Portsmouth’s Five O’Clock Shadow Must Be Removed

Portsmouth’s Five O’Clock Shadow Must Be Removed

By on Mar 2, 2010 in Finance, Latest | 13 comments

It is, as if you hadn’t already noticed, open season on Portsmouth. There had been precious little sympathy for the supporters in the club in the media, but when it was confirmed that the club were back in court over a challenge by HMRC over the legitmacy of them placing themselves into adminstration, the gloves came off. On the one hand, the club had made themselves none too popular when the adminstrator, Andrew Andronikou, stated that he would be investigating ways in which the club would be seeking to avoid their nine point for decuction for entering into administration. Meanwhile, whilst the team itself scrambled its way to 2-1 win at Burnley. It has been more or less the only piece of good news for Portsmouth supporters over the last week and a half or so.

HMRC’s concerns over Portsmouth’s administration are well-founded. They are owed in the region of £18m and a CVA might see them (and, by extension, us) lose something like 90% of this money. Over the last few weeks, however, the clubs debt has risen exponentially with the latest figure standing at £86m. Considering that just a couple of weeks ago the clubs debt was reported by the Daily Telegraph at being £60m, it is starting to feel almost as if someone is making these figures as they go along. What we can say for sure is that if HMRC are owed from £18m a total debt of £60m, they would have a blocking vote on any proposed CVA. If they are owed £18m from a total debt of £86m, though, they wouldn’t.

On the surface, however, this doesn’t seem to be the reason for HMRC’s interest in the process of their entry into administration. There are two main reasons why HMRC are challenging Portsmouth’s administration. Firstly, they are questioning the independence of Andrew Andronikou. The role of an administrator, it should be remembered, should not be to defend or protect the interests of a company that is entering into administration. It should be to protect the interests of creditors. There would be a clearly conflict of interests if the administrator was seen to be acting in favour of indebted club rather than its creditors. The point of administration is to see if a company can be rescued as a going concern, and not for a supposedly independent administrator to work the figures in order to absolve a company of its debts.

The second issue that has been raised by HMRC is that of the loans that have been put into the club by the four owners that it has had over the last twelve months. The amounts of these loans are critical, as they will decide who holds what proportion of the balance of power at the time that a creditors meeting to vote either for or against agreeing a CVA. Seventy-five per cent of creditors by value have to vote in favour of a CVA proposal for it to be agreed. If Portsmouth, providing their entry into administration is confirmed by the court, were unable to get a CVA approved, they would almost certainly face a further points deduction on top of the initial nine points that they are almost certain to be docked, and may even face liquidation.

In short, there are two reasons in law why a CVA can be challenged by a creditor and overturned in court – unfairly prejudicing one creditor over the rest and material irregularities. It wouldn’t be difficult to draw the conclusion that HMRC are unhappy that these conditions will be met in any proposed CVA without the terms of it even having been drafted yet, none of which is likely to instil much confidence in the hard-pressed supporters of the club. At the High Court this afternoon, the case was adjourned until March 15th by the judge, Mr Justice Norris, whose words carried the ring of being damned by faint praise:

A shadow has been cast over the existing appointment of the administrators and it is clear that shadow should be removed as quickly and cheaply as possible. It is common ground before me that immediate liquidation of the company is a course to be avoided if possible. But it is only possible if properly funded administrators can be put in place.

HMRC’s viewpoint was succinctly summed up by their representative at the hearing, Gregory Mitchell QC. Any club entering into administration – and this is what football clubs and too often their supporters often seem to forget – are at the very last chance saloon before liquidation. The very least thing on the minds of Portsmouth supporters (as it should be at any club that enters into administration) should be the points deduction. It really is the least of their worries. It seems, however, that so many clubs have now entered into administration that it feels almost commonplace for it to happen, all of which understates the severity of the situation. Mr Mitchell, however, sounds a stark warning to anybody still in any doubt about this:

We say there are serious questions that arise and require full investigation as to what financial dealings there have been between the various different owners of the club and between the club and its owners.At the moment, everything is shrouded in mystery.

He also added that there is, “a real concern as to whether administration is feasible at all”. Unsurprising, perhaps, considering that the club’s assets would only cover a tiny proportion of what they owe at present, even if they were all sold. Reports in the Daily Mail today stated that Portsmouth are currently considering selling Fratton Park to Balran Chainrai for £10m and rent it back from them for £1.2m per year. At that sort of rate, the club would have used up all of this money in eight years even if this £10m wasn’t to be offset against their current debts in some form or other. Peter Storrie had overvalued the team by £17m, according to the Guardian.

