The perils of administration. A cautionary tale.
Since October 2012 the Pompey Trust’s bid business partners have committed £800,000 of their own money to the club. If the Trust bid succeeds they will convert this sum to equity in the club. If the Trust bid fails they lose the lot, some individuals to the tune of six figures. As an article of faith in the Trust bid that is quite something.
The bid partners, collectively referred to as the High Net Worth Individuals (HNWI), and some of the members of the Trust presidents’ club, have been keeping PFC running since October by making up the shortfall in the club’s running costs.
If the bid fails to get control of the club they stand to lose the lot. They will get nothing back in liquidation and nothing if someone else takes control of the club.
The question that many erudite Pompey fans have been asking is; ‘Why have they had to do it?’ Indeed, why has the club been running at a loss month to month whilst in administration? The HNWI began subbing the running costs at the end of October 2012, when the Trust became the preferred bidder of the club, after the previous preferred bidders Portpin failed to satisfy the Football League’s questions and were deemed ‘unlikely’ to pass the Owners and Directors’ Test.
Since then the HNWI have put £800,000 into the club over four months, indicating an overspend of about £200,000 per month. Fans have to ask what money was being used in the months before that, from August when players were signed until October. £600,000 came from … where? Was this creditors’ money?
January saw a round of cost-cutting and the recent player cull indicates that the club is now likely to be able to run at break-even and the HNWI can take a breather from writing the cheques. So, those same erudite fans are forced to ask, ‘Why weren’t those costs cut back in October?’
Meanwhile, some of those same players culled from the wage bill complain that promises were made that have not been kept. These are players signed in August, six months after we went into administration. So again the erudite are puzzled. Who was in a position to make promises to these players? And why was that person signing players whose wages took us into the red? If we were working to Portpin’s budget proposed in the June CVA why weren’t these issues addressed at the beginning of October when Portpin ceased to be a viable option?
Pompey could be accused of cheating by fans of other clubs if their results hadn’t proved to be so irredeemably awful. Actually that hasn’t stopped some.
It could be said, in mitigation, that the administration would have been over in December if the court case to decide the value of Fratton Park had gone ahead. It was all that was needed to settle the sale of the club to the Pompey Supporters Trust. The HNWI may well have thought they were in for six weeks cheque writing rather than three months.
But the court case was adjourned. The cause seems to be two issues in the remit of the administrators; the paperwork for the sale of Fratton Park to the Trust’s Property Developer partner, Stuart Robinson, and the possible over-sight of a floating charge held by Portpin on PFC.
Fan erudition to the fore; ‘How can such a highly rated firm as PKF make these basic errors in the detail of their case?’
In respect of the sale of Fratton Park, this oversight has been beneficial to the Trust as they were able to take the time allowed to improve their bid. They are now in a position to own Fratton Park outright without relying on Robinson to buy it. Loans are in place from Portsmouth City Council and another source, at preferential rates, that will enable the club and the ground to be in the Trust’s ownership from the start. These loans have been factored into the business plan and will be paid off over two years.
The Trust bid is fully funded, signed, sealed and ready to go. Frustratingly the rest of the deal is out of their hands. All that is required is for the courts to agree the value of Fratton Park for the purchase to go ahead. The adjourned date was part of that process. Portpin are being intransigent on the setting aside of their charge of £18m on the Club and ground. The Trust offer, based on several independent valuations, is £2.75m for the ground plus a settlement of the agreed unsecured and football creditors bill as detailed in the CVA.
It is a puzzle how the£2m floating charge was missed as it is part of the only charge held over PFC (2010) Ltd. Portpin’s charge was both fixed (on Fratton Park) and floating (on the business of PFC). The Trust’s offer was on the assumption it dealt with the charge. So why would PKF make an application to the court that did not do so?
This charge is not going to disappear. The Trust bid is not going to increase to cover it, as it is a fixed price offer, already agreed. So does anyone have to pay it? Are PKF liable for this possible mistake? Are Portpin in a position to exploit this error?
Portpin and PKF have been talking. As they should if a resolution to the case is to be sought. The adjournment of the hearing due on 31 January until 14 February can only be to allow these discussions to continue, surely? Although it seems the whole situation is taking on the flavour of a game of cat and mouse.
Meanwhile the Trust is expected to wait. The £800,000 is spent; £800,000 which was given in good faith by the nominated preferred bidders of the administrator. One final thought from the erudite, ‘If the Trust bid fails due to the administrator’s mistake, are PKF liable for this money?’
Fans are asking why this is taking so long. There is a viable buyer ready and waiting. This club has suffered enough at the hands of self-interested businessmen. It would seem it still has to wait on the wrangling of two more groups of them. It seems administrators prove to be no better at running football clubs than any other businessman. The culture of overspend prevails.
The Trust has reached a point where negotiation is no longer an issue. It is time to say enough, it stops here. Time to set PKF a deadline beyond which our offer will not reach. The Trust chair has stated they have a target date of 1 March for their takeover. Any hitch in the completion of that deadline will not be down to them.
So what are the administrators waiting for? Fans would like to know just why they cannot complete on the deal.
The Pompey Supporters’ Trust is still taking pledges for community shares. Details can be found here.
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