At first glance it seemed like bad news. Another spanner in the Pompey Trust bid for ownership of the club. Balram Chainrai’s Portpin are not happy at the Football League’s rejection of the Keith Harris bid for Pompey. On Friday 22 Februaury the BBC website reported:
Portpin claims the Harris bid would mean it received £6.3m for the stadium, as opposed to the £3m currently being offered by the PST.
It claims ruling out consideration of other offers “unlawfully limits the ability of the administrator to fulfil its role in securing the best terms for creditors”.
And Portpin has warned that if alternative bids are not considered, the League “will leave itself exposed to legal action for damages from creditors which could amount to millions of pounds”.
A spokesperson from Portpin added:
“We have made clear that we are agnostic as to the source of the solution for Portsmouth Football Club and welcome whichever bid offers both the best deal for the creditors of the club and provides the highest degree of certainty for the supporters in bringing Portsmouth out of administration.
“There are now at least two offers for the club, one from the Supporters Trust and one from a consortium which includes Keith Harris, and legally they must both be considered on their merit.
“After more than a year of uncertainty, this process must be brought to a close. We are calling on Greg Clarke, Chairman of the Football League, to commit publicly to the Football League reviewing any bid that is put to it for approval by the administrators.
“If Mr Clarke fails to provide everyone with the certainty that is needed on this issue, the Football League will have no option but to accept its share of the responsibility for the damage that could be caused to Portsmouth Football Club, its creditors and the other members of the Football League which may not end up recouping any of the money owed.”
Pompey blogger Micah Hall, on the other hand, sees this as good news.
Here is the full text of his rationale:
The press release from Portpin is great news for the PST. It contains a series of tacit admissions which reinforce my certainty that the Fans bid for Pompey will succeed.
Admission number 1:
Their threat of legal action against the Football League is obviously intended to mean they will attempt to sue the League for the difference between what the PST deal would give them and the Harris deal would offer.
Until that actually happens and they are deprived of the money they would have no case. So this would be retrospective legal action against the League. It’s hard to see what claim they would have against the League in any case, Portpin as creditors have no contractual relationship with the League. It’s not The Leagues job to look after Portpin.
Portpin could ask PKF to sue the League on their behalf after selling Pompey to the PST but I’ve got a funny feeling PKF won’t fancy it.
Anyway, it’s all irrelevant to us.
So tacit admission number 1 is that they can’t stop the league standing firm in their decision to only deal with the fans bid. Good news!
Admission number 2:
If Portpin were so confident of their valuation case they would simply say – “It’s all academic, when we win the valuation case the League will be forced to look at the Harris bid.”
However, their legal attempts to force Portsmouth City Council and now the Football League to change tack reveal the fundamental weakness of their position.
A source close to Portpin has rushed to assure anyone who will listen that they will win the case on valuation based on a bid from Simon Jordan that apparently offered £8m for the ground and from Harris whose valuation is £5m. Their fundamental problem is that these valuations are stunningly irrelevant.
Those ‘bids’ are not part of the process. Unless it is a bid that can succeed it has no relevance. The market value of the land is what someone who can buy Pompey will pay for it, not what someone who happens to want to but isn’t or can’t would pay for it. It’s totally irrelevant.
The reason lies in Section 71 of the Insolvency Act under which the valuation case would be heard. The administrator is able to ask the court to release a charge at market value as long as it is in line with the aims of the administration. The aim of the administration is to secure the best deal for creditors.
And here is the rub: you can only collect the £8.5m in parachute payments to give to creditors if you can take the club out of administration and receive the golden share. The Harris bid cannot receive the golden share so their bid cannot serve the aims of the administration, so PKF are obliged to forget about it. Simon Jordan’s bid is not a bid – it’s gone and it’s too late to return. Sulaiman Al Fahim’s heroic attempt to open a bank account never amounted to anything.
So market value comes down to two factors:
1. What a bidder still in the process is prepared to pay
2. What an independent valuer assesses the value of the land to be
We know that the fans bid has a series of valuations. Not one of which is as high as their offer of £3m.
