Lithuanians' administrator challenge is signal of intent in battle for Hearts

Richard Wilson and Stewart Fisher
Wednesday 19 June 2013

The directors of Hearts are likely to be thwarted in their attempts to appoint KPMG as the administrators of the company that owns the club.

As the holders of a floating charge over the assets, Ukio Bankas take precedence and have signalled their intention to appoint a firm of their choosing and it is likely papers lodged at the Court of Session in Edinburgh will see the accountancy firm BDO appointed as administrators of Heart of Midlothian Football Club plc.

The Tynecastle directors had posted notice of their intention to put the club into administration, and intended for KPMG to take over. BDO will operate to the same statutory requirements, which is to pursue the best interests of the creditors, but the move by Ukio Bankas is a signal of their intent to not be sidelined. The Lithuanian bank, which is itself in administration, is owed £15m, which is secured against Tynecastle, as well as holding a 29.9% stake in HMFC plc. UBIG, the investment company that Vladimir Romanov owned, holds a 50% stake, although that has been frozen along with the rest of its assets by the administrator looking after Ukio Bankas's affairs.

"We thoroughly analysed the financial and legal framework of Hearts' case and, taking into account failure by Hearts to cover the debt to HMRC, it appeared administration of the club is the only option available at the moment," said Gintaras Adomonis, bankruptcy administrator of Ukio Bankas. "We still believe that we should stay with our ultimate goal to defend the interest of the creditors of Ukio Bankas and sell the club to the appropriate investor as soon as possible. Thus, we want the administrator to be not only experienced but dedicated to football as well."

Adomonis is believed to have sought recommendations and chosen BDO, whose partners have extensive experience in the administration of clubs. The wrangle has echoes of events at Rangers last season, where owner and floating charge holder Craig Whyte was granted preferred administrators Duff & Phelps, although their appointment was contested by HMRC.

While the appointment – which is likely to happen this afternoon – will trigger an automatic 15-point penalty for next season, if the club is to escape administration via a Creditors Voluntary Arrangement (CVA), any preferred bidder is likely to have to raise a sum in the region of the value of the club's main asset, Tynecastle. The stadium and its surroundings are valued at £6.8m in the club's accounts, a far cry from the £22m offered at one time by property developers CALA Homes. But with any proposed property development on the land subject to stringent Health and Safety Executive Regulations – the area has been decreed a consultation zone in relation to Control of Major Accidents Hazard (COMAH) due to the nearby North British Distillery – and the local property market having taken a downward turn, it may be closer to £5m.

While several other parties are thought to remain interested in buying the club – including interest from USA, Scandinavia and London – the Foundation of Hearts (FOH) bid continued to make ground last night as they broke the threshold of 5000 pledges, nearly 1000 of which have been made since Monday evening. Although the process of converting these into hard cash began last night, the final date for payments to be withdrawn from accounts is July 4, by which time everyone should have a clearer idea of the position.

"The Hearts supporters have been absolutely incredible," said FOH independent chairman Ian Murray. "We know they are going to rise to the challenge of allowing us to make a credible bid for control of Hearts, which will create a supporter-governed, community-focused club run by highly professional people charged with ensuring the oldest club in Edinburgh can have a bright future after these difficult days."

Taken from the Herald