Hearts: CVA a big step but fears remain

Another hurdle cleared: Foundation of Hearts chairman Ian Murray at Tynecastle this week. Picture: Neil Hanna

It’s been a long, hard battle, which began in earnest just over a year ago when the former regime threatened that the gates could be closed permanently unless fans dug deep. This week, the club was again a matter of days from being forced into liquidation. Creditors and shareholders approved a Company Voluntary Arrangement (CVA) that should ultimately see the club transferred into the hands of fans’ group Foundation of Hearts, provided Lithuanian parent company UBIG can be convinced to hand over their 50 per cent shareholding. Had the CVA not been accepted, there was no Plan B, said those in control of the club’s pursestrings. There still isn’t, according to Bryan Jackson of administrators BDO. “That 50 per cent is the biggest issue for us because the sale purchase agreement will throw up obstacles that I would think we will be able to overcome eventually because both sides want an agreement. We don’t really know how big a problem [the UBIG share transfer will be]. It may be smaller than we think or bigger than we think.”

The fact that UBIG are also in administration complicates matters, with those in charge there now exploring every option available to them as they seek to recoup some of the millions owed by the Tynecastle club. But, as that debt is unsecured, their options remain limited. They could transfer their stake for nothing or scupper the CVA, force the club into liquidation and still walk away with nothing. What they don’t want at this delicate stage of negotiations is someone distracting the Lithuanians or convincing them that they should haggle with Hearts for money that the cash-strapped club simply can’t offer.

With matters perched precariously, it has emerged that one of the individuals dismissed during the earlier bidding process has now tried to contact the Lithuanian administrators in the hope he can convince them to sell their stake in the club directly to him. That would lead to the collapse of the CVA and the administrators and the Foundation of Hearts are hoping that due dilligence by the Lithuanians will lead to them ignoring the last-gasp agitator.

“My concern is that the individual making the offer is not seen as being credible by us here but it may be seen as credible there,” said Jackson. “We have the benefit of prior experience, which they don’t have yet, so it might take time to filter through. “

But all that is time-consuming and disruptive and, with money for the day to day running of the club expected to dry up in March, those are factors Hearts can ill-afford.

“That has not helped our position and, although I’ve not been party to it, I have heard the same reports. Whether his is a valid offer or not, we have our creditors to answer to so, if someone in Lithuania thinks ‘they should be offering us that, why are you offering us nothing?’, it’s not going to help the cause and could be potentially derailing. So, that’s all bad news,” said the visibly exasperated Jackson. Having brought things so far and with the promise of being able to exit administration within the next few months, he said the future of the club could be bright.

“Go back to what we inherited on day one: £7,000 in the bank; arrears of wages of a month for players and non-players; 7,000 season tickets sold and that money totally gone on prior debt.

“That’s what we inherited and then there were the sanctions on top of everything else. And look at where we are now. If you had offered me that on day one, I think I might have taken it! I know we have not achieved anything yet, but I think I might have taken it.

“This is where some more positives come out that people have maybe forgotten about. People forget about the creditors and the people behind this who are owed money. We have not far off £30m debt but, if you look at what the balance sheet will be post-administration, it would be assets £2.5m, financed by the Foundation with only half a million still due, then there will be an extra liability of about £500,000 of football debt but the other £29m will have gone. You also have a cost structure that has already been reduced, albeit that investment will need to be made over a period. So you will be inheriting a clean balance sheet situation. If you think of the debt that would be written off here, that debt could never have been paid, not over the next 50-100 years, so that’s the picture post-administration.

“Some people kind of forget we are close to writing off £29m debt. I think some people forget that and I know that some people are already looking at ‘can we sign anybody in January?’.” That is now a forlorn hope, with all signings banned until the club exits administration, leaving the Foundation planning for at least a season in the second tier.

“We have to highlight that the priority is to keep the club going until we get dry ink, dry signatures on the contracts, until then the fans have to continue to come through the turnstiles, continue to buy the tickets and everything else because we need enough money in the bank to keep the club going until we can deliver the CVA,” said Ian Murray, chairman of the Foundation.

The Edinburgh South MP says they are planning for the worst case scenario. In truth, the worst was avoided on Friday, for the time being at least.