Hearts share offer raises over £1m

As Hearts fans took up the share offer, the club was able to strike a deal with HMRC to pay tax debts in instalments.  Picture: Ian Rutherford
As Hearts fans took up the share offer, the club was able to strike a deal with HMRC to pay tax debts in instalments. Picture: Ian Rutherford
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HEART of Midlothian will today announce that their share offer, which closed yesterday evening, has raised over £1 million.

The offer, which was launched in late October, only surpassed the £800,000 mark last weekend, but a late surge has taken the total into seven figures.

The sum represents over half of the total value of shares which had been offered for sale. It remains to be seen how Hearts owner Vladimir Romanov interprets the uptake of shares, but it is already clear that without the money raised, the club would have been in a severe, possibly terminal, position.

Although the launch was several months in the planning and was originally designed to test the willingness of supporters to take a stake in the club, it acquired additional urgency just after it went live when Her Majesty’s Revenue & Customs was granted a winding-up order against the club. Hearts were given eight days to make a back payment of almost £450,000, with club officials warning that if they failed to raise the sum, a home game against St Mirren on 17 November could be their last.

With money coming in from the share offer, Hearts were able to reach agreement with HMRC to pay the due sum in two stages over a slightly longer period than the original eight days, 
the latter payment coming on 3 December.

Since the offer was launched the Tynecastle board has also agreed a deal with HMRC over a claim for unpaid income tax relating to players on loan from Kaunas. The tax authority had originally sought a payment of £1.75m – just under the total which would have been raised had all the shares on offer been sold – excluding interest and penalties. The terms of the out-of-court agreement mean that Hearts will pay three annual payments of £500,000, beginning in May 2013.

Romanov, who put Hearts up for sale late last year, has appeared to be increasingly unable to fund the club as a going concern. As a result, it is uncertain where Hearts will find the half-million due next spring.

But the money raised by fans has taken them a large part of the way towards meeting their running costs for the rest of the season. And, besides that figure of £1m-plus, supporters have helped generate extra revenue over the past two months by responding to appeals to attend home games in greater numbers, and by engaging in other fundraising activities.

In the most recent of them, former manager Paulo Sergio, now at Romanian club Cluj, has sent his maroon cardigan to Edinburgh to be raffled. Other activities included Scottish Cup final hero Rudi Skacel serving behind an Edinburgh bar one evening, with all funds going to the club, and a bring-and-buy sale held in the Gorgie Suite at Tynecastle.

But, while a remarkable amount has been raised, particularly in the run-up to Christmas, Romanov has yet to clarify his plans in the longer term. The share offer document says that Hearts’ directors are “committed to the development of a state-of-the-art football stadium befitting of a top European club”, but with Romanov still committed to selling up, there is no realistic prospect of such a development taking place soon.

And, with Hearts’ debt currently standing at around £22m, the