The club and Andrew Andronikou remain bullish about the club’s prospects. They have no alternative to be. For supporters of Portsmouth Football Club, however, the main hope for survival of at least the spirit of their club lays with the Pompey Trust, an organisation founded only over the last few weeks, to make contingency plans for the worst and to hope amongst hopes that somehow the club can pull through. That day at Wembley, less than two years ago, must seem like a very long time ago already.

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    13 Comments

  1. It’s getting more like Chester last summer every day.

    What is the betting that Al-Faraj doesn’t actually exist?

    Good luck HMRC.

    Martin

    March 2, 2010

  2. Interesting. It almost seems as if the level of debt is being, in some way, engineered. Of course there’s no evidence of that, is there.

    RichardG

    March 3, 2010

  3. Portsmouth have only survived by cheating for years – avoiding taxes, buying players they never intended paying for and paying wages they couldn’t afford to pay. All the time they have been doing this, more honest clubs have been relegated and suffered tremendous financial hardship.

    It’s disgraceful that it’s taken action by HMRC rather than the football authorities to bring all these things to a head – the Premier League and the FA have stood by and allowed this wretched little club to damage many other clubs. They’d still be allowing it to continue, if HMRC hadn’t stepped in.

    Portsmouth should be closed down immediately and all their results wiped off the record. It’s harsh on their fans who’ve done nothing wrong, but the club’s behaviour and continued existence harsher on hundreds of thousands of fans of other clubs who’ve suffered because of Pompey’s corruption.

    Chris

    March 3, 2010

  4. I recall there was an interview with Joe Hart on 5-Live last week (I think). During this was asked about the Portsmouth case, discussed it briefly, and mentioned a player (don’t think he mentioned a name) who Birmingham were interested in and talked too, but they couldn’t afford the wages he’d been offered by Portsmouth. Now, of course, we know that Portsmouth couldn’t afford them either!

    RichardG

    March 3, 2010

  5. We haven’t ‘cheated for years’. We were not the first and will not be the last club to pay for players on instalments or use the financial resources of a wealthy benefactor to pay for players and wages. Whether that is right or wrong is neither here nor there – what is important is that virtually every Premier League club and 70% of Football League clubs are also reliant on a benefactor owner to survive. Remember that our problems started when the money ran out and the loans were called in. Yes, we were mismanaged and there are serious allegations of corruption around (not least the curious links between owners, which delve deeper than the media have picked up on yet) but all in all I don’t think this situation is at all peculiar to Portsmouth Football Club (although there’s a typical Pompey flavour to proceedings) but is an inevitable consequence of the benefactor / investor model of football. Bring on fans’ ownership.

    Bear in mind that I have absolutely no problem with any points deductions or the like and find our tax avoidance pretty distasteful to say the least. Given the stench of corruption around the place I also wouldn’t be averse to liquidation and starting again – frankly, I’ve had more than enough of the whole charade and I’d like to just follow a football team now.

    Jack

    March 3, 2010

  6. Well said Jack, absolutely spot.

    RichardG

    March 3, 2010

  7. Nice one Jack.

    How many other clubs with access to the Sky Premier League millions have gone into administration then?

    This “everyone else is as bad” just won’t wash as it’s simply not true. You are the worst example of financial mismanagement for decades. Take it on the chin and please stop the embarrassing squirming.

    I can only assume that if your house was on fire you wouldn’t worry about it as other houses have burnt down before…

    Martin

    March 3, 2010

  8. You are the worst example of financial mismanagement for decades.

    This fails the “simply not true” requirement imposed by the previous sentence.

    ejh

    March 3, 2010

  9. Like I said, the money ran out and lo and behold it turned out we couldn’t afford to sustain that team without continued investment from an owner. How many other Premier League teams have had two major funding sources (Gaydamak and the banks) halted within six months – indeed, how many have then had to repay a vast bank loan in one go? I’m not denying the mismanagement, it’s embarrassing and everyone who has ran the club over the last few years should never have anything to do with football again, but I’m not sure you can say that, at core, the way the club was run from 2006 until late 2008 when the money stopped was fundamentally different from an awful lot of other Premier League clubs.

