The Chips Are Down in Pompey's Ownership Roulette

A Paradoxical Possession

The offer from the Pompey Supporters’ Trust for Portsmouth Football Club is on the table. This represents one of the most significant steps in the history of the supporter trust movement, not simply because a trust is bidding for a club so recently in the top flight, but because of who they are bidding against. They are taking on the most paradoxical owner in the club’s history: Balram Chainrai.

Chainrai, a self-avowed ‘reluctant owner’, claims to not want the club, yet he has been a persistent presence since August 2009. His involvement began when he and his business partner Levi Kushnir were put forward as potential new owners. The seller at the time, Sacha Gaydamak, was reportedly unwilling to do a deal with them as they were suing his father in Israel. Instead, Gaydamak sold to Sulaiman Al Fahim, who lasted just one month before an unknown Arab consortium, allegedly owned by Ali Al Faraj, took over on 5 October 2009. The very next day, Chainrai and Kushnir’s company, Portpin, held a charge over Fratton Park.

That charge has defined the club’s downward spiral ever since.

The Weight of a Charge

Portpin added another charge in January 2010, weeks before Portsmouth entered administration for the first time. When Portpin gained ownership of the club out of that administration in October 2010, the charge was switched from the liquidated old company to the new one. This manoeuvre has been questioned in court, as there was no evidence of new money being introduced to the business. Player acquisitions were fraught with promises that were oddly botched in practice.

In June 2011, Portpin sold the club to CSI but retained their charge over Fratton Park, presumably hoping the instalment-based deal would finally see their original debt paid off. CSI, however, defaulted under dramatic circumstances, falling into the over-spending trap and adding £10.5m of debt to the club. Both CSI and Portsmouth ended up in administration. As the charge holder over both companies, Portpin retains its influence over Portsmouth’s future. This single factor explains the lack of interest from other parties. Any prospective buyer has been asked for funds far beyond what the club is worth, simply to satisfy Portpin’s charge of around £18m.

The involvement of Portpin has led to two administrations and contributed to the club’s slide into League One. It has laid a blight on any chance of sustainable development.

An Offer of Last Resort

Chainrai maintains he is an ‘owner of last resort’, tabling a bare bones offer to purchase the club out of its current administration merely to stave off liquidation. Liquidation would be bad news for Portpin. The club’s ability to function in the Football League would die, and with it £14m in parachute payments. The only asset of any value, Fratton Park, would be dead too. Portsmouth City Council has made it clear that no planning permission will be given for anything other than a sports venue on the site.

His offer is £500,000, which translates to 2p in the pound for creditors. He has offered to pay football creditors and small businesses himself, a move that makes sense when parachute payments will exceed these costs. His offer is conditional on the administrator, Trevor Birch, reducing the current wage bill, which still includes two players on Premier League money. According to Levi Kushnir, as a reluctant owner, Chainrai would seek to be out of the club within three years, just after the parachute payments cease.

Financially, it stacks up for him. He acquires the club for a good price, reduces debts from his previous ownership without paying a penny, accesses parachute payments and retains the asset. As a football club, however, it looks less than enticing. He is pursuing £18m on an asset worth far less. Valuations of Fratton Park vary wildly: a ‘book value’ of £13m, a ‘going concern’ price of £10m, a £5m valuation from an unnamed buyer, a £2.1m value from an independent source, and less than £1m in liquidation. All fall short of the charge that sits on it.

The Supporters Play Their Hand

The Pompey Supporters’ Trust’s bid, entirely fan-funded, also comes with a condition regarding player salaries, but it includes a bid for the ground. This makes the creditors’ meeting on Monday 25 June a very interesting proposition. It ensures Portpin is not the only option. The key is the disputed value of Fratton Park. If the Trust’s offer represents ‘fair value’ for the ground and offers creditors more than 2p in the pound, then Birch can argue it is a better deal. It gives him the ability to test the value of the ground in court and, if he wins, to sell Fratton Park ‘as if it were not subject to the security’, as provided for under the Insolvency Act.

Advised by Begbies Traynor, the Trust has played a neat ball back into Portpin’s court. Not only does it offer a more sustainable future, it offers a chance to remove the debt millstone the club has carried for three seasons. If Chainrai is truly an owner of last resort, he has been offered an easy way out. He can accept the Trust’s valuation and walk away, cutting his losses. Or he can face a long court process with a chance of having his entire involvement in the club brought into the open.

The clock started ticking at the creditors’ meeting, after which there is a 28-day grace period where offers can be considered. Portpin could up their offer, which would rather belie their claimed reluctance. It all depends on which desire wins out: the desire to cling to a financial asset, or the desire to run a football club for the benefit of the community of Portsmouth.