So if Portpin were confident that their own valuations would blow this out of the water, why are they trying to push the Football League and Portsmouth City Council into retreat? (Incidentally, Harris spokesman Bick told me the legal grounds on which they felt the Council’s loan was susceptible to challenge. By a curious process of telepathy, Portpin issued a challenge on those same grounds a few days later. Of course Portpin and Harris are in no way connected so just a massive coincidence).
This is seemingly an admission that they don’t fancy their chances of winning the valuation case one bit.
Admission number 3:
Why didn’t Portpin lodge their own bid? They’ve repeatedly tried to tell people that despite the 6 page letter they got from the League explaining why there was little or no likelihood of them passing the Owners and Directors test, that they were able to pass.
Ok, so why not resubmit their own bid three months ago? Why wait till now to fight for the Harris bid to be considered?
Admission number 4:
If the Harris bid values Fratton Park at £5m and Keith Harris intends to rent Fratton Park for one year, then the only possible conclusion to be drawn from Portpins figure of £6.3m for Fratton Park is that the rental for that year is £1.3m. Anyway, whether these numbers are correct or not, the whole arrangement of paying rent for Fratton Park was described in the following terms in 2012, by er, Portpin:
“We strongly believe that Fratton Park and the Club must stay together as one entity. There will be no cash drain for lease payments to a third party for the use of Fratton Park”
In order for Harris to lease Fratton Park and then buy it from Portpin, Portpin would have to own it. At present, they do not, they simply have a charge on it – with Portsmouth Football Club in administration owning the freehold.
So tacit admission number 4 is that the first thing that would happen under the Harris deal is that Portpin would be given the freehold of Fratton Park. Can anyone possibly imagine the Pompey Supporters Trust giving fans money to Harris and giving Fratton Park to Portpin in the process? Would we ever get Fratton Park back? Read Neil Allen’s piece from Harris PR man David Bick and decide for yourselves;
The ‘stadium deal’ described by Bick centres on leasing Fratton Park from Portpin rather than buying. It is with a view to a permanent purchase, although Bick was unable to pinpoint the time frame for completion of the sale. What’s more, he admits Portpin wanted it structured that way.Bick added:
‘There’s a deal leasing the stadium. In terms of Keith buying it, they (Portpin) do not want to do it that way at the moment.‘The sellers want to take rent for a period of time. It is particularly to do with future value, they don’t want a panic sale or lower valuation.
The Portsmouth News 16th February 2013.
To me that looks like there would be a valuation done in a year. Which is where we came in really in this blog. Valuations seem to be somewhat controversial and difficult.
Final point on this: Portpin said that paying rent to a third party threatened the clubs sustainability. If they were right and Pompey were to hit the rocks again, Portpin would be outright owners of Fratton Park this time.
Tacit Admission number 5:
Unless Portpin can get the Harris bid back into official consideration, they are going to be out of Pompey in the next 3 or 4 weeks.
The other problem for the Harris bid is this: sources close to the bid confirmed to me and others at the outset that it was an outline bid, a proposal. According to sources who met with senior trust members at the time there were weeks of work to be done before the bid could actually go to the Football League.
The league met three days later and told PKF it was a no-go, at which point presumably no further work was done on it by PKF. This is all academic, because that deal isn’t on the table any more. Harris ‘restructured’ his bid again on Monday. Presumably he resubmitted it to PKF, and presumably again they did no further work on it. So there is no bid. It’s paper no-one has bothered to read. So any approval by the creditors committee is also presumably voided by the fact that this is now not the same deal, although possibly the terms to creditors may be the same.
All that bluster about being ready to complete and not requiring due diligence is so much hot air. Harris may not, but PKF have a duty to only pass a bid to the League when they are sure it will meet all their criteria, business plan etc etc. This process has taken three months since the Trust revised its bid and took at least as long to verify Portpin’s before passing to the Football League.
And the League have confirmed three times they won’t change their minds so no-one is even going to start the process, let alone finish it.
Which means, we are going to win.
Micah Hall is on Twitter here.
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