Portsmouth’s Debt Up To £119m

Portsmouth’s Debt Up To £119m

By on Apr 20, 2010 in English League Football, Finance, Latest | 7 comments

The full extent of the financial horror at Portsmouth, then, is starting to become apparent. It is starting to feel as if every time the club’s administrator, Andrew Andronikou, opens or moves anything, there is a red bill hiding underneath, behind or within it. The figures estimated in the media earlier in the season had put the club’s debt at around the £70m mark, which had seemed insane enough for a club heading for relegation from the Premier League and with a 20,000 capacity stadium. The latest figures to be released by Andronikou, however, make the days of Portsmouth’s £70m debt seem like the carefree days of the past.

The current debt is now £119m, including £14m in unpaid transfer fees for Jermaine Defoe, Sulley Muntari and Glen Johnson, all three of whom have been sold on to other clubs at a considerable (theoretical) profit. The total amount that Portsmouth have been reported as having received in transfer fees for these players was around £50m. This may seem to be absurd beyond absurd, but it seems as if there is no madness that is too great for this club. £14m is owed to Balram Chainrai, the club’s current owner, though the fact that he is a secured creditor means that he will be likely to be paid in full. The £14m from unpaid transfer fees will also be excluded from any proposed arrangement to dig the club out of its woes because, under the football creditors rule, this is effectively underwritten by the football authorities.

The single maddest statistic to come out of Andronikou’s tally is the £9m that is owed to agents. Of this thoroughly depressing figure, £2m is owed to Pini Zahavi and £2.3m is owed to as as yet unnamed agent for the transfer of Lassana Diarra alone. Money well spent, I think we can all agree. If we look at the blocks of unsecured creditors, the former owners of the club (who are owed around £40m between them) could theoretically block any CVA if they stick together. As ever, we can assume that HMRC would vote against any proposed CVA. The size of the debt would surely mean that any CVA would be a very low percentage of the club’s total debt, and they have stated more than once their rank, outright opposition to the football creditors rule.

Quite where they go from here is anybody’s guess. Andronikou has already stated his lack of confidence in the consortium headed by property developer Rob Lloyd. Lloyd was criticised in some quarters for the blaze of publicity with which he launched his group’s interest in the club, and his due diligence was due to start two weeks ago, lasting for seven to fourteen days. There have been no results yet of what this may or may not have turned up, but things took a turn for the strange as the due diligence period started, with Lloyd telling the club that there had been a change in the funding of his bid without him being able to say who the new backers were. None of this cloak and dagger style of dealing with matters fills the watching Portsmouth support with a great deal of confidence about the nature of what is going on at the club at present.

What we can say for certain is that the FA Cup final will hardly dent the club’s finances, regardless of whether they win against Chelsea or not. For the long-suffering supporters of the club, however, this is probably irrelevant and would be entirely understandable if they took the attitude of “eat, drink and be merry, for tomorrow we die”. The club needs to agree settlement with its creditors if it is to have any chance of competing in next year’s Europa League. The club missed UEFA’s deadline of the first of March in order to secure its UEFA licence and, while they can apply for one retrospectively until the end of May, it seems unlikely that they would be granted one if they were still in administration and with no resolution to their financial crisis in sight.

Meanwhile, after a year of stating that there was nothing wrong with the Premier League’s financial model, Richard Scudamore confirmed that the league will be looking to introduce a “means and abilities test” to sit alongside the fit & proper persons test. Whether this is a pre-emptive attempt to circumvent any sort of post-election attempts to regulate the game or not is anybody’s guess, but it is not unreasonable to hold the opinion that the Premier League largely stood by and watched as the club floundered and failed. We will never know whether they were keeping their fingers crossed that the club would hold itself together until the end of this season (thus protecting the Premier League “brand”), but we know for certain that, from the middle of next month, they will be very much the Football League’s problem. The question may then become one of whether they will face another points deduction before the start of next season.

