TRADING normally, say Hearts. About to plunge into administration, say the rumours. Such statements would usually appear mutually contradictory, but in this instance that need not be the case.
Hearts were right to pour some cold water on a newspaper report which said fears were growing that they were about to go into administration, but they took care not to drown it completely. They are well aware that, while the timing of the story may have been inaccurate, its general substance could be proved correct – if not this week or next, at least some time in the following months.
The reason for that is simple. While the Tynecastle club are, as they say, paying their way at present, that is only because no-one is asking for immediate repayment of their £25 million debt. The minute anyone does demand any sizeable chunk of that money back, they are in deep trouble.
The achievement of those currently in charge of the club should not be underestimated. Since majority shareholder Vladimir Romanov cut off direct funding from parent company Ubig, the Hearts board have had to bridge a yawning gap between expenditure and income. No longer able to rely on the Baltic businessman’s largesse, they have had to prune their playing squad while trying to remain competitive on the field of play. They have just about managed to do so, even if the club’s supporters have been less than enthused by a league campaign which has them languishing in tenth place.
The massive consolation which has tempered the fans’ discontent is the knowledge that things could easily have become a whole lot worse. If Hearts had gone into administration, they would have been docked 17 points – one-third of last season’s total – and would now be bottom of the table. Six points behind Dundee with three games to play, they would be staring relegation in the face, and preparing for life in the First Division 30 years after they last won promotion back to the top flight.
They are not out of the woods yet, of course. Even after the league campaign ends, they will still lose 17 points, and thus almost certainly be relegated retrospectively, if they go into administration before the end of this month.
On 1 June, the 2013-14 season officially begins, and Hearts will be confirmed as members of the SPL for that season provided they are still afloat. If they go into administration after that date, they will be docked a third of the points they finish with this season, and start the new campaign with a negative total.
Such a position would be bad enough but at least they would have a fighting chance of beating the drop. Let’s say they begin on minus 15. In most recent seasons, they would fancy their chances of finishing at least that much ahead of the club that finishes bottom of the heap.
That is why, although no-one at the club wants to discuss the issue, they would prefer, if given the choice, to go into administration in the summer rather than now. But their real preference, understandably, is to avoid such a fate altogether, come to some sort of arrangement about the debt, and pass almost seamlessly into new ownership – ideally, under the control of their own fans. It will not be easy, and in legal terms they are at the mercy of the administrator who will decide the fate of Ukio Bankas, the club’s erstwhile shirt sponsors. But the administrator is aware that, given their turnover, there is no way under normal circumstances that Hearts can repay the £15m that they owe Ukio.
He must therefore decide how to get the best deal for Ukio and its creditors from Hearts. While forcing the club into administration and attempting a fire sale of their assets could realise a certain sum, it would come nowhere close to realising that £15m. Given Hearts have a large support base who have kept them going for the best part of a century and a half, it could make economic sense to allow the club to carry on as a going concern.
In that latter case Hearts might have to strike a long-term agreement with the administrator, for example by paying an annual sum to be allowed to carry on playing at Tynecastle.
Such an arrangement could prove to be a severe drain on the club’s resources, but it would be far preferable to going under.
Meanwhile, the united fans’ group under the chairmanship of Edinburgh South MP Ian Murray must hope that the club is still in viable shape by the time they are able to make a bid for it.
The quicker they can move, the better chance they have of taking over something worth salvaging.