Romanov bank hit by poor credit report

VLADIMIR Romanov's plans to invest in Heart of Midlothian Football club have been undermined by a shock report on the financial standing of Ukio Bank, which he is using to bankroll his ambitions.

Ukio, in which Romanov is a major shareholder, has "very modest" financial strength, offers "questionable-to-poor credit quality" and may need to be propped up by another institution, according to Moody's, the credit rating agency.

The report raises questions about Romanov's ability to pay for expansion at Hearts and threatens his ambitions to join Edinburgh's financial community. Hearts have made no significant player signings and are still without a manager following the departure of John Robertson in May, despite frequent mentions of high-profile names such as Nevio Scala, Lothar Matthaus and George Burley.

Since Romanov bought a controlling interest in Hearts in January the club has unveiled plans to replace its ageing main stand and challenge Celtic and Rangers for the Scottish Premierleague title - but these plans will require substantial resources.

Romanov's stated aim is to use his controlling interest in, and Ukio's sponsorship of, Hearts to build bridges with the likes of Royal Bank of Scotland, HBOS and Standard Life. But a source at one Edinburgh financial institution said: "Moody's reports are very influential in financial services. If Moody's took this view on a company that we were thinking of working with, then that is something we would have to consider."

If Romanov finds himself unwelcome in the Edinburgh financial community, he may decide to sell his stake in the club and move on, or to sell the Tynecastle site to developers.

Last week Hearts signed a shirt sponsorship deal with Ukio, for an undisclosed sum, believed to be "six figures". A Ukio spokesman said: "By deciding to establish in Scotland, the bank is seeking to increase its foreign partner and potential investor awareness. Edinburgh is a well-known financial centre in the world and Ukio is keen to get more exposure to potential partners and investors."

Ukio said it would open an office in the UK and hoped to act as a financial bridge between the UK and eastern Europe. Hearts chief executive Phil Anderton said he had signed Ukio after finding himself in "a difficult position" without much time to negotiate a sponsorship deal.

A spokesman for Romanov said: "Ukio will have a job to do the convince the financial community of its value. They have to win hearts and minds."

But he denied that Romanov would be unable to support his expansion plans for Hearts: "Every promise Romanov has made so far, he has fulfilled. The next stage is the appointment of a manager, which is ongoing."

Ukio terminated an agreement with credit rating agency Fitch International in March after that agency downgraded its long-term loan ratings.

In its first report on the company, Moody's gives Ukio an E+ rating for financial strength, one level above the lowest possible rating. This indicates that Ukio displays "very modest intrinsic financial strength, with a higher likelihood of periodic outside support or an eventual need for outside assistance".

Ukio is given a B rating for long term deposits, indicating "generally poor credit quality", and a non-prime rating for short term deposits, suggesting it offers "questionable to poor credit quality and an uncertain capacity for timely payment of short-term deposit obligations".

Taken from the Scotsman