The problem at Hearts is the trouble with British football

Vladimir Romanov admits to mixed motives for his controversial takeover but it's really a sign of the times

David Conn, sports news reporter of the year
Wednesday November 9, 2005
The Guardian

Graham Rix, then, has arrived in the heart of the Romanovs' ruthless empire, sidestepping the gore on the Tynecastle carpet. Now, after the departure of the former manager George Burley and the chief executive Phil Anderton, a further apparent shock for Hearts: Vladimir Romanov, the Lithuanian banker and industrialist, is funding the club with loans only. Hearts' debts, already £19.5m when Romanov took over in February, have, far from being wiped out, increased by around £2m.

This financial uncertainty partly lay behind the resignation from the chairmanship of George Foulkes, the Labour peer, a fortnight ago: "I kept seeking reassurances about Vladimir Romanov's financial commitment," Foulkes told me. "I did not obtain satisfactory assurances and I am still seeking them."

But before we descend again into the seductive tale of Vlad the Impaler's regime, we could take the tiniest step back in time to search for a hint of perspective. Hearts, let's get it straight, were crumpling before Romanov arrived. The millions owed to the Bank of Scotland had become so unpayable that Chris Robinson, the club's then major shareholder and chief executive, took the humiliating decision to sell Tynecastle - to be demolished for housing for a headline £22m, the remains of which would have been handed to the bank.

Hearts were going to play their home matches temporarily at an empty, cavernous Murrayfield; the future thereafter was fog and yearning. "It would have been the slow lingering death of our club," recalls Derek Watson of the Hearts Supporters Trust.

Despite the passionate Save Our Hearts appeal, nobody arrived to invest substantially except Romanov. A hard, exotic character who built his £400m Ubig trading empire, elbows out, in the white heat of post-communist Lithuania, Romanov admits openly to wider financial motives than simply wanting Hearts to reach the top of the Scottish Premierleague and the Champions League.

Through buying a top club in Edinburgh for around £4m in total, Romanov is gaining access, comparatively cheaply, to one of Europe's major financial centres: a solid opportunity for his bank, Ukio, to improve the low credit rating that is characteristic of eastern European financial institutions.

Examine his takeover, though, and it looks like Hearts could have done a lot worse. Asset strippers do not generally take on £20m debts but Romanov has, transferring the Bank of Scotland's loans to Ukio at, his advisers say, a lower rate of interest. When told of the monthly shortfall to finance his high-flying team, Romanov pays the money personally, accounting for it as unsecured loans.

His advisers present this as evidence of commitment: real money that Romanov could lose. They say the club will be refinanced once Romanov, following further imminent share purchases, controls at least 75% and has taken Hearts off the stock market.

"Vladimir Romanov has made a substantial investment," said his spokesman, Charlie Mann. "He has long-term plans to make Hearts successful and recent developments have been to further those ambitions."

Grand plans have been unveiled at Tynecastle before. Robinson, a catering entrepreneur, and his then partner Leslie Deans, a solicitor, paid £2.1m to take over Hearts in June 1994. Three years later they served whisky and jam tarts at the launch of Hearts' stock market float, and the City of London, briefly infatuated with football clubs' moneymaking potential, valued the latest plc at £14m.

A few months later, Hearts lobbied enthusiastically alongside Celtic and Rangers for a complete breakaway from the Scottish Football League, forming the SPL in August 1998. The league is dramatically unbalanced, with no gate-sharing to level the vast difference in size between the Glasgow giants and the rest, but the clubs, according to the SPL's website, were "taking control of their destiny, to drive the game forward and deliver a brighter future".

Six years later, according to the financial accounts for 2004, collated by PriceWaterhouseCoopers in a report published last week, the 12 SPL clubs had amassed total net debts of £183m. Dundee, Motherwell and Livingston have all been in administration; Hearts and Dunfermline have had serious financial problems. Even the Glasgow clubs have been far from immune - Celtic's £20m debt is being soaked up by a rights issue underwritten by the majority owner Dermot Desmond, while at Rangers an enormous £74m debt necessitated a £51m rights issue last December, underwritten by the chairman David Murray's trading group.

"The top two have overspent trying to compete in Europe," explained David Glen, of PriceWaterhouseCoopers, "while the smaller clubs borrowed to stay with Celtic and Rangers."

The meltdown has led to an inquiry by the Scottish parliament, whose enterprise and culture committee is expected shortly to recommend closer financial supervision of clubs by the Scottish Football Association and greater supporter involvement in clubs. The SPL's submission blamed football's "financial blizzard" on falling TV revenues - the clubs signed players on fat contracts but failed to renew their deal with BSkyB in 2002 - and the post-Bosman collapse of transfer income.

Hearts plc, led by Robinson, very well paid as chief executive (£131,000 last year), piled up years of losses, leading to the desperate decision in September 2004 to sell Tynecastle to the Edinburgh developer Cala Homes, just to fend off the bank.

Romanov had considered buying a football club in one of Europe's other financial centres before realising Scotland's were going cheap. Robinson, under siege from furious fans, sold his 19.6% stake to Romanov in September 2004 for £867,000, 35p a share, a third of the 1997 stock market valuation, saying the whole venture had cost him money.

Romanov has since taken his stake to 55%, undone the sale deal with Cala Homes, invested in a squad shrewdly assembled (with Burley) to reach the top of the SPL, and is now proposing to develop Tynecastle. The financial opportunity is there: if Hearts finish in the top two, then make it to the Champions League group stage, they will be guaranteed at least £7m TV money, double their current turnover.

Burley's departure, still padlocked by confidentiality clauses, has been unsettling, and Rix's is not the most obvious name to reassure fans. With regard to Anderton, recognised as a marketing talent, Roman Romanov, Vladimir's son and the club's new chairman, implied they simply did not feel he was the chief executive for them.

Ruthless? Probably, but perhaps so much froth has been whipped up over a departing manager and chief executive because of underlying unease with foreign businessmen taking over our famous clubs. We will, if nothing changes, have to get used to it. While Foulkes was describing Romanov as "a megalomaniac" last week, Bruce Buck, Roman Abramovich's lawyer and Chelsea's chairman, was saying English football will see more foreign investors.

"It's difficult to buy European clubs as lots are community-owned," he said, "but here we have a proper corporate structure." Meaning: ours are not mutual or membership clubs but limited companies and plcs, many in financial mire.

So rather than vilify Vladimir Romanov, who, for reasons of his own, has kept Hearts at Tynecastle, perhaps British football should tackle the difficult question of how our clubs became so vulnerable in the first place.

Taken from the Guardian/Observer