Delays sharpen focus on Hearts cash crisis

AS Hearts supporters woke up yesterday in a state of post-derby euphoria, the last thing they must have wanted to hear was a stark reminder that their club remains in danger of liquidation.

Dale Carrick (2nd from left) celebrates after opening the scoring against Hibs at the weekend. Picture: SNS
Dale Carrick (2nd from left) celebrates after opening the scoring against Hibs at the weekend. Picture: SNS

They have accepted that relegation, despite Sunday’s 2-0 victory over Hibernian, is an inevitability. But there is now a mood of optimism around Tynecastle: a mood that says this club, although doomed to the drop, is already on the way back.

So the story on the BBC website headlined “Hearts in fight to stay afloat” did not make for the most welcome reading. And when they read the intro saying “Hearts may run out of money by the end of April if a deal to take the club out of administration is not agreed soon”, some fans reacted by claiming there was nothing new in that suggestion.

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They were right in principle. The club has had finite funds since going into administration last June, and liquidation has always been a possibility. That’s the way it is with any business trying to come out of administration via a Company Voluntary Arrangement: if the CVA cannot be agreed, the administrators have to ask if pulling the plug is the only remaining option.

But, while the threat of liquidation is not new, the situation has changed a lot since BDO were first appointed administrators of the club last June. Once they had cut costs and increased income – largely by making some staff redundant and succeeding in selling some more season tickets – that, at least, was the situation stabilised. Once they agreed that the Foundation of Hearts should be preferred bidders, that was further progress. And once the CVA was passed on principle, another significant step had been taken.

But that CVA agreement was at the end of November. Over four months on, BDO and the Foundation are still waiting for approval from the creditors of Ukio and Ubig, the two firms previously controlled by Vladimir Romanov that together hold around 80 per cent of the shares in Hearts. The general picture remains the same, but the club’s plight is now in far sharper focus.

Both BDO and Hearts are aware that the club is just one small part of what was Romanov’s business empire, and that the administrators of Ukio and Ubig are under no obligation to treat it as a priority. Even so, delay has followed delay for some time now, often with no explanation or, at best, an inadequate one.

The message yesterday, no matter how uncomfortable, was therefore timely. The administrators in Lithuania, and the creditors of both Ukio and Ubig whose agreement is needed for the CVA to go through, are being told that the time for delays is at an end. Procrastination will not only put Hearts at risk, it will also jeopardise the payment of £2.5million to Ukio for the security it holds over Tynecastle. Ten months after going into administration, Hearts need to know if they can start planning for next season in the Championship as a going concern.

After last week’s latest delay from Ukio, the crucial date now is next Monday, 7 April, when Ubig’s creditors meet. Ian Murray MP, the chairman of the Foundation, warned yesterday that another postponement in six days’ time could have grievous consequences.

“If the 7 April meeting doesn’t take place or isn’t very positive, then I think everyone has known for some time that liquidation is a possibility,” Murray said. “The pressure is on them [the Ubig administrators] to get this deal done. A liquidation event gives them nothing. The deal from FoH has been on the table for nearly eight months.

“We are all worried. We want to get this over the line. It’s been going on too long now and the information coming out of Lithuania is inconsistent or incomplete. We just have to wait out this process. There is nothing we can do about it.”

It is only thanks to a combination of BDO’s good management and other elements, such as continued big attendances at Tynecastle, that Hearts have kept going this long. Back at the end of November when he announced the approval of the CVA, Bryan Jackson, of BDO, suggested that funds would have dried up by now. “When the money runs out will depend on how much the supporters give us, but, on the basis of what we have now, I would say things will get a bit hairy going into February and March,” he said.

We are now into April and the money must be all but gone. BDO have been very patient with their counterparts in Lithuania, but there is clearly now a great need for urgency.

By supporting their club throughout this most difficult of seasons, the fans have shown that Hearts, once back on a firm financial footing, could thrive again in future. As things stand, that future remains out of their hands. On Monday it could become a reality, but the wait, like it or not, is going to be an anxious one.