Too Late for Licensing:Time to Pray at Pompey?

By on Feb 4, 2012 in Finance, Latest | 13 comments

When questions about your football club are raised in Westminster and the Prime Minister agrees that the situation needs investigation then you know you are in a bad way. Not because you might be investigated but because the Prime Minister actually knows what Penny Mordaunt, MP for Portsmouth North, is talking about. David Cameron has backed Ms Mordaunt’s call for HMRC to meet with Portsmouth Football club to negotiate their way around the winding up order HMRC took out against the club last month.

But would such a move be in the club’s best interests?

Pompey seem to be just over two weeks from liquidation. The winding up order is due to be heard on 20 February. The final step into oblivion is all that’s left according to some. The stranglehold of Balram Chainrai on Portsmouth FC is killing the club in painful stages. The close of the transfer window has left fans waiting for his next move, while the club seeks a court order to unfreeze bank accounts to pay players and staff for January. It may be that staving off the winding up order will just extend the misery.

It was expected that the club would sell some of the meagre squad to meet HMRC demands. The club currently owes £1.8m in unpaid tax. In the event one player with few appearances, young Ryan Williams, left for Fulham raising in total less than a third of the tax bill. Others subject to bids, mainly from Ipswich, remained with the club at the end of Tuesday’s business. The story on Tuesday night was that the club had accepted bids for two of three players but the players themselves, local boy Joel Ward and young keeper Stephen Henderson, had turned down the move. Clearly the players had been well advised – they have nothing to lose, they are in demand and if the club is liquidated they then become free agents. No need for them to take an unattractive offer from another struggling club. But the gesture and its meaning to fans is important. It says to the money-lender Chainrai that this fight is not all on his terms.

Maybe things weren’t that clear cut. The administrator, Andrew Andronikou, said the lack of transfer action left him ‘bitterly disappointed.’ However, if Paul Jewell’s story is anything to go by, Andronikou must bear some of the blame for that. Jewel talks of being passed from CEO to Administrator to agent in his attempts to sign the Pompey players. He told the Portsmouth News that he, ‘knew by 4pm on deadline day it wasn’t going to happen as I hadn’t even met or spoken to the players.’ Pompey’s manager, Michael Appleton, heard nothing at all. Of course, Ipswich’s own money worries might have put the players out of their budget, given that club’s reputed £66m debt. So whether this was player stoicism or management inefficiencies we cannot be sure.  But it is worrying if the Administrator is trying to sell players that are vital to the team even fulfilling its fixtures, never mind surviving in the Championship. Fans are confused as to why Andronikou has any say at all in the players’ sale as the club itself is not in administration, just its parent company CSI. Short sighted sales to pay this month’s tax bill do nothing to meet the next set of bills. Andronikou clearly needs to buy time, having wasted the months since CSI went into administration last November by failing to realise the worth of CSI’s other assets and dissipating many weeks on negotiations over PFC with the weird bid of J. Joseph Cala. The optimists among us detect a dissenting mood emanating from within Fratton Park itself on the back of this lack of player sales.

One thing Cala’s farcical bid has told us about the sale of the club is that, as far as creditor Chainrai is concerned, it is nothing to do with the football. Nor, I suspect, was Cala’s bid. Seemingly unable to satisfy the Football League when first seeking to buy the club, Cala hoped to circumnavigate the Owners and Directors’ Test by trying to buy Chainrai’s debenture in a second attempt. However, the Football League made it clear he would still have to pass the test, causing Cala to say passing it was like trying to get into MI5. This prompted a few hollow laughs down at Pompey.

It is all about the debt. That is what Cala wanted to buy, Chainrai’s debenture for his £17m. This is the means by which Chainrai dictates terms at the club. Unless it is paid up by a purchaser, something CSI failed to do, he will continue to wield power over the destiny of PFC. The debenture not only pays him handsome interest but keeps the capital of his loan secured. This keeps the purchase price of PFC above its value as a going concern whilst Mr Chainrai clings to the hope of, ‘getting his money back.’

No wonder Andronikou is annoyed that the club hasn’t decimated the team to pay its tax bill. The closer we get to the court hearing without a viable buyer stepping in, the more Mr Chainrai stands to lose if we are liquidated. It seems his grasp may be slipping.

