WARRINGTON Borough Council finance chief Cllr. Cathy Mitchell, says she remains “happy” with the council’s investment in Redwood Bank, despite concerns raised by external auditors – and opposition Tories who say £17m of public money is at risk.
The external auditors for Warrington Borough Council, Grant Thornton, recently published an Audit Findings Report into the 2017/2018 accounts of the council, which raises more concerns about the Council’s investment in Redwood Bank.
The external auditors question the handling of a revision to the investment agreement. They say that the revision appeared to have significantly weakened the Council’s protections in its original investment agreement. The report states:
“The modification of the investor agreement was so significant in its potential dilutive affect that we believe further approval should have been sought before it was signed“.
The report goes on to say:
“We believe weaknesses existed in the governance arrangements in place over the review and approval of the modified terms to the investor agreement.“
The council originally paid £30M for its 1/3 shareholding in Redwood Bank, whilst the other shareholders paid approximately £5m for their 2/3 shareholding.
The report describes a range of values that Grant Thornton has considered appropriate for the current value of the council’s investment in the bank and this range is lower than the already-reduced value that the Council is using.
In terms of valuation of the Council’s 33% shareholding, the report states:
“We are comfortable with a company valuation range of between £30M to £40M which would make a 33% shareholding worth between £9.9 million and £13.2 million.”
The council has already written down the value of its investment in the bank by £17M to £16.2M.
Cllr Ken Critchley
“Conservative Councillors have been, and remain, highly critical of the Council’s decision to invest in Redwood Bank. The comments and figures in the external auditors’ report reinforce our view that the Council was ill-equipped to make this investment, an investment that has consistently failed to pay a dividend to the Council and has in fact cost in the region of £750k per annum in interest since the Council’s purchase of its 33% shareholding.
“Using the Council’s own figures, some £17m of public money is potentially at risk in relation to this investment, which is another indictment of the poor financial decision-making of the Labour run Council.
“It’s time for Labour Councillors to stop the spin regarding their investments and come clean with the residents of Warrington. WBC needs to take the hard but necessary decisions to exit its poorly performing investments such as Redwood Bank or face the risk of more fiascos like the Together Energy debacle.”
Deputy leader Cllr. Cathy Mitchell
“We acknowledge that most banks have seen their share value decrease in the current, challenging market, and we know that shares go up and down in value. However, Redwood continues to grow despite poor economic conditions. The bank has ambitious plans for the future and we will continue to monitor its progress.”
3 Comments
This is not just a question of the Redwood valuation, although having to write down the value WBC declared by half is bad enough – and supported incidentally since Thurrock bought new shares in December 2021 and now own 8% of the bank paying just £1.29 / share where WBC have paid on average £2.76/share.
No, the more serious question is why did WBC choose to pay £30m for the bank when Grant Thornton tell us WBC’s ~33% shareholding could have been bought for £10m.
i.e. for some inexplicable reason WBC overpaid by £20m. Something is not right here. Putting it bluntly in the absence of any sort of justification from Cllrs. Bowden & Mitchell it stinks.
We’ll just have ‘follow the money’ as deep throat reportedly said in All The President’s Men
There are several things wrong with this entire story. In no particular order:
1. As Richard Buttrey says, the unbalanced initial investment / share allocation is deeply disturbing. A child wouldn’t sign up to that. Who in WBC thought this was an acceptable deal?
2. The people of Warrington have had no say in this, or any other, investments. Worse, Freedom of Information questions are routinely stonewalled and evaded. This is not remotely good enough. Councillors exist to represent the communities which elect them.
3. The comments from Cllr Mitchell are just spin. We have enough of this nonsense nationally, we don’t need it at local level too. Of course she isn’t genuinely happy with an investment which has lost half of its value – Cllr Mitchell is an intelligent person and can see how bad this is for the town.
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