewed, varied or revoked.

The second gives directors the power to 'allot equity securities' - potentially converting those shares into equity in the future - if the first resolution is passed.

The third is for the draft articles of association attached to the letter to be implemented, and the final resolution is to appoint Mr Attanasio onto the board of directors, pending EFL approval.

That, for many football fans, is very difficult to decipher and dilute into layman's terms. There remain questions around what the overall scale of Attanasio's involvement in City would be if ratified, namely the scale of his shareholding and how many of the 'C Preference Shares' he elects to purchase. At this stage, those details haven't been published or made public.

But this letter details that Attanasio could complete the transfer of shares with deputy club chairman Michael Foulger, as has been widely reported, and provide the club with an immediate cash injection through the purchase of a new form of share capital.

At present, Norwich City only have two types of preference shares - A-preference and B-preference.Then there is the ordinary shares beyond those.

The first resolution is about constructing a new preferences of share that Attanasio would seek to purchase - called C-preference.

The creation of C Preference Shares is a completely new form of share capital, which is seen largely as a positive for the club by financial experts. It is, in essence, loan capital that would provide both parties with security should the agreement not work out, whilst rewarding the buyer with a dividends in the short term.

It isn't miles away from the method used by Delia Smith and Michael Wynn Jones to earn seats on the board initially nor the route used to secure shareholding from the Turners back in 2007, albeit slightly different in structure.

It would instantly improve the balance sheet and equity in the club. They are non-controlling shares, so would prevent holders from making decisions about the club - although Attanasio is set to join the board, so will be given a vote in meetings on the running of the club and key decisions.

The interest on those dividends would be seven per cent. If approved, that would provide Attanasio with a sweetener to make any investment worthwhile whilst offering Norwich a degree of security in the short term.

They wouldn't contain voting rights on resolutions put to existing shareholders, as is the case with ordinary shares - unless any resolution being voted on related to c-preference shares.

Norwich City's board of directors, including majority shareholders Delia Smith and Michael Wynn Jones, will host a general meeting for shareholders on September 12 to vote on four resolutions. (Image: ©Focus Images Limitedwww.focus-images.co.uk+44 7813 022858)

The proposal being put to shareholders is to issue up to 10m C-preference shares, which have a £1 notional value.

£10m is only the total nominal value of this proposed allocation of C shares. All the other types of shares have a nominal value of £1 but have all had different issue prices. So, for example, if the issue price is higher than the £1 nominal value, the total amount raised increases. To put into practice, if a buyer purchased these shares at £10 each there would be a million shares in total.

In seven years' time, or upon certain trigger events, those can be redeemed into conventional shares, although the documentation says, in this instance, that conversion is to a maximum of 10 per cent of ordinary issued share capital.

The C-shares have a seven-year redemption right, but there are 'Trigger Events' - such as a sale/transfer of the majority shares - where they can give notice to exercise the redemption but aren't compelled to do so - that would bring that process forward.

C-preference shares will undoubtedly create other interest, but the directors would hold the discretion of who to administer them to and when. The purpose of the articles of association is to draft them as wide as possible to facilitate all possibilities, but actually discovering a mechanism for this to be activated remains complex, plus the interest rate of dividends could put some potential C-preference buyers off.

This all leads to a conversation about the future and the inevitable talk of a change in ownership.

There is a pathway that leads to Attanasio assuming overall control, but there is little in this plan to suggest that will happen in the short to mid-term under this agreement, which largely protects the current shareholders, as is probably sensible given the new source of shares.

Shareholders are being encouraged to vote by proxy. Attanasio won't be present and, in reality, the resolutions just require the votes of the majority shareholders to pass. It is unlikely they would have reached this stage if that wasn't already the case. There won't be a question and answer session on any of the contents, either.

In the here and now, Attanasio will purchase shares from Foulger, and possibly other minority shareholders, and invest in C-preference shares that would provide an instant cash injection into the club.

This is merely the outline of what an agreement could look like in the future and represents a cautious first step. The devil is in the detail - how many ordinary or C-preference shares Attanasio has acquired. Once that is made clear - then proper analysis of Attanasio's involvement can take place.

But this feels like the beginning of the story, rather than the end.