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Ukio Bankas in administration: Call to sell Hearts

Hearts owner Vladimir Romanov has recieved bad news about Ukio Bankas. Picture: SNS

Hearts owner Vladimir Romanov has recieved bad news about Ukio Bankas. Picture: SNS

  • by DAVID McCANN
 

HEARTS fans are urging Vladimir Romanov to sell the club – after his Ukio Bankas bank was put into administration in what could develop into a serious body blow for his business empire.

Administrators have been drafted in to unpick Ukio Bankas’ tangled affairs after its value fell to an eight-year low in a move that could threaten the existence of Lithuania’s fourth-largest bank and hit the Hearts owner in the pocket. Today, supporters claimed Romanov’s banking crisis could force his hand to sell the club.

Steven Kilgour, general secretary of the Federation of Hearts Supporters Clubs, said: “Perhaps I have too much faith, but I think this problem with his bank is more likely to strengthen the hand of fans to buy the club from him.

“If he has financial difficulties that could make him more likely to sell – and sooner.

“It may give him an urgent need to sell the club to get some finances. He has already said he wants to sell Hearts and I would imagine his bank would be more important to him than Hearts, and if it helps him free up money he might do that.”

A source close to the fans’ consortium Foundation of Hearts said the dilemma at Ukio Bankas “could be an important event for the Foundation”.

Foundation members are said to be closely monitoring the rapidly developing events.

The fast-paced crisis saw Lithuania’s former deputy economy minister Adomas Audickas appointed temporary administrator yesterday as

investors speculated about the unprofitable lender’s rescue or demise.

Should it slide into administration – or at worst bankruptcy – Hearts’ outstanding debts to the bank could be recalled, though it is not yet known how much the Tynecastle club owe the bank.

Hearts’ huge £25 million borrowings are understood to be owed to parent company UBIG, which is not in the cross hairs but is linked to the struggling financial institution.

The administrators have been given six days to determine a course of action for the problem bank. On the same day Lithuania’s central bank suspended operations at Ukio Bankas, it also emerged prosecutors were to investigate “suspicious transactions” into possible embezzlement of assets at the bank between 2005-2012.

The central bank said in a statement: “Deficiencies in the bank’s operation and violations of legal acts have been established more than once.”

Hearts director Sergejus Fedotovas moved to allay fans’ fears saying the development in Lithuania would have “very little affect on our day-to-day business”.

He said: “The board wishes to make it clear that Heart of Midlothian plc and Ukio Bankas are two separate companies.

“Hearts is majority owned by Ukio Banko Investicine Grupe (UBIG), a multi-national business conglomerate. UBIG is an entirely separate

entity and stands alone from Ukio Bankas.

“At a service and operational level, Ukio Bankas does provide the club with some banking services and debt facility and the board is liaising with Ukio Bankas on these matters.”

But football finance expert Neil Patey said reports that loan securities – assets that could include Tynecastle – had been transferred to Ukio Bankas from the parent company could be “worrying” for Hearts.

He said: “You would only have security in place if you had borrowed some money.

“Now Hearts have confirmed they have been lent money by the bank it would make sense that the bank would have security to protect that loan.

“If the bank demand the money and Hearts don’t have the resources to pay the bank, Tynecastle stadium could be sold it to try to recover the money.”

Bryan Bradley, a journalist for business and finance firm Bloomberg who is based in Vilnius, the Lithuanian capital, said: “I don’t have a clear

picture of the exact ties between

Ukio Bankas and Hearts through Romanov.

“On the one hand, it doesn’t seem that as an owner of Hearts he has had a lot of resources to invest in the club recently and I guess that means he will not have those resources anytime soon.”

Lord George Foulkes, who helped broker the deal to bring Romanov to Hearts, said it was essential that there was transparency in the relationship between Hearts and the other business interests of its majority shareholder.

“It’s all very complicated and one of the things we need to do is to resolve the position regarding Mr Romanov, Ukio Bankas and UBIG.

“It’s just not clear. The positive thing is that Hearts are an asset now where a few months ago it was a

liability.

“Now it’s moving towards breaking even in a profitable situation with the high-paid players moving on and income coming in from the share issue, people buying tickets and the cup final coming up.

“It’s an asset that any administrator or anyone making decisions about it would want to continue to operate.

“The problem is that we need to see if we can disentangle the club and finances from Mr Romanov’s and his problems.”

Vladimir Romanov owns 64.9 per cent of Ukio Bankas shares, according to a note in the bank’s earnings report.

He is also chairman of the board and at least part owner of a sister investment company, UBIG.

Since December 7, Ukio Bankas has owned a company which has 17 per cent stake in UBIG, while

Romanov owns another 17 per cent directly.

Yesterday central bank Chairman Vitas Vasiliauskas told reporters in Vilnius, said: “Bankruptcy is the last option – our priority is for Ukio Bankas to continue operating after a restructuring.

“All other banks operating in Lithuania and foreign bank

branches implement prudential requirements and there’s no risk to their stability.”

TROUBLED TIMES

March 2012: A football team sponsored by Romanov, Partizan Minsk, is left struggling in the Belarusian Second Division after he pulls funding, forcing it to abandon its top-flight status.

May 2012: A reprieve from financial concerns as Hearts thrash Hibs 5-1 in Scottish Cup final.

June 2012: Stars Ian Black and Rudi Skacel, plus manager Paulo Sergio, lead a summer Hearts exodus as Romanov looks to slash the wage bill.

August 2012: It emerges that Ukio Bankas is to close its branch in Edinburgh – just seven months after it opened.

September 2012: Wages are paid late to Hearts players, leading to a transfer embargo.

October 2012: Hearts announce a share offer to raise funds and admit they are short of money to see out the season.

November 2012: Hearts warn that a forthcoming clash with St Mirren could be the club’s last, and appeal to fans for emergency financial support.

December 2012: Romanov asks fans of Lithuanian basketball club Zalgiris to help play players’ wages and admits help is urgently needed, but it is announced that the threat of liquidation no longer hangs above Hearts, after share issue raises more than

£1 million.

February 2013: Romanov gives up ownership of Zalgiris after failing to secure financial backing as shares in Ukio Bankas plummet by as much as 21 per cent. Yesterday, it was announced that the bank is in temporary administration.

Romanov has a major stake in both institutions

THE relationship between Hearts and Vladimir Romanov’s other business interests has been complicated by share issues, debt-for-equity swaps and a series of holding companies since he swept into Edinburgh in 2005.

The Lithuanian businessman owns 64.9 per cent of Ukio Bankas shares and is also the chairman of a sister investment company, Ukio Banko Investicine Grupe (UBIG), Hearts’ parent company.

On January 8, UBIG was reported to have taken advantage of a new Lithuanian law allowing the company to pledge all of its assets as collateral.

UBIG had a floating charge over Tynecastle Stadium and the land around it which was transferred to Ukio Bankas in December 6. The charge, which secures the stadium against debts, is worth £6.8m.

• THE company that’s in trouble [Ukio Bankas] is not the one that’s lent £24.4 million to Hearts, so on the face of it that’s good.

Hearts have confirmed that there is some debt provided by Ukio Bankas which they are now negotiating with as to what that means and whether that has to be repaid.

If it does need to be repaid, the question is where do they find the resources?

If they can’t, is there any security – eg, Tynecastle football stadium – which might have been pledged as security on the loan?

If there’s debt within Hearts held by the bank then there could be trouble. There’s a possibility, depending on the terms of that debt, that it could be recalled, and repaid as soon as possible, and Hearts may not have the resources to cover it.

 

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