Greg Clarke: A Bit of A Dinlow Moment?

By on Apr 26, 2012 in Finance, Latest | 4 comments

‘Dinlow’ is proper Pompey. It is used, often affectionately, to someone who has said or done something idiotic. If Greg Clarke has not been a ‘bit of a din’ in his statement regarding Portsmouth Football Club yesterday then he is guilty of being either over-simplistic or disingenuous, I feel. He certainly hasn’t helped the odds on the survival of the club. He has, very kindly, ‘warned Portsmouth he fears they are on the verge of liquidation,’ according to Sky Sports. Well, no sugar Sherlock! Down at Pompey we are wondering if Clarke has been residing on another planet for a while.

‘The debts at that club are immense, we are talking tens of millions of pounds,’ the erudite Clarke continued. This the same erudite man on whose watch the FL passed the erstwhile Vladimir Antonov as a fit and proper owner for Portsmouth Football club; Antonov who was shot at by Chechens, refused a banking licence by the FSA, with whom General Motors would not trade and who now awaits extradition from the UK to face charges of alleged money laundering and fraud in Lithuania.

Mr Clarke told the Government Enquiry into football governance in February last year that, ‘If I had to list the 10 things about football that keep me awake at night, it would be debt one to 10.’ Pompey fans could say the same. Mr Clarke and the Football League have murdered their sleep with their Catch 22 rules in regard to debt in the Championship. You know the ones, they say you can financially dope your club as much as you like as long as you pay the bills but as soon as you can’t we will take points from you and call you cheats. So fans might hope that Clarke ‘may sleep no more’ as a result. They wonder just what Mr Clarke was thinking allowing an owner to load another £10m of debt onto a club with a £16m CVA to pay and a charge from a previous owner on the ground. All that on top of allowing a deal for the purchase of the club on the never-never.

It was the failure of Antonov’s company CSI to pay former owner Balram Chainrai the second instalment of the £17m purchase price that tipped that company into administration. Chainrai took out a charge on CSI for what he was owed as soon as Antonov’s assets were frozen by his arrest warrant. This is turn starved Pompey of the cash flow it needed to maintain its running costs. Running costs inflated by the wages of players bought in by Antonov’s injection of his ‘loaned’ £10.5m. CSI gave the club an £18m credit facility – a facility they were never in a position to properly guarantee. In effect the Football League have overseen the club accruing £58m worth of debt since its last administration, most of which seems to be owed to previous owners. The Football League say they cannot afford to investigate new owners to sufficiently guarantee they are financially sound. Perhaps Mr Clarke should have spent his sleepless nights on Google.

Having allowed the club to accrue this debt, Clarke’s answer to its dilemma is illuminating: ‘Unless someone comes with significant capital to invest in that club, the club will be liquidated by the administrators. So it all depends if someone turns up with millions of pounds to invest …’ In other words, someone needs to come in and add to the debt burden of a club with a 20,000 capacity ground that is in serious need of redevelopment, no training facilities, and no team to speak of. The administrator is currently in the process of attempting re-home several expensive players in the hope of paying off the deferred wages from earlier in the season. Meanwhile ordinary employees are either made redundant or having their hours cut as the club struggles to find running costs for beyond the end of May. Nice one Mr Clarke. Let’s perpetuate the problems, why not? Perhaps we can find a Middle Eastern despot to fill the bill. Excuse my obvious bitterness, but Clarke shows the wide gap in understanding of the game that exists between the administrators and the people whose money ultimately sustains it – the fans.

Clarke continues to extrapolate on this theme: ‘The size of that bill may be too big for the local fans, I think the people of Portsmouth are doing their best to raise money, but it’s a big ask to raise tens of millions of pounds from football fans.’ Recovering breath from the patronising tone of this statement, one is brought to wonder at Clarke’s lack of understanding of how insolvency works, particularly for someone who loses so much sleep over debt in the game. So lets clear this one up for him.

Firstly, in respect of purchasing the club. Portsmouth football club is not worth ‘tens of millions of pounds’. It is only worth what a purchaser will pay for it. No matter how much any previous owner thinks it is worth there is no magical formula that will produce what they claim to be owed. Sadly this applies to all other creditors of the club as well, including local businesses and charities. The debts will be settled in a strict order of priority by the purchase price or the realisation of the assets in liquidation – whichever turns out to be the greater. The administrator will try to gain the best price he can and has been quoted as saying that this is best achieved by trying to maintain the club as a going concern. But that price will not be ‘tens of millions.’ It is unlikely it will even be anywhere near ten million. Fans attempting to purchase the club will not be obliged to pay off inept past owners in full. These owners gambled money in investment, I suspect in the chasing of the potential Premier League ‘pot of gold.’ They made loans to a club that could not provide the income to repay. More fools them. They are in negative equity and it is time to swallow their losses.

