The Dog Returns to the Pompey Manger.

By on May 20, 2012 in Finance, Latest | 0 comments

You have to admire the stoicism of football fans. No matter how much the parameters of the game are manipulated to the advantage of those with little emotional investment in our clubs we continue to process through the turnstiles. We tolerate being frisked for lethal bottle tops and are directed to seats where we are ordered to sit down and play nice. The money we pay goes who-knows-where? Given the loose regulation of the business of the game and the range of people passed as fit and proper to own a club we are expected to improve the finances of anyone from arms dealers through owners of unregulated financial institutions to nice philanthropic gentlemen. Except we don’t get to choose. In some cases we don’t even know who they are – eh Ken? Its laissez-fair all the way to the bank or the insolvency courts. Like it or lump it.  So again at Pompey the return of the most reluctant  owner of a business since Basil Fawlty is welcomed by many with relief and the hope that this time the magic beans will take root and flourish. Maybe the dog will let a little more of the grain dribble out of the manger this time.

How many times? Fool me once, shame on you, fool me twice, shame on me … fool me three times? Money for old rope.

You will have probably realised by now that Balram Chainrai is bidding to be owner of PFC for the third time. That Chainrai’s business methods have constantly held Pompey over a barrel has been well documented on this site already. Yet many people still ask the question why some supporters ‘hate’ Chainrai so much. ‘After all,’ they say, ‘he is a businessman and entitled to his money back,’ and ‘He has saved us from going under twice already.’ Therein lies the rub. Twice Chainrai’s manipulations have ended with Pompey in administration. Yet without a doubt he is keen to ensure the club survives. So ‘At least we have a club to watch,’ say many. This has given credence to Chainrai’s assertion in the South China Post today that he had, ‘been approached by many fans and people from Portsmouth who requested me to take over the club.’ Pity those same people aren’t satisfied with so little from manager and players as they are from an owner. The paradox of modern football; the differing directional pull of the business of the club versus the club’s business concerning the team and the community it represents.

Chainrai has asserted that he will not let the club go into liquidation. His offer would form the basis of the CVA if accepted by the creditors of the club. The chief creditor of the club is … Balram Chainrai; once as a secured creditor of PFC with a charge via his company, Portpin, on Fratton Park and twice as the secured creditor of Pompey’s parent company CSI (in administration). So lets not be surprised if the creditors nod this one through.  Fans of Leeds United will feel some familiarity with this situation.

Of course Chainrai expresses his chief objective to be the return of Pompey to the Championship. Sadly this is not the only promise those truly concerned with the sustainable future of the club want to hear. The reality is that Pompey is a club with a legacy of financial problems that won’t go away – not only in regard to the rolling nature of Portpin’s continually renewed debentures on the club but also in the salaries of the contracted players that can’t be shifted from the wage bill. With the League 1 Salary Cost Management Protocol (SCMP) kicking in next season, where a strict 65% of turnover is the limit of what can be spent on players, and a virtually  non-existent infrastructure apart from a dilapidated 20,000 capacity ground which is seldom filled; turnover is going to be restricted in the extreme. As a relegated club Pompey have a year to adjust or remove high salaries from the wage bill. Some players bought under Chainrai’s previous reign with budget busting salaries seem difficult to shift and those can be bank rolled, but other than that the budget for wages will be tight. Those players had us relegated – to get us promoted they will need to turn in better performances than they have this season if they remain in the squad. This is the ownership model Chainrai presents us with. Pay the team and hope they take us up the league to higher earnings. Mr C., it seems, likes a gamble. It is notable that Chainrai has not spoken of plans for any investment into infrastructure that will increase turnover, which is where inward investment is encouraged by the SCMP.

Of course these rules apply to any owner taking the club over, but common sense dictates that an owner who will peg any money put in onto the club as ‘debt’ and then charge interest without increasing revenue streams is going to weaken its financial stability. History shows us that Chainrai and Portpin have form on this one. In addition the use of charges on the ground and then selling on via loan agreement to a new owner comes dangerously near separating the club from its ground in the future. This tactic has been used already by Sacha Gaydamak to keep necessary development land separate. It has made development of the club’s infrastructure problematic. Any further separation of property from the club could be catastrophic. Ask Coventry City.

The only opposition to Chainrai’s bid is coming from the Pompey Supporters’ Trust. At an open meeting this weekend the Trust bid committee revealed they were close to hitting their target number of investors. They will table an opposing bid in the next two weeks – before the FL meeting on 2 June, where it will have to be proved that Pompey can fulfill next season’s fixtures. Funding for the Trust bid will come from a community share issue and a number of high net worth individuals who will form a directors’ club. There is also potential for the involvement of the Portsmouth City Council at some level and discussions have taken place. Other forms of funding are available to community interest companies that private companies cannot directly access. The Trust will have a package ready to oppose Chainrai’s bid. They are willing to engage with any potential bidder as partner or will go for a 100% Trust buy out if necessary.

The one person not interested in engaging with the Trust is Balram Chainrai. It is clear that Chainrai’s business philosophy and that of the Trust are at opposite ends of the spectrum of football ownership. A community run club will asset lock the ground to the club, run the club within its means, feed any profits into future development and is far more likely to engage with Sacha Gayadamak for the development land he owns. It seems Gaydamak has already expressed an interest in listening to the Trust on this. There never has  been any engagement between Chainrai and Gaydamak, the club being subjected to what seems to be a long running feud between the two men. You have to ask if there is ever going to be any chance of development at Pompey while they are  both involved.

You also have to ask why Chainrai wants to hold the fans at such a distance. As a self-confessed reluctant owner of a football club, logic would suggest that he would benefit from working with the fans, who most want the club to exist. Some say he will buy us time to find another owner, but this seems illogical – an owner who would develop the club would be most interested now, buying out of administration at a price of their own making. The last sell-on by Chainrai did nothing but add further debt. To me, his disinterest suggests there would not be enough in it for him if he were to engage, that he needs to maximise the return on his initial investment, however he can do that.

There is another, better, owner ready and willing. The fans themselves. Yet, despite his reluctance to sit in the manger, this dog is not going to let go of the grain.

You can follow SJ Maskell on Twitter by clicking here.

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