Hearts Up Against It

By on Nov 7, 2012 in Finance, Latest, Scottish Football | 2 comments

Today’s news that the Hearts have been served with a winding-up petition for almost £450K in unpaid tax comes as little surprise to those of us who have been following the club’s fortunes over recent years. But such is the capricious and unpredictable nature of owner Vladimir Romanov that it’s impossible to tell, at this stage, whether this is just the latest in a series of mini-crises between which the club is stumbling on an ongoing basis, or whether this really is the beginning of an endgame.

Shortly after news of the action broke this afternoon, a statement appeared on the club’s website titled ‘The future of Heart of Midlothian’. It observes that:

Without the support of fans there is, as we issue this note, a real risk that Heart of Midlothian Football Club could possibly play its last game next Saturday, 17 November against St Mirren.

This isn’t a bluff, this isn’t scaremongering, this is reality.

Since Hearts have not always been in the habit of acknowledging the seriousness of their evident financial problems, the tone of this statement has to come as a major worry. A deal may yet be struck or some money found from somewhere in the eight days before the petition falls due, but this is clearly not a matter to be taken lightly.

All this has come in the midst of their efforts to raise around £1.8 million via a share issue. Directors have tried to assure potential investors (ie fans) that any money raised is earmarked for investment within the club, and not for a second – disputed – tax bill which tallies up to a remarkably similar amount.  But it’s patently absurd to expect anyone to believe in the meaningful possibility of such investment at a time when they are unable to pay the bills needed to keep the wolf from the door.

Some, doubtless, will be all too eager to see this as the first step towards the financial armageddon which Scottish football was so heartily promised in the summer, but there are no grounds for linking Hearts’ difficulties to events in the close season. For a start, it very quickly became clear that the shortfall in the TV deals would be nothing like on the scale that Neil Doncaster et al had threatened. (And nothing like the debts, for a single club, being talked of here.) And in any case, it’s been clear since well before then that Hearts were a basketcase waiting for something like this to happen.

Like so many of the owners who have featured on twohundredpercent’s ‘Clubs in Crisis’ strand over the years, Romanov arrived at Hearts at a time when they were already in difficulties and couldn’t afford to be too choosy. Not only were the club struggling with debts in 2004, but they were also faced with the imminent prospect of losing their ground. Romanov was said to have approached (and been rejected by) other Scottish clubs before Hearts, but once he was able to secure the debt (through UBIG, his own banking group in Lithuania) and guarantee the immediate future of Tynecastle, the takeover went through the following year.

And not only were the immediate problems averted, but things even looked rosy for a time. With a squad augmented by overseas signings, the 2005-06 season started with eight straight wins and talk of a title challenge. They went on to finish second – the only team this century to split the Old Firm (at least until next May when the achievement will be matched be some thirty other clubs).

But the pattern of Romanov’s behaviour had been set during that season, with George Burley sacked as manager in October, while the team were still top of the league. In the years since, a succession of managers have been hired and fired, amid predictable rumours of interference with team selection and other behind-the-scenes problems. Meanwhile, Romanov found himself embroiled in a running battle with the Scottish football authorities, which prompted and were further exacerbated by some impressive rants on the club website – the most extraordinary of which appeared to accuse a well-known football agent of paedophilia, or something indistinguishable from it. And, although his banking group were continuing to subsidise the losses, and even converted some of the debt into equity, there was no sign of financial stability, and you could but wonder what would happen if and when Romanov lost interest and pulled the plug.

And to some extent this has already happened. Although there has been no suggestion of him calling the debts in, by last season Romanov had made it clear that he had no further interest in the club – apparently accepting that they weren’t going to be able to win the Champions League after all – and that he would not subsidise any further operating losses.

The attempts to live within their means and stand on their own two feet, however, have not been going terribly well. Last season saw a whole succession of delays in wage payments, and this season – despite a reduced wage bill and much-depleted squad – things seem to be continuing in the same vein. The team is, predictably, not doing very well on the pitch, and wages have been late again the last two months, triggering a transfer ban: the first of a series of potential penalties which the SPL introduced in the summer, largely in response to Hearts’ problems of last season. Further penalties will accrue if – or let’s say when – it happens again. Most peoples’ guess would be, later this month.

That’s assuming they survive that long. They probably will, but in the long-term it’s hard to see a good way out of this. Romanov no longer shows any interest and has expressed his willingness to sell up – if someone will pay up £50 million to allow him to recoup the debt. That’s not going to happen, and if the club is ever to sort itself out, at some point Romanov will surely have to accept that the bulk of that money is gone and will have to be written off. We can only hope he does so in some form that allows the club to pass to other people, rather than simply washing his hands of it and letting it go to the wall.

In any event, it doesn’t seem likely that he’s going to be ready to see that happen just yet, and while the clarion call to the support is undoubtedly genuine, my guess is that somewhere from within his investment group he’ll come up with the cash necessary to avert immediate danger. But that’s only a guess, and reading the mind of Vladimir Romanov is a task that would make for the crowning glory of Derren Brown’s career.

Some things can be said with reasonable certainty, though. For one thing, paying off this debt is not going to solve the long-term problems. And for another thing, however and whenever this saga comes to an end, I fear it’s not going to end well.

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    2 Comments

  1. Who on Earth could have predicted that yet another dodgy foreign ownership scam may end in disaster for a famous old club?

    Nathan

    November 9, 2012

  2. Get rid of the Romanov’s and Hearts might just survive.

    Nobody wants to see them go the way of Rangers FC.

    Adam

    December 30, 2012

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