THE future of Hearts is hanging by a thread after bosses have been left with just eight days to save the club.
The club faces being wound up after being served with a court order over an unpaid £450,000 tax bill.
Worried fans were today faced with the devastating prospect that unless the cash is found by next Friday, the Tynecastle club’s proud 138-year history could end in liquidation.
The Hearts board is trying to negotiate with the tax authorities to pay the demand in instalments, but appealed to anxious supporters to buy shares in the club or purchase tickets in advance for upcoming games to generate extra revenue.
A statement on the club’s official website said: “This isn’t a bluff, this isn’t scaremongering – this is reality.”
And there were signs that at least some fans were responding. A message on Twitter claimed more than 2000 tickets had been sold in just over an hour for the match against St Mirren on November 17. And one fan tweeted: “Unemployed. Redundancy money gone. Going to buy match ticket now. Will worry about eating later. Won’t let my club die.”
The Scottish Government said it stood ready to assist in any way it could, including making contact with HMRC if necessary. A spokesman said: “It is in everyone’s interests to find a solution which ensures that Hearts can continue in business while also meeting their obligations to the tax authorities.”
A spokesman for Alex Salmond, himself a Hearts fan, said: “Like any Hearts supporter, the First Minister is concerned at the current situation at the club. All clubs facing financial difficulty must be treated even-handedly.”
Independent Lothians MSP Margo MacDonald was hoping to raise the issue at First Minister’s Questions today. She said: “I’m going to ask him to do all he can by getting hold of the SFA and the League and trying to have some sort of plan for clubs that find themselves in this sort of difficulty.
“I feel particularly sorry for Hearts. We can’t all be Hibbies, we’ve got to keep them going. They are a business, but they are part of the fabric and culture of the city. We need two football teams.”
Former Hearts chairman George Foulkes said it was up to Hearts owner Vladimir Romanov, Lithuania-based director Sergejus Fedotovas and Mr Romanov’s banking business Ukio Bankas Investment Group (UBIG) to produce the money to save the club. The Labour peer and former Lothians MSP said: “We have been in this situation before, but that does not mean we should underestimate the problem that would be created if the money was not paid. Having spoken to the club, my understanding is if the money is not paid, we would go into liquidation. That would be a disaster – dreadful for Romanov, dreadful for the Revenue and dreadful for the fans. It’s not the way forward.
“UBIG said they would take responsibility for all the expenditure and it was on that basis the SFA registered the club for the current season.
“Romanov has been quoted saying he will keep the club going until the summer. They have to come up with the money by next week. If Romanov stands by his word and keeps it going until the summer, that gives us time to explore other owners.
“I understand people are working on the future ownership, but it needs time for the work to be done. I don’t want to raise hopes unduly because eight years ago the only person around was Romanov.
“But one of the things Romanov has done is show the potential in terms of the numbers who turn up for matches; we’ve won two cups; and in the last year he has reduced expenditure, stopping spending silly money on players.”
Romanov first took a stake in Hearts in 2004, with an increased share-holding giving him effective control of the club the following year and he gradually increased his stake to 82 per cent. His wealth has been variously estimated at between £200m and £300m.
Mr Fedotovas today said Hearts were in a “really serious situation”. He added: “It’s important people understand that before it’s too late. The truth is that we need supporters to help the club out of this situation. There is no bank, there is no institution that will lend to the club in Scotland or the UK.” He hinted, however, that UBIG could help Hearts out of the hole. He said: “We hope we will be able to find some solution and one of the possibilities may be UBIG. We are speaking to UBIG and they have a good understanding of what is going on.”
In a statement, the board said the club had been served with an order to wind up Heart of Midlothian plc by the Court of Session on behalf of HMRC. But it said it was “hopeful” of agreeing a suitable payment plan for the £449,692.04 of unpaid tax. The demand is separate from another tax bill for £1.75m which the club is contesting.
Hearts fan and Lothians Conservative MSP David McLetchie, said: “This is a tragedy which will do nothing to save the club. The key is how we are going to salvage something. Those who put their faith in Mr Romanov are going to have to explain themselves but most importantly what is their alternative.”
By Neil Patey, Football finance expert at Ernst & Young and former adviser to Roman Abramovich
This is not the first time this has happened to Hearts. Previously, HMRC has issued a winding-up order and in that situation Hearts paid in time to avoid the appointment of a liquidator.
Hearts had eight days from Tuesday
November 6 to either pay up in full or convince HMRC to
allow them to pay through an instalment plan.
It’s difficult to
imagine how amiable HMRC might be.
HMRC have a separate ongoing dispute case so there is a risk that they may insist on the full amount. It would be very difficult to pay that off in one go. The club could stop paying all their bills, wages, creditors, so they can generate as much cash as possible in time. If they can’t raise the cash and if HMRC do not agree to an instalment plan a provisional liquidator would be appointed by the court.
Within 28 days the provisional liquidator would call a meeting of creditors and the meeting has to be held within 42 days of that. At the meeting, creditors, confirm by simple majority the appointment of a liquidator.
Then, as with Rangers, the liquidators would seek to run the club and start to try and break even.
This may mean cost cuts and selling players to stop further cash losses and then the eventual sale of the club. Ultimately, it may mean the liquidation of the club.
The big unknown in all this is will Vladimir Romanov have the ability – or the willingness – to supply cash to make up any shortfall before that process.
The Hearts fans – who the club has
appealed to buy
future tickets – could have an important say here and might well be the deciding factor.
Council can step in says Cardownie
COUNCIL chiefs could offer help to keep Hearts alive.
Depute city council leader and Hearts fan Steve Cardownie said the news of the club’s predicament had come as a shock. He said: “This is a very grave development and one that will have to be addressed immediately by the club. As yet there has been no approach to the council and I understand Hearts are seeking staged payments to HMRC.”
He said when Hibs were on the brink of financial ruin in 1990 the council had offered the team the use of Meadowbank for its games. And he did not rule out some kind of council assistance for Hearts.
“It’s an Edinburgh institution,” he said. “All sorts of factors would have to be taken into consideration. But there has been no approach from the club. It’s hard to see how we could step in because they are a private company owned by a bank. It’s difficult to see where we would have a locus. But there are other ways the council may be able to help.
“Although it does not exactly mirror the Hibs situation, the council did play an active part in Hands off Hibs.”