Portsmouth’s Administration – Postponement Or Salvation?

Portsmouth’s Administration – Postponement Or Salvation?

By on Feb 23, 2010 in English League Football, Latest | 7 comments

The mask now seems likely to slip. After seventeen years of wearing a mask of opulence and limitless wealth, the Premier League self-made reputation as The Richest League In The World will face its most severe test yet, as Portsmouth face the inevitable and collapse into administration. Their only reasonable prospect of avoiding administration would be to find new owners by the end of the week, which is an admission in itself that the club has simply been unable to find the new investors that had been talked about as being the next people to try and sort the carnage at Fratton Park out.

It has been a desperate couple of weeks for Portsmouth, starting with an attempt to persuade the Premier League to bend FIFA transfer window rules in order to allow them to sell players. There is no reason they can’t sell players outside of the transfer window – this is a common misunderstanding about the transfer window – but Portsmouth had requested that the Premier League allow players signed by clubs during the transfer window to play before the end of this season. Such an arrangement would obviously make said players more attractive to clubs looking to buy. However, even though they received positive signs from FIFA on the matter, the Premier League turned the request down, stating that it this would “not be an appropriate course of action at this time”.

What, then, will administration mean for Portsmouth? Well, most importantly it freezes all of their debts, meaning that no further legal recovery action can be taken against them. Friday’s court case will not be heard, as HMRC can no longer petition the winding up of the company. The club will be deducted nine points by the Premier League, which will reduce their points haul for the season to a feeble seven, and will almost certainly condemn to relegation at the end of the season. The administrator (who, it has already been confirmed, will be paid for by Balran Chainrai himself) will then be faced with the job of selling assets, trying to keep the company alive as a going concern and trying to find a new buyer for it.

The major problems – and, considering that this is Portsmouth that we are talking about here, these things have to be viewed as relative – for the club will start if they are relegated from the Premier League and they do not agree a CVA as a route out of administration. If Portsmouth were to be relegated, they would be subject to the Football League’s rules on such matter, and clubs such as Rotherham United and Luton Town, for example, will be more than happy to confirm that they can be draconian, should they choose to be. All previous cases of clubs that have exited adminstration without having a CVA in place have resulted in further deductions for the start of the following season of between fifteen and twenty points. Anyone seeking confirmation of the Football League’s view need look no further than this quote from its chairman, Lord Mawhinney, from just a couple of weeks ago:

People try to find excuses about why clubs have had to go into administration. One of the sadnesses is that there is never enough recognition of the small businesses, the taxpayer, and worthy groups like St John Ambulance who are left owed money after doing business in good faith.

Why, though, would Portsmouth find it difficult to agree a CVA, though? There are two obvious answers to this: FA rules and HMRC intransigence. The FA insists that all football debts are settled in full, and Portsmouth still owe at least £10m for Sulley Muntari. HMRC are said be owed in the region of £12m. HMRC will not – we already know this much – vote in favour of a CVA. Unless they can find the money to settle these debts in full, a CVA to cover their other creditors seems highly unlikely to be approved. Portsmouth, it would seem, will be starting life back in the Football League with quite a fight on their hands in order to avoid a second successive relegation.

The club is believed to have three groups interested in buying the club, but all eyes over the last few weeks had been on the New Zealander Victor Cattermole. Cattermole, however, required thirty days to carry out due diligence before purchasing the club (unsurprising, considering the state that it is believed to be in) and confirmed that he would not be purchasing the club prior to the court hearing on Friday. It is  possible that Portsmouth may dodge a bullet, however, if Cattermole decides that his loyalties lie elsewhere. His company, Endeavor Plan, specialises in what it describes as “network marketing”, which seems to be virtually indistinguishable from pyramid selling. In 2003, the company drew the attention of the New Zealand Securities Commission (which oversees the regulation of investment in New Zealand), who had this to say about Endeavour Plan:

The Securities Commission has banned advertising for an investment scheme which appears on the web site www.endeavorplan.com. This web site appears to be administered by a company in the West Indies called Endeavor Portfolio Corporation Limited. The web site also states that its founder is Mr. Victor Cattermole. We understand that Mr. Cattermole is a New Zealander and resides in Wellington.

The scheme invites the public to contribute funds by way of credit card. It is said that these funds are then invested in a British Virgin Islands fund called CSA Absolute Return Fund Limited. This is done through a Hong Kong company. The scheme offers commissions to investors who introduce other investors.

The Commission banned advertising for the scheme because it does not comply with the law. To be offered in New Zealand the scheme must have a registered prospectus and an investment statement. These documents are not available.

The Commission warns people about committing any money to the scheme. The Commission warns people generally about investment schemes that they find on the Internet. Investments promoted on the Internet must still comply with New Zealand law.

The authorities will have to wait to decide whether he is a “Fit & Proper Person” for the time being, though, unless new owners can be found by Thursday afternoon. If they can’t, and Chainrai doesn’t put the money in to stave off the bid, then all eyes will focus on Andrew Andronikou of the accountancy firm UHY Hacker Young, who has reportedly already been approached by the club to act in the case of administration being required. What is important to bear in mind is that Andronikou has no responsibility to act in the best interests of Portsmouth FC. His job is to secure the best deal for the club’s creditors while keeping the business alive as a going concern. He will sell what he has to sell. It starts to feel as if the Pompey Trust – which already has 1,000 members – formed just in time.