So we enter the endgame. Chainrai has the option of drip feeding the club money to meet running costs until a buyer is found, possibly taking a reduced price, or letting the club go into liquidation. How much he can get for the club is a moot point. Liquidated there really is only the ground at Fratton Park. Hemmed in by housing on two sides and land owned by the owner of five moves ago, Sacha Gaydamak, on the other two, it is designated for sports use only by Portsmouth City Council and therefore has no redevelopment value. His return from liquidation would be a fraction of what he claims to be owed. Chainrai is therefore having to balance his gains against his losses. In sticking out for full repayment of his foolish ‘investment’ made in 2009 he seems to be willing to push the club to the wire before making his decision. As to putting the club into administration there is little to gain for Chainrai one way or another; the level of unsecured debt is low and the secured creditors, himself and Gaydamak, would still remain.

Currently the administrators are asking prospective purchasers to provide £12m as proof of funds, and assurances they could meet another £20m in repayments to former creditors, Balram Chainrai and Alexandre Gaydamak. Unless they are the Supporters Trust of course, who were asked to provide £100m proof of funds due, they were told, to £50m owing to creditors plus share transfer and running costs. An odd disparity. It has long been the case that the cards have been stacked against Trusts in the attempt to buy their club – but this is beyond ridiculous. Chainrai has always refused to talk to the fans, and clearly isn’t going to start now. This, and his description of dissenting fans as ‘aliens from another planet,’ justify his attitude to fans being described as contemptuous. But unless we are buying season tickets to save him putting his hand in his pocket to maintain his asset, we are of little interest to him.

Such treatment has left most fans exasperated, alienated and out of love with the club. Many were priced out of attending at the start of the season and all the pricing initiatives since – including the dropping of the spurious pay-on-the-day surcharge for the next two games – have done nothing to help. Others have vowed never to pay anything to the club whilst Chainrai has an interest. There is now a strong tide of feeling that the best thing that can happen is that PFC (2010) is liquidated and the fans put ‘Plan B’ for a Phoenix club into operation. The feeling that we need a clear break with the tangled web of the past is strong.

If he really wants to help the club Mr Cameron might be better advised to look to implementing some of the measures of his own government’s enquiry into football governance. The matter was raised again in Parliament as recently as 26 January with Minister for Sport, Hugh Roberts, reiterating the value of a licensing scheme for football clubs, exemplifying Supporters’ Direct’s proposals that were formerly launched 01 February, ‘where much more robust rules around financial sustainability, fit and proper persons and directors are laid out. We see that licensing model as the appropriate vehicle for greater supporter representation at football clubs.’ That representation he said should encompass three ways fans should be involved with their clubs, ‘The first is through fans being better informed about a club’s activities—for example, its financial standing, particularly, and the identity of its owners. Secondly, supporters ought to be represented or consulted in the club’s decision making … Thirdly, supporter and supporter-run groups ought to have a formal share or ownership in their club.’  The football authorities are due to make public their response to these proposals by the end of February.’

By then Pompey could be gone. If Cameron wants some negotiation to save us, how about getting together with the football authorities and the fans and implementing these changes now? How about looking at a really viable way of running the club for the people of Portsmouth rather than continually papering over the cracks in order to profit an inept businessman? A man who wants nothing to do with the City and people of Portsmouth?

Or Pompey fans could just pray for help instead … and hope they won’t get fooled again.

Meanwhile the Pompey Supporters Trust maintains its efforts to draw supporters together in order to maintain the fans voice at the club. The 12th Man website is aimed at collating the details of all supporters interested in aiding the survival of the club – in whatever way possible.

You can follow SJ Maskell on Twitter by clicking here.

You can follow Twohundredpercent on Twitter by clicking here.

 

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    13 Comments

  1. The role of the administrator needs to be looked at. Andronikou has wasted the time he had to pass Portsmouth onto a viable owner, after opting that a crook was the best bidder last iime around.

    Add Brendan Guilfoyle and his £300 per hour go-slow strategy that he employed at Luton, Palace and Plymouth into the mix and there is an emerging industry of parasites that make a tidy living out of football clubs in difficulty.

    Jim

    February 4, 2012

  2. Portsmouth have signed players on silly wages again like last time they cheated there way to the premier league and the FA cup, all paid for by the tax payer and local business and even charities, all this well under a CVA witch they have not started to pay back or even the creditors £2500 and under have not been paid as promised .
    if portsmouth had stopped doing this paid some of there creditors off and was not singing players on £20000 + a week then i might feel a bit sorry for them , but no it was down the them to have players on wages that high not the tax payer

    mrzippy

    February 4, 2012

  3. I suspect the club don’t want their accounts unfrozen as there is nothing in them..

    AA didn’t realise any of CSI’s assets as there weren’t any there either, whether Pompey or otherwie.

