Portsmouth FC's insolvency: multiple offers on the table

Mr Andrew Andronikou's problems as the administrator of Portsmouth Football Club (and elsewhere) have been mentioned on this blog before. Matters have taken a further twist as he now faces a competing proposal which offers creditors a higher dividend than that which he has been offering to date. The CVA proposal from Griffins insolvency practitioners (pictured - well a Griffin) who are acting for HMRC can be seen here.

This story is grabbing the attention of the fans and others. The chat rooms are full of opinion. Most of the comment seems to highlight the idea that most commentators are unaware that creditors can propose modifications to a CVA. They also seem to have missed the option of suing the directors which is of course considered as an asset in an insolvency. The Griffins document has highlighted both these important issues.

The Griffins proposal has produced a rebuttal from UHY Hacker Young. Accountancy Age are reporting that a UHY spokesman has said:

"If the club paid out 65 pence in the pound, let alone 99 pence in the pound, it simply wouldn’t be able to survive.”

“For some reason the proposal overstates the club's income over a five year period by over £17 million. Some of the errors are basic. For example, Griffins has included VAT in its calculations, but that would go to HMRC, not the club,"

“Griffins’ is claiming that Gaydamak could be liable for £50m unless he gives up the £30m he is owed by the club. If Griffins has evidence of any wrongdoing on Gaydamak’s part, I hope they will make that available to the authorities and current administrators. No evidence has so far come to light that Gaydamak acted unlawfully. He isn’t simply going to walk away from £30 million unless there is a reasonable prospect he might face a claim for £50 million,”

“Griffins' proposal would send out completely the wrong message to creditors. It would be saying that football clubs can be run with excessively high levels of debt, without robust financial management, and that everyone will get their money back in the end.

“I am not sure whether advancing a proposal to win business from creditors, which could destroy the club in the process, is a responsible position for an insolvency practitioner to be taking.”

The Griffins response notes:

"We are surprised to read that the Administrators of Portsmouth FC have, with the

assistance of a public relations agency, issued a press release attacking our firm.

It is clear from the statement that they have not understood the comments we

made in our modifications and we would urge them to take time to read each and

every part. Whether deliberately or otherwise, they have misrepresented the

document and the suggestions made therein.

We thought the document was clear and we are happy to repeat that our firm has

no interest in seeking any appointment over Portsmouth FC of any description.

Our involvement is to represent creditors and to advise them on our concerns

about the proposed CVA.

We are particularly surprised that the Administrators, despite their statutory

duties, can find no link between the losses incurred and the management of the

club. We feel it would be unwise for any responsible insolvency practitioner to

make such a public declaration of support for the former management before a

full investigation has taken place.

We remain of the view that our modifications are sensible and provide a better

deal for creditors. The club would also be viable in the future."

Picture Credit: http://www.pantheon.org/areas/gallery/folklore/folklore/griffin.gif