The richest football league in the world, the one that boasts the biggest global pull of all, sees its first club head towards insolvency without having left it first. Supporters may well pause and think, “there but for the grace of God go I”, but the belief that it will always happen to someone else is not a healthy one. Leeds United, Sheffield Wednesday, Queens Park Rangers, the list goes on – once well established football clubs reduced to shadows of their former selves by a lack of managerial wherewithal. Portsmouth will likely slip quietly off the Premier League radar at the end of the season, but it feels as if there problems will only start with the end of this season. Meaningful change in the way that clubs run themselves, however, seems as far away as ever.

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    7 Comments

  1. “The FA insists that all football debts are settled in full, and Portsmouth still owe at least £10m for Sulley Muntari.”

    This is interesting, as it’s not 100% true, and could therefore open up a bigger can of worms, on a bigger scale. The FA insists that all Football Creditors are paid – this is a little different from football debts, as Udinese may well find out.

    As far as the FA are concerned, Football Creditors are:

    The FA
    The Premier League, Football League, Football Conference, Northern Premier League, Southern League, Isthmian League and their clubs
    Any full-time or part-time employee of those clubs (or ex-employee if owed money from their tenure) – note, no distinction is made between footballing and non-footballing employees, so admin staff are considered Football Creditors.
    The Professional Footballers’ Association
    The Football Foundation
    Any Affiliated Association (essentially the County FAs)
    Any other affiliated clubs or leagues

    However, neither Udinese or the FIGC (Italian FA) are affiliated to the FA. So, as the money owed for Muntari appears to be a debt, rather than an a future instalment, Udinese are a normal creditor, and have to line up with the Taxman, St John Ambulance and the other non Footballing Creditors. Of course, because most of the clubs that have entered administration haven’t bought players from abroad, and owed money for them, this hasn’t come up before.

    However, when Ipswich were in administration in 2003, they still had outstanding instalments due for three foreign players who had been bought. But, in one of those cases – that of Thomas Gaardsøe signed from Aalborg Boldspilklub (AaB) – there were payments due triggered by the number of games Gaardsøe played, and £100k was owed when Ipswich went into administration, and AaB had to vote in the CVA and accept a reduced amount, because they weren’t considered a Football Creditor. So, if the Muntari money is considered a debt, then Udinese could find themselves getting stiffed big time, and if they have to accept 10p in the pound or less, it will be interesting to see if the FIGC or UEFA have anything to say.

    Rob

    February 24, 2010

  2. Andronikou was our administrator at Swindon. If he’s appointed, God help Portsmouth and their creditors. You’re right that administrators are bound to act in the best interest of creditors but he showed no sign whatever of doing that at Swindon, or in the best interests of the club. Instead his overseeing of both our administration and subsquent CVA seemed suspiciously aligned with the interests of his mate Mike Diamandis who’d taken the club to the brink of ruin in the first place. But then, it’s not often in the insolvency trade that you get a customer who brings you as much repeat business as Diamandis has brought Andronikou over the years.

    Paul Davis

    February 24, 2010

  3. It is an absolute disgrace that a club WITHIN the Premiership cartel can go into administration at all. As if getting £50m pa. in TV money and sponsorship isn’t more than enough to run a decent club!

    Storrie and his henchmen should be fired, fined his entire salary since “working” there and tried for tax evasion.

    But more than likely Portsmouth will just “do a Leeds” and escape paying their real debts because their loyal fans are too valuable to the Football League to ignore.

    Martin

    February 24, 2010

  4. B*ll*cks to it all. This is tantamount ot cheating in my view. Clubs spending money they don’t have, and taking players away from other clubs that probably could have afforded them at reasonable wages etc. It’s about damn time that football clubs were required by the footballing authorities to be run within their turnover. Besides, isn’t it illegal to allow a company to trade whilst knowingly insolvent?

    RichardG

    February 24, 2010

  5. Martin – I agree 100% with you about Storrie – he is of ocurse already being charged with tax irregularities.

    I was amazed when I saw that he’s worked at four football clubs – West Ham, Southend, Notts County and Portsmouth. There’s a common link here ….

    Dermot O'Dreary

    February 24, 2010

  6. Indeed Dermot.

    You would think fans would have learned after the daft West Ham bond scheme he introduced, but sadly fans are (hopefully were) too divided, too stupid or just too apathetic to run such exploitative chancers out of all football for good.

    Martin

    February 24, 2010

  7. Portsmouth have over the last two years signed players that they have not paid for, and could not afford. With those players, they have stayed in the Premier League and won the FA Cup. Had they not had those players, which they should not have, then maybe Cardiff or someone else would have won the FA Cup, and one of those teams that got relegated in the last two seasons would still be in the Premier League. Even the Premier title itself may have gone to another team, if Portsmouth results had been different by playing only players they could afford.
    This club should not be put into Administration, as its been there before and not learned from it, but should be wound up and put out of existance.
    Come on you Saints

    Gossie

    February 24, 2010

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