    As to player sales, why leave it to the last minute when you are in a weak bargaining position. Sales should have happened, I dunno, two years ago.

    whistler

    February 4, 2012

  4. I know I will come off as a dumb American, but a winding up order is like bankruptcy, right? I feel lots of pain for Portsmouth supporters, but lots of US teams have gone through bankruptcy and come out all the better. However, in the US, we have a death/liquidation bankruptcy and then we have a reorganization/discharge debt bankruptcy. Is a winding up order like the first or the second?

    Once again, so sad for Portsmouth.

    -Ignorant Yank

    Elliott

    February 4, 2012

  5. This article shows some of the reasons why so many fans do not intend to ‘Pack the Park’.
    A new beginning is clearly needed and until that happens many feel their money continues to go to waste.
    The loyalty of Pompey fans is admirable but a lot of them supporters feel alienated from their club.
    A classic case of deciding whether our hard earned money supports the club or props up a disfunctional regime.

    Portsea Islander

    February 5, 2012

  6. A bit of clarity from SJ through the dense fog of confusion. I swear Tinker, Tailor, Soldier Spy was easier to understand that the goings on behind the doors at the end of Frogmore Road. Looks to me like Chainrai is sitting pretty. To make him sit up and take notice we need to make him squirm. Banners with his name on them in a demo that will draw in the national press might do it. But it has to be a GOOD demo. By good, I mean one that will catch the attention of the media. I”m afraid we in danger of Crying wolf over the next wind-up petition as far as publicity is concerned – regardless of being raised at Prime Minister’s QT, Pompey’s woes are becoming a bit of yawn in press circles. If you want some advice on this front, look no further than the doors of St Paul’s Cathedral.
    The demands must be specific and targeted. There is nothing more useless than a protest for the sake of it. WE ARE UNHAPPY! WE DON’T KNOW WHAT TO DO ABOUT IT BUT SOMEONE DO SOMETHING! Er….PLEASE! Chainrai needs to tell Andronikou to drop the financial demands to a level realistic with the present economic climate and what PFC is worth. THAT might attract genuine interest. Rentamouth MPs like Hancock need to do more than send a begging letter to Number 10. He needs to speak Chainrai’s name in the Commons. He can say anythiing he likes about the guy because he is protected by Parliamentary priviledge. I promise that would be something Chainrai wouldn’t ignore. Without Chainrai lowering his demands, AA is never going to sell Pompey. After looking at the books just over a year ago, Mandaric said only a madman would buy the club. He seemed genuinely horrified at the state of the books. We can only imagine! Of course, such a move will come too late on the present timetable so we need to deal with the winding-up petition and administration might buy us enough time.
    It is a long shot but might work.
    In the meantime we need to start the ball rolling with Plan B. To start season 2012/13 the groundwork needs to be in place by the end of this season to lodge an application with the Football League.
    As Churchill once said: Action this day! The present situation with fan groups reminds me of that scene in Life of Brian where Graham Chapman is about to be crucified. When this is brought to the attention of the Judean People’s Front, John Cleese says: “Yes, we need to take action. Yes, this calls for a completely new amendment to help brother Brian, all those in favour….”

    Dinksy

    February 5, 2012

  7. @Elliot – A winding up order is like your second. The club could go into administration – like the first – before 20 Feb to protect itself but as it is already in the middle of paying off a CVA there are those that feel a court might not allow us to do that.

    @Dinksy – I very much agree with what you say. Any protest has to have a tight focus and it has to be this debenture. Anything else is pointless. See: http://www.fansonline.net/pompey-fans/article.php?id=404

    @Portsea Islander – This is what I am hearing from the Island PI. Which is why I think any persuasion of HMRC is misguided. Better to focus on the cause of the problem – not one of the symptoms.

    @MrZippy – !? I really think there is no longer any mileage in that sort of rhetoric. What has happened to Pompey is happening to football teams country-wide. You only have to read across this website to see that. Ask Leeds fans about profiteering owners and the damage they are doing to the game. This is not longer about my club/your club. This is about football.

