There is something to be said about Portsmouth going into administration – with debts of around £70 million, it became the first Premier League club to achieve this dubious honour and gave a stark reminder that the entrapment from the richest league in the world will be insufficient to shelter a mismanaged club from financial woes.For better or worse, the Premier League has been largely spared by the financial crisis and economic recession in the last two years, what with transfer fees and wages spiralling upwards while austerity measures were frowned upon, but in the fullness of time, one must expect the day of reckoning to arrive when the limit to how much debts a club can rollover or snowball is breached.
Portsmouth is facing its darkest moment currently. Entering administration means the club is virtually certain to be relegated when their 19 point tally is slapped with a 9 point deduction. With only 11 matches left to preserve their Premier League status, Pompey has to win at least 7 games, which is a tall order even in the best of circumstances.Are they up to the task? Last Saturday, Pompey displayed enough gumption to edge out fellow relegation candidate Burnley in a morale boosting 2-1 victory. Portsmouth struck through Piquionne but a Martin Paterson goal returned the scoreline to parity and it was up to Algerian Hassan Yebda’s penalty to settle the game.
The fans can take heart from this victory; even if the cause is lost, the players are determined to fight for their pride. Manager Avram Grant, who shaked hands with the travelling fans after the game, said: “Despite everything, we were fighting today. You saw the spirit today, you see the real trait of people in difficult days. I still believe, I want to stay positive.”Let’s hope the troops continue to respond positively to Avram Grant’s rally. However, it will take all of Grant’s abilities to steer the ship when the administration soap opera is underway. Firstly, the ship is now rudderless. Chief executive Peter Storrie has tendered his resignation instead of staying on for a nominal salary to sort out the financial mess which was created during his tenure.
Last year, he took home more than £1 million when the club is already insolvent. I can understand paying good money for top talents but what is the point of having a chief executive if the club is going to be run into the ground? Employing a minimum wage cleaner in that position will suffice. There should be a clawback in Storrie’s bonus or he returns the bonus willingly but that is just wishful thinking.Instead of feeling remorseful, Peter Storrie looked on “favourably” on his eight years of service. Portsmouth fans will beg to differ. Questions abound over Storrie’s leadership and ethics but at the moment, transparency and accountability are in short order.
While wages at the club are high and the tattered ground is too small to generate sufficient revenue but where did the television money and transfer money from the sales of players like Diarra, Muntari, etc go to? Why wasn’t the money used to pay down mounting debts?Andrew Andronikou, from Hacker Young, has been installed as chief administrator and he has promised to review all expenses and open up the books, even calling in the police if money laundering is uncovered. Andronikou has a reputation for doing the right thing so Portsmouth fans should not jump the gun on any alleged wrongdoings (on Storrie’s part or the owners).
There is little love lost for Peter Storrie but in the coming weeks, there could be more departures. Avram Grant is unsure if he will stay until the end of the season. England goalkeeper David James, the most experienced member in the squad, has volunteered to take a pay cut than be shown the door. The relegation battle could be made easier if other highly paid footballers in Portsmouth share the same sentiment.The priority for the administrator is to find a buyer for Portsmouth but this is easier said than done. To make matters worse, the stadium and surrounding land is no longer owned by the club, thanks to financing deals made by “fit and proper” owners.
Balram Chainrai made a £17m loan loan to previous owner Ali Al Faraj in return for mortgages on Fratton Park and the club. Chainrai became Portsmouth’s fourth owner of the season after the club defaulted on repayments due to him.The inability to find a suitable buyer sparked his controversial move into administration but as a secured creditor, it gave him priority after football creditors (like players, staff, etc) to be repaid. Ironically, Balram Chainrai is likely to emerge again as Portsmouth’s owner. In the absence of new investors/suckers, regaining control of Portsmouth with the debts largely wiped out will allow him to preserve his investment and possibly profit at a later date.There are other legal disputes awaiting Portsmouth too. It has been sued by former defender Sol Campbell for £1.7m for unpaid image rights. The football club is also involved in a separate dispute with former owner Gaydamak over whether they have missed a deadline in paying a £9m chunk of the £28m they owe him.
Pompey must also enter a Company Voluntary Agreement for unsecured creditors by the end of the season or start next season with another deduction of at least 15 points which could result in another relegation into the Championship and put off any potential buyers.On the bright side, Portsmouth will be a more stable and financially viable Championship side. Administration is definitely the lesser of two evils compared to a winding up order and there are already four interested parties circling in. The winding-up process, started by HM Revenue and Customs, due before the High Court this week, will be suspended automatically.
Andrew Andronikou has requested for a meeting of the Premier League board to ratify the nine-point deduction. He will also try to overturn rulings that prevent them from selling players outside the transfer window. This rule is too cumbersome for the administrator. If players have not contributed enough to justify their high wages and refuse to take pay cuts, the direct way to reduce the debt burden is to sell them, rather than waiting for several months to take action.With Portsmouth going into administration, it is set to receive outstanding payments from the Premier League – including parachute payments paid to relegated clubs – totalling £36 million.
The Premier League has also given Portsmouth written permission to raise £20m against the promise of the future funds. However, the League will retain about £16m to pay off football debts. Besides the advance payments and raising of fresh capital, negotiations forcing creditors to take a haircut and offloading of redundant players will make the £70 million debt less daunting.