All of the above shines a harsh glare on the laissez-faire economics of the Premier League, and it is to be hoped that the FA and the Premier League learn a lesson or two from this most cautionary of tales. Meanwhile, there seems no definite consensus on who specifically is to blame for what has gone so horribly wrong at Fratton Park over the last two or three years, and the best that we can hope for now is that the club will somehow emerge from this having learnt a harsh lesson about the realities of both football and business economics. Portsmouth supporters, likewise, should enjoy the next few weeks, take a break from the panic and crisis all around them and get behind their team at the FA Cup final. Things may well get more difficult for all concerned before they get any better.

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    7 Comments

  1. Excellent article, but the £14mn for the three players is actually money owed TO Pompey, not BY Pompey. Although the club borrowed against this money, the debt is due to be repaid by Spurs, Liverpool and Inter and not by Portsmouth. Admittedly that still leaves £105mn of other debts for the club to pay off but hey, take whatever positives you can.

    Jack

    April 21, 2010

  2. Pompey’s debt will be enough to prevent HMRC having the necessary 25% to vote any dubious CVA down in the summer, inevitably followed by a lengthy court case about it.

    It all happened before at Chester last summer.

    Martin

    April 21, 2010

  3. I always thought that the reason Glen Johnson’s transfer fee was so exorbitant was that a lot of it was a write off on the money owed to Liverpool for the Peter Crouch deal. If that’s incorrect and Liverpool still owe Pompey however many million pounds as part of Glen Johnson’s transfer, and this wasn’t part of the original deal (i.e. payment in installments) then that just shows what a mess the English game is in, right the way up to the top.

    The Horse

    April 21, 2010

  4. Jack – It’s long been reported that Portsmouth owe Udinese money for Sulley Muntari, as for Johnson and Defoe, if Portsmouth were owed money, then Liverpool and Portsmouth would be under tranfer embargoes. Instead, there are probably further payment instalments outstanding, which is a different thing altogether.

    As for Defoe, consider this situatuon: Portsmouth manager Harry Redknapp buys Defoe for £6m from Spurs, then 12 months later buys him for Spurs for around £15m, including oustanding clauses and fees for Younes Kaboul and Pedro Mendes (both signed by Redknapp) being waived, only for Redknapp to sign back Younes Kaboul for Spurs a few weeks later at a discounted price because of outstanding fees. It’s as clear as crystal, and only in a situation involving the various Portsmouth boards and Harry Redknapp could one actually believe that there’s some truth in the matter.

    Rob

    April 21, 2010

  5. I’ve looked at the CVA proposal (publicly available on the UHY Hacker Young website: http://www.uhy-uk.com/pages/posts/portsmouth-city-football-club-ltd–notice-of-creditors-meeting729.php).

    I’m using ‘owe’ as in ‘money is due’, not as in ‘money is overdue’. Maybe that’s not right, I don’t know, but to me money agreed on an instalment plan is still money owed. I’m not interested in a semantic debate in any case. With that in mind, we owe a total of around £17mn in transfer and loan fees, mostly future instalments, though payments seem to have been missed since February. We still owe Udinese 4 instalments on Muntari (two of which are overdue and appear to have interest accumulating) and Chelsea 3 instalments on Johnson (up-to-date at the moment). However, we are still owed (ie instalments are due to come in) around £14mn from the sales of Muntari, Defoe and Johnson – see http://www.sportingintelligence.com/2010/04/20/exclusive-extracts-portsmouth%E2%80%99s-debts-laid-bare-in-administrators-bombshell-report-210401/ for more, including some scans from the CVA proposal.

    It’s very probable that the Johnson and Defoe sales both contained a write-off of other fees as part of the reported price – especially given that the Pompey M.O. seems to have been ludicrously long-term instalment plans and we do not owe any money for players such as Crouch, Kaboul, Mendes etc. But as a combined total of the Muntari, Johnson and Defoe deals we are due to receive (or rather, the companies we borrowed from are due to receive) around £14mn still.

    Jack

    April 21, 2010

  6. It’s as clear as crystal

    Not to me it isn’t. Could you try again?

    ejh

    April 24, 2010

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