Fears for Hearts after Vladimir Romanov's bank is downgraded

The ability of Vladimir Romanov, the owner of Heart of Midlothian, to finance the football club was questioned yesterday after a ratings agency downgraded the creditworthiness of the Lithuanian bank in which he is the biggest shareholder.

Moody’s reduced Ukio Bankas’s credit ratings to near junk status, following a similar move by Standard and Poor’s last month. The agency was also concerned that the bank’s core capital — the money it needs in order to meet any losses on its loans — was “stretched”.

The rating reflects the agency’s fear that Ukio Bankas will suffer severe losses as the global financial crisis deepens, but a spokesman for the bank, based in Vilnius, said yesterday that its work with Hearts, which it sponsors, would be unaffected.

Rumours about the financial security of Hearts have circulated for some time. Last year the players’ wages were twice paid late and there were claims that the Lithuanian-born Mr Romanov might have to sell the club he acquired in 2005.

Alex Salmond, the First Minister and a long-time Hearts supporter, added to the concerns when he told The Times last month that the club was “in unsafe hands”.

“I still believe there is a general problem in football which involves a kind of devil’s bargain. If you get a club sold to a very rich foreign guy — often a Russian oligarch or somebody like that — then I suppose you enter a kind of devil’s bargain, whereby you hope that the guy is rich enough to buy you success,” he said.

“I’m not saying that Romanov is some sort of dreadful person. All I’m saying is that, if we were going to be taken over by a rich guy from the Baltic states, then it’s just a pity he wasn’t a bit richer.”

The rating suggests that Mr Romanov, who has a 32.95 per cent stake in Ukio Bankas, may be about to become poorer. Although the bank made a € 14 million (£12.4 million) profit in 2008, it made a loss in the last three months of last year.

The bank now lies close to the bottom of the credit ratings league. By comparison, British banks, despite their problems, are all in the top half of the league.

The lower a banks’ rating, the more expensive the borrowings that an organisation has to make in order to finance its operations.

Moody’s said that it had reduced the bank’s rating because of “the reported significant decline in Ukio Bankas’s profitability and asset quality and Moody’s expectation of a significant further weakening in asset quality due to the rapidly deteriorating credit conditions in Lithuania”.

The problem for the bank, Lithuania’s fifth biggest, is that the Baltic states are suffering the worst recession in Europe, mainly because property prices are crashing. The Lithuanian Government predicts a 10.5 per cent decline in output in 2009.

Limas Kontrimas, an adviser to the Ukio Bankas board, said that the bank had no special problem. All the banks in Estonia, Latvia and Lithuania were having their ratings downgraded because of the problems of the regional economy, he added.

Asked about the bank’s support for Hearts, he said that the board had recently reviewed all its activities: “One of those projects is the football club of Hearts and there was no discussion about that.”

The shares in Hearts are owned by Ukio Bankas Investicine Grupe, which is chaired by Mr Romanov and is separate from the bank. Remigijus Jurgelaitis, a spokesman, said that he believed the downgrade in the bank’s ratings was not a problem for Hearts.

Lord Foulkes of Cumnock, who is a former chairman of Hearts and sits as a Labour MSP, said: “It is difficult to know if this decision will have any effect on the club and if it does, what kind of effect it will be. But it is clearly not good news.”

Taken from timesonline.co.uk