Secondly, perhaps Clarke feels that running a football club requires the fabled ‘tens of millions.’ Evidence for this being the way in which the FL allowed the club to run up more debt whilst having a CVA to pay.  It is true that Pompey’s infrastructure is seriously in need of development, but throwing money at the club does not need to be the solution. A programme of steady growth with sustainable development over the long term does not require an instant input of millions. CSI were insisting this is what they were doing, all the while putting their money into a playing staff that could not deliver the required standard of football to gain promotion. A fan led ownership will have an entirely different set of priorities, with sustainability and the long term future of the club at the head of the list.

The Pompey Trust are trying to raise funds for a buyout, details are on the Pompey Trust’s Community Pompey website, but plans for millions of pounds of investment are not on the agenda. The Trust will aim to run the club in a self-supporting and sustainable manner in line with the Football League’s own ‘Financial Fair Play‘ proposals published on the same day Clarke made these ill-advised remarks. It is interesting to note that the Championship dissenters to the plans were clubs whose own finances may not stand up particularly well to scrutiny in terms of the ratio of wages to turnover and whose owners may also have ‘interesting’ financial backgrounds. There is a powerful paradox in play here, where on one hand the League works to bring in these measures but on the other maintains the implied assumption that financial doping is necessary to sustain a club in the higher echelons of the game.

Clarke’s statement makes it clear why so many clubs flounder with unsustainable debt. The philosophy that tens of millions are needed from financial dopers clearly comes from the very top of the game. Until there is better support and a more even playing field for Supporters Trusts seeking to get a toe hold in the governance of their clubs this will ever be so. That the Football Authorities response to the government enquiry was so thin on such support makes it clear where Mr Clarke’s interests lie. He may claim to ‘love’ the game, and I’m sure he feels he does. But part of the buzz he gets seems to come more from the amount of money swilling about than from the passion generated by the game itself and the communities that support it.

This becomes clear from Clarke’s final statement on the matter. When asked if he thought Pompey would be liquidated, Clarke added: ‘No, I expect liquidation if a new owner does not come forward this summer.’ Yet his evocation of the tens of millions required to save the club has done little to encourage anyone to come forward. It dispirits the fans in their work to save the club and makes many faithful supporters question the worth of their efforts. There are still fans of Pompey, even now on the brink of liquidation, who think a White Knight will step in at the last minute and give them the club they dream of. The culture of financial doping seems engrained into the very fabric of English football. It seems there is no one but the fans with the will to turn that around.

 

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    4 Comments

  1. the fact is that Pompey’s first CVA was a fraud . Pompey need to be closed down and start again like Chester.

    Start at the bottom again – reborn – hopefully ran without the shysters and the no money men.

    The FL need to ban loans – only cash capitol allowed – invested as shares – which you LOSE if the company goes bad.

    Camoron

    April 26, 2012

  2. I think that the 10′s of millions is not so far off.

    Lets assume the CVA is .1p in the £ and so is effectively free. The Football creditors at the moment are £5.9m and growing by £450k per month so even if a sale happens at great speed they are likely to be around £6.4m. Then add in whatever is going to be needed to prise Chainrai’s hands off Fratton Park as no one is going to be stupid enough to buy the club without FP – lets say he can be pursuaded to walk away for £2m so add in that. Then there is an additional £1.6m due to further football creditors on transfers that have not been paid for.

    Finally you can add in about £5m to run the club next year – and that is assuming some of the larger earners are moved on – so maybe sot quite 10s of millions but well over £10m even looking at the situation fairly optimisticly. Of course maybe the Parachute payments would be available but then maybe they won’t if Gaydamak keeps control of them under his agreement – and there are so many court cses needed to get things sorted that legal fees are likely to be stupidly high as well,

    I do agree that if he had wanted to scupper the Trusts efforts it is difficult to thnk what more he could have done and many fans will listen and give up or pin their hopes on the illusion of a white knight when the most likely nightmare scenario is a return of Chainrai to run the club as a shell so he can pocket the parachute payments – if he can get his hands on them. -

    Lesley

    April 26, 2012

  3. Wimbledon have shown that whilst one set of fans can re-generate a club that was needlessly destroyed for a few individuals’ commercial gain, due to its competitive nature and the massive income dispararities between levels it is impossible for just one club’s fans to change our broken national sport.

    Only legislation will have any effect now.

    Nathan

    April 30, 2012

  4. Shame HMRC didn’t finally get the high profile “victim” the sport sorely needs (as a deterrent if nothing else) back in 2010.

    http://www.bailii.org/ew/cases/EWHC/Ch/2010/2013.html

    “Furthermore, in the end, HMRC have been bound into a CVA which can only leave them financially better off than a liquidation…”

    Better off? Mr Justice Mann’s words sound hilarious now. Have Portsmouth paid ANY of the CVA he rubber-stamped or ANY tax since then?

    Nathan

    April 30, 2012

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