    SJMaskell

    February 5, 2012

  8. Surely to describe Chanrai’s involvement as an investment is overstating the case? As I understand it his reluctant ‘ownership’ was only brought about when the loan he made was defaulted on. His business acumen assured that he had the necessary security to guard against that happening and he has only ever activated that in the interest of protecting his loan amount in the same way as a house is most people’s collateral against their mortgage.
    I do agree that the brand is now so tainted and the business case for securing the current incarnation is so far beyond redemption that a phoenix club should be the credible option. I feel for all those left in the rubble that is what’s left of the old company..it’s no consolation to the bulders, charities, pie suppliers that Chanrai couldn’t realise his own debt…either!

    Foryoublue

    February 5, 2012

  9. so many people and so many different opinions. Most of which are based solely on a small bit of information and very few of which will be based on most of the information (i suspect noe are from an unbiased point of view of some sort.

    so for my tuppenece worth as a long standing dedicated fan………….this whole saga reminds me of people who i have advised (I work in Finance) with similar personal debt situations. The debt is never going to go away. The club has over spent and then economic influences have affected plans to rape PFC financially and here we find ourselves going around this merry-go-round of owner-spend-hmrc-administration and so-on.

    What inevitably happens in these cases are that bankruptcy is actioned and then low and behold the individual (in this case PFC) has a MASSIVE sigh of relief and wonders why the hell they didnt do it earlier. The writing is on the wall.

    I am now keen for that MASSIVE sigh of relief for PFC. I may be extreme in my views and I may not have all of the facts and understand the implications but from what I do have lets (for the right reasons) boycott FP and let HMRC do what they have to do. The quicker the rise of the Phoenix the better.

    We all support PFC regardless of what division/league we are in so lets take some action and ownership over our passion rather than letting money launderers and tax avoiding business men use the club as a vehicle to grow their profile and ego. It would give us 6months to sort the new club out and what a breath of fresh air we all ENERGISE the club with.

    Great work by the Supporters Trust now lets get behind the Pheonix and wacth PFC grow with the passion of the fans and the city agian. What a story and precendence this could be for other clubs and the whole world of football in general. The writing has been on the wall for many years and the snowball of stories similar to PFCs mis-management has amassed over the years.

    PUP(hoenix)

    ps – sorry for any spelling mistakes or gramatical errors. this was written with passion and I havent got time to re-read it to check it!

    grogan52

    February 5, 2012

  10. MRZIPPY YOU CLEARLY DONT KNOW WHAT YOUR TALKING ABOUT SO IT WOULD BE BETTER IF YOU KEPT YOUR OPINION TO YOURSELF pup

    NOBBY

    February 5, 2012

  11. Jim – as far as Brendan Gulfoyle is concerned he did a reasonable job at Palace – perhaps becahse Agilo who called him tied him down to a £500k fees cap – according to Brendan he spent a lot more than that sorting it out – Palace were sold as quickly as was feasible in a very difficult situation indeed.

    For Portsmouth AA may have wasted time with Cala but the unpalatable truth may be that he was the only game in town so he could either deal with him or do nothing – where he does come off badly was with the oeroptimistic statements about a deal being imminent – it isn’t. While I feel for Portsmouth there may be something to be said for letting clubs and owners realise you can’t just keep on bilking the revenue and carrying on paying football crediors but no one else. It would be tough but a phoenix club might be the best way forward – good luck whatever happens.

    Lesley

    February 7, 2012

  12. AA hates Supporter’s Trust’s after we at Swindon went after him, and pointed out to the press every time he stepped out of line, especially when he was not doing what he was supposed to do, like this story :

    http://www.swindonadvertiser.co.uk/sport/1478034.Trust_demand_Andronikou_apology/

    And I wouldn’t be holding my breath for new investors/owners, as the only one’s AA had ever bought in were being investigated back in Portugal, by the football authorities !!

    Personally, I agree with Grogan52, Pompey are in such a mess, it’s now time for the Pheonix option, which we had in 2007 as a last resort. Luckily enough, unlike Pompey,the person who was owed the money at Swindon, was a fan for a number of years, gave up the club, whilst in Chainrai, Pompey has no history with him supporting the club, and really, just wants his money back, and doesn’t care how he gets it.

    Alan Jones

    February 11, 2012

  13. There will be little sympathy for the Phoenix club if it doesn’t begin life in non-league football as happened with the likes of the reformed Newport County, Aldershot Town, Maidstone United and AFC Wimbledon.

    Why should it try and muscle it’s way in to League 2 or the Conference when these clubs didn’t ?

    Pay up Pompey

    February 14, 2012

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