Portsmouth’s Administration – Postponement Or Salvation?
The mask now seems likely to slip. After seventeen years of wearing a mask of opulence and limitless wealth, the Premier League self-made reputation as The Richest League In The World will face its most severe test yet, as Portsmouth face the inevitable and collapse into administration. Their only reasonable prospect of avoiding administration would be to find new owners by the end of the week, which is an admission in itself that the club has simply been unable to find the new investors that had been talked about as being the next people to try and sort the carnage at Fratton Park out.
It has been a desperate couple of weeks for Portsmouth, starting with an attempt to persuade the Premier League to bend FIFA transfer window rules in order to allow them to sell players. There is no reason they can’t sell players outside of the transfer window – this is a common misunderstanding about the transfer window – but Portsmouth had requested that the Premier League allow players signed by clubs during the transfer window to play before the end of this season. Such an arrangement would obviously make said players more attractive to clubs looking to buy. However, even though they received positive signs from FIFA on the matter, the Premier League turned the request down, stating that it this would “not be an appropriate course of action at this time”.
What, then, will administration mean for Portsmouth? Well, most importantly it freezes all of their debts, meaning that no further legal recovery action can be taken against them. Friday’s court case will not be heard, as HMRC can no longer petition the winding up of the company. The club will be deducted nine points by the Premier League, which will reduce their points haul for the season to a feeble seven, and will almost certainly condemn to relegation at the end of the season. The administrator (who, it has already been confirmed, will be paid for by Balran Chainrai himself) will then be faced with the job of selling assets, trying to keep the company alive as a going concern and trying to find a new buyer for it.
The major problems – and, considering that this is Portsmouth that we are talking about here, these things have to be viewed as relative – for the club will start if they are relegated from the Premier League and they do not agree a CVA as a route out of administration. If Portsmouth were to be relegated, they would be subject to the Football League’s rules on such matter, and clubs such as Rotherham United and Luton Town, for example, will be more than happy to confirm that they can be draconian, should they choose to be. All previous cases of clubs that have exited adminstration without having a CVA in place have resulted in further deductions for the start of the following season of between fifteen and twenty points. Anyone seeking confirmation of the Football League’s view need look no further than this quote from its chairman, Lord Mawhinney, from just a couple of weeks ago:
People try to find excuses about why clubs have had to go into administration. One of the sadnesses is that there is never enough recognition of the small businesses, the taxpayer, and worthy groups like St John Ambulance who are left owed money after doing business in good faith.
Why, though, would Portsmouth find it difficult to agree a CVA, though? There are two obvious answers to this: FA rules and HMRC intransigence. The FA insists that all football debts are settled in full, and Portsmouth still owe at least £10m for Sulley Muntari. HMRC are said be owed in the region of £12m. HMRC will not – we already know this much – vote in favour of a CVA. Unless they can find the money to settle these debts in full, a CVA to cover their other creditors seems highly unlikely to be approved. Portsmouth, it would seem, will be starting life back in the Football League with quite a fight on their hands in order to avoid a second successive relegation.
The club is believed to have three groups interested in buying the club, but all eyes over the last few weeks had been on the New Zealander Victor Cattermole. Cattermole, however, required thirty days to carry out due diligence before purchasing the club (unsurprising, considering the state that it is believed to be in) and confirmed that he would not be purchasing the club prior to the court hearing on Friday. It is possible that Portsmouth may dodge a bullet, however, if Cattermole decides that his loyalties lie elsewhere. His company, Endeavor Plan, specialises in what it describes as “network marketing”, which seems to be virtually indistinguishable from pyramid selling. In 2003, the company drew the attention of the New Zealand Securities Commission (which oversees the regulation of investment in New Zealand), who had this to say about Endeavour Plan:
The Securities Commission has banned advertising for an investment scheme which appears on the web site www.endeavorplan.com. This web site appears to be administered by a company in the West Indies called Endeavor Portfolio Corporation Limited. The web site also states that its founder is Mr. Victor Cattermole. We understand that Mr. Cattermole is a New Zealander and resides in Wellington.
The scheme invites the public to contribute funds by way of credit card. It is said that these funds are then invested in a British Virgin Islands fund called CSA Absolute Return Fund Limited. This is done through a Hong Kong company. The scheme offers commissions to investors who introduce other investors.
The Commission banned advertising for the scheme because it does not comply with the law. To be offered in New Zealand the scheme must have a registered prospectus and an investment statement. These documents are not available.
The Commission warns people about committing any money to the scheme. The Commission warns people generally about investment schemes that they find on the Internet. Investments promoted on the Internet must still comply with New Zealand law.
The authorities will have to wait to decide whether he is a “Fit & Proper Person” for the time being, though, unless new owners can be found by Thursday afternoon. If they can’t, and Chainrai doesn’t put the money in to stave off the bid, then all eyes will focus on Andrew Andronikou of the accountancy firm UHY Hacker Young, who has reportedly already been approached by the club to act in the case of administration being required. What is important to bear in mind is that Andronikou has no responsibility to act in the best interests of Portsmouth FC. His job is to secure the best deal for the club’s creditors while keeping the business alive as a going concern. He will sell what he has to sell. It starts to feel as if the Pompey Trust – which already has 1,000 members – formed just in time.
The richest football league in the world, the one that boasts the biggest global pull of all, sees its first club head towards insolvency without having left it first. Supporters may well pause and think, “there but for the grace of God go I”, but the belief that it will always happen to someone else is not a healthy one. Leeds United, Sheffield Wednesday, Queens Park Rangers, the list goes on – once well established football clubs reduced to shadows of their former selves by a lack of managerial wherewithal. Portsmouth will likely slip quietly off the Premier League radar at the end of the season, but it feels as if there problems will only start with the end of this season. Meaningful change in the way that clubs run themselves, however, seems as far away as ever.