How did Sheffield Wednesday avoid 15-point deduction?

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Sheffield Wednesday's supporters had accepted their fate some time ago.

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Not just relegation from the Championship, but also starting next season in League One on -15 points.

That deduction seemed set in stone because Arise Capital Partners, who on Saturday completed a takeover of the beleaguered South Yorkshire club, were not going to meet obligations to pay unsecured creditors.

The EFL's insolvency policy required those debts to be settled to 25p in the pound, but the offer from Arise had fallen well below that level.

So, on top of the 18 points deducted this season for entering administration and other financial breaches, the Owls looked likely to start next season adrift at the foot of the third tier.

Even so, a sell-out crowd - dressed in a Honolulu party theme - flocked to Hillsborough for Saturday's 2-1 win over West Brom.

The fans were there to herald the new ownership, a consortium led by David Storch, his son Michael and Tim Costin.

Supporters were told to get into the ground early - and were not disappointed.

After the group had been introduced, the big screen changed to show "-15" points, then ticked on to -14.

As the countdown continued, the Wednesday fans cheered louder and louder. And then it reached zero.

Out of nowhere, the Owls had two huge reasons to celebrate - new owners, and no points deduction.

But how did they pull it off?

Owls turn to sports legal expert De Marco

On 15 April, had David Storch put out a statement which left fans fearing the worst.

The American businessman said the 15-point penalty was "set to be imposed" and a request for arbitration had been "refused" by the EFL.

The details of what happened next may never be fully revealed, but Storch did what so many clubs do when taking on the establishment - he turned to Nick De Marco.

De Marco is considered one of the leading sports lawyers, who in 2020 helped the Owls get a points deduction related to financial fair play reduced from 12 points to six.

A case as complicated as this - weighing up the interests of the club, the EFL and former owner Dejphon Chansiri - needed De Marco.

Chansiri had made a claim for £64m in loans, meaning Arise would need to pay £16m to satisfy the 25p in the pound rule.

Storch and his team were not comfortable paying Chansiri for failure, especially because so much money needed to be spent on the infrastructure of the stadium and the training base.

Was there a way around this which would satisfy the EFL?

Deferred debt offer put to Chansiri's team

Hillsborough requires huge investment to bring up to modern standards [Getty Images]

Reaching an agreement with Chansiri was never going to be easy.

During the administration process, the Thai was offered a number of offers on his debt, which were either outright refused, ignored or not taken in good faith.

"The EFL had to take into account the intransigent soul shown by Mr Chansiri and his reluctance to engage with offers made by the bidder," football finance expert Kieran Maguire told BBC Sport.

It was only last week that things fell into place.

Chansiri was made an offer which would see him receive payments, in effect, to about 25p in the pound.

But he would not receive a penny now - it would all be based upon the club's future success.

"We're probably talking about promotion first of all back to the Championship, and in due course to the Premier League. He could then get his 25%," Maguire says.

The EFL said the offer must remain on the table for a short period of time to show it was credible and serious.

But there was one final act which might just sum up Chansiri's tenure, as reported by the Sheffield Star.

A response to the offer had to be received by midday on Tuesday. Chansiri decided to accept, but replied too late - minutes after the deadline.

Chansiri - subject to any challenge - might now be left with nothing.

Having agreed to cancel Wednesday's 15-point deduction, the EFL board made a few other stipulations.

Football creditors and HMRC had to be paid in full, while all other non-secured creditors - local businesses - had to get their 25p straight away.

Had the EFL been less flexible, those companies faced receiving a much lower return.

"The EFL probably took the view that as HMRC are being paid 100%, football creditors are being paid 100% and other unsecured creditors are being paid 25%, other stakeholders were being treated appropriately," Maguire added.

"Therefore there was a clear case for having no penalty."

Arise had to make a firm commitment to invest in the decaying stadium immediately.

In his speech on the pitch on Saturday, Storch promised there would be both running water, and hot water, in the toilets.

That might seem like a joke, but anyone who has attended Hillsborough in recent seasons would know it was anything but.

Arise did not hang about. An outstanding charge of about £7m owed on a loan Chansiri had taken out against Hillsborough was cleared on Wednesday.

As part of a two-year business plan agreed with the EFL, some restrictions on spending and wages have been lifted.

"It's been a well-negotiated settlement by the Storch group," Maguire added.

"This allows them to put other financial commitments into the football club in terms of infrastructure where it needs to be spent.

"As a result of that, the EFL board would have felt that all parties have been reasonably well treated."

Discretion has been shown before. Derby County only paid 25p in the pound of their £25m tax bill when coming out of administration in 2022.

That should have been repaid in full, but there was no 15-point deduction. Derby also needed former owner Mel Morris to write off millions of pounds in loans.

EFL clubs are set to revisit the insolvency policy over the summer. Perhaps there will be a way to treat directors' loan differently to others, and separate money owed to local businesses.

But it will be the clubs who decide this themselves.

A solution is needed that suits everyone - and that is never easy to find when self-interest is involved.

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