Four Star Daydream: The Portsmouth Ownership Saga Continues

A winding-up order for £1.6 million in unpaid PAYE hangs over Portsmouth Football Club. As the January transfer window ticks down, manager Mike Appleton is hamstrung, forced into a one-in, one-out policy with a squad already down to just eighteen players. The reason for this paralysis is depressingly familiar: the club is so entangled in debts owed to its former owner, Balram Chainrai, that any sale is financially unworkable for a serious buyer.

The current mess began in November. The club’s owner, Vladimir Antonov, saw his assets frozen amidst an extradition case involving allegations of fraud and forgery. This sent Portsmouth’s parent company, Convers Sports’ Initiatives (CSI), into administration. The move was forced by Chainrai, who placed a charge on CSI after it failed to make the first payment for the purchase of the club. Without Antonov’s money, CSI was insolvent.

Antonov had previously passed the Football League’s ‘Owners and Directors’ test, a decision that looks worse by the day. His bank, Snoras, has collapsed, triggering the charges against him. Before that, he had been permitted to ‘lend’ Portsmouth £10.8 million through CSI, plunging the club deeper into debt. In effect, the League’s vetting process simply rubber-stamped the accumulation of yet more unsustainable debt at Fratton Park.

The Bigger Fool

With CSI in administration, the club has been for sale since the end of November, primarily to ensure Chainrai, as secured creditor, gets his money back. The situation seemed to call for what football economics terms a ‘pretty big fool’ to step forward. And then along came Joseph Cala.

Cala’s main business interest is reportedly the construction of undersea resorts and casino ships, a venture that has so far failed to build anything. His company, Cala Corp., has recorded losses of over $2.4 million and holds an accumulated deficit of £9.3 million against net assets of just $6,377. His previous foray into football ownership, at Italian Serie C club Salernitana, lasted for part of February last year before the club collapsed after he failed to pay the wages.

This background should have set alarm bells ringing at Football League headquarters. Yet, as the media interest grew, Cala presented himself as a near-certainty. He claimed to be 90% sure of a deal on Thursday, rising to 95% by Friday morning, with plans to slash the squad to ten players and take a hands-on role. The entire proposition was ludicrous, but it transpired that the administrator, Andrew Andronikou, had been entertaining Cala as his preferred buyer.

A Blessed Relief

The charade ended on Friday afternoon. Cala withdrew his offer, citing an unwillingness to lodge a £3m to £5m guarantee into his lawyer’s account for Chainrai’s company, Portpin. With his departure, Andronikou’s bullish talk of a preferred buyer evaporated, replaced by vague references to ‘two or three parties’ still in contention. One can only conclude that Cala, a man whose business losses are in the millions, was his main hope.

The withdrawal was a blessed relief for Portsmouth supporters. Fans, organised through the Supporters Trust, had been conducting their own research, wary of the Football League’s ability to properly vet candidates after the Antonov debacle. The Trust had offered to assist the League, stating that the club “cannot afford to once again be handed to anyone who does not have the finances to stabilise the club.” Given Portsmouth’s history of owners, anything had seemed possible.

Cala’s brief, absurd appearance on the scene wasted valuable time. The unpaid £1.6m tax bill is a direct consequence of the club’s cash flow crisis, which was known about back in November. It appears the club has once again been using the taxman as an unauthorised overdraft while a buyer is sought. The whole saga seems a repeat of the events that led to administration in February 2010: an unpaid tax bill, a desperate search for a buyer, and Chainrai holding all the cards.

This time, however, administration may not be an option. The club is already in a CVA, on which it has yet to pay a penny. A court could easily decide to send the club straight to liquidation. This pressure gives Chainrai a choice: drip-feed the club money to keep it a going concern, or let it go to the wall. He seems determined to get his money back in full, repelling other potential buyers. The Pompey Supporters Trust was told it would need proof of £100m in funds just to look at the books. Cutting his losses does not appear to be an option.

Portsmouth MP Mike Hancock has now called on the Sports Minister to intervene, stating, “We have been serially shafted.”

But government intervention takes time. Today, a new website, Pompey’s 12th Man, has gone live for fans to register their support for some form of supporter ownership. With the club caught in a spider’s web of debt and dubious suitors, it seems there is no one else left to help.