    Your fire analogy is flawed (we’re not letting the house burn down, are we, fans are doing all we can to keep the club alive in some form and we’re hardly going down the oh well, not our fault route) – but, on the same lines, if one house burns down because it’s made of straw, that’s a disaster but explicable. If everyone else’s house is made of (maybe slightly less flammable) straw and they don’t fix it, well, you can see what’s coming. You can say we were mismanaged, and we were, horrifically – if you see a Pompey fan who says we weren’t they’re either lying or Peter Storrie (though that’s much the same thing) – and the people running the club should have been far more responsible. On the other hand, it’s easy to be complacent and trust that everyone else isn’t as stupid as Pompey but unless everyone else gets their act together and tries to solve the root cause of the problem it’s only going to happen again. Debt, financial mismanagement and a reliance on a limitless supply of sugar daddy owners all represent great evils within football today and we should be a warning of what lurks around the corner for an awful lot of people should the money run out.

    Jack

    March 3, 2010

  10. How many other clubs have gone into administration whilst still having access to the £40m+ Sky money then?

    It is a complete disgrace.

    Martin

    March 4, 2010

  11. Jack says Your fire analogy is flawed (we’re not letting the house burn down, are we, fans are doing all we can to keep the club alive in some form and we’re hardly going down the oh well, not our fault route)

    All you can.? How abut filling your ground every week instead of thousands of empty (no income) seats .It wouldn’t make a lot of difference you’re so deep in the you know what now but every little helps.

    And as for not going down the not our fault route, if I had the time I’d put links to the – probably in the 100s by now – posts I’ve seen on various Pompey forums and on the Pompey News Online comments, not to mention fans I’ve spoken to, all blaming the Premier League for your predicament. I’m still yet to work out exactly why? your fans are blaming them and how it is they’ve treated you any differently than any other club, but there is definitely a hell of a lot of your fans who don’t think it’s not PFCs fault they are in the situation they are in.

    And remind me, isn’t the current PFC only 10 years old after the previous one went into admin as well? Once could be classed as careless, unlucky, even unforeseen, but twice ! ????

    Wurzel

    March 4, 2010

  12. As Jack rightly points out, Portsmouth’s situation is a symptom of the greater problems in football (especially top-flight football), and the fans are once again blameless – with the money involved at this level, supporter intervention is impossible (in fact it’s almost impossible everywhere). The only surprise is that somehow these teams have been bumbling along for years, begging, borrowing and (dare I say it) stealing to fuel the egos of a select few rich men at the top, and yet Portsmouth are the first to actually enter admin whilst in the Premier League. And while Martin is right to point out that Portsmouth are the biggest fuck-up in recent years, the cases of Bradford City, Leeds United, Southampton, more recently Crystal Palace et al show that Portsmouth aren’t alone in their misdoings. The timing of the admin is all that’s different.

    I would like to know which teams Martin thinks are doing things the right way – and then perhaps we could enlighten him (for there are none).

    Matt Boothman

    March 4, 2010

  13. There would be a clearly conflict of interests if the administrator was seen to be acting in favour of indebted club rather than its creditors.

    That line made me laugh…as a Swindon fan,we had Mr Anderonikou as our administrator, and for the last 12 months or so, until we were sold to our current owners, Mr Andronikou spent all his time acting in favour of our club and NOT in the creditors best interests. The final part of our CVA payment, £900k which was due in June ’07, was delayed as the then owners openly admitted they hadn’t the money to pay it, yet AA refused to call a creditors meeting, despite the creditors committee requesting one.

    Instead he backed the then owners, who said they had been having talks with mysterious backers, which hardly saw they light of day.

    This is a quote from May’ 07 :

    Quote from: Andronikou boasting about new mystery investors who never materialised date=15th May 2007
    ‘I have information in my hands that the club are very close to agreeing a deal to secure the long term future of the club, this would deal with the CVA as well. It’s brilliant news. I am championing the cause and something could be announced within the next three to four weeks’.

    And from Sep ’07 :

    Quote from: Swindon Advertiser reporting Andronikou on how well he’d done with the BEST takeover date=11 Sept 2007
    Town’s administrator is confident the payment of the outstanding £1.2million Company Voluntary Arrangement is now a formality, with wealthy Portuguese investors about to secure the club’s long-term future.

    BEST Holdings were a group of Portuguese ‘investors’, who pulled out within weeks,who never put a penny in, but made us sign 3 players, who we had to pay off in the end, because they were, at best (pardon the pun!!) crap.

    When the club was eventually sold, HMRC was owen another £3.3m, due to the club not paying any tax or VAT for 18 months!!

    And while the final payment of the CVA payment was paid to Mr Andronikou to pay out to the creditors over a year ago, the club has yet to be released from the CVA as of a few days ago.

    And yet the national press has been saying that he saved us in 2002 and 2007…yet it couldn’t be further from the truth!!

    Alan J

    March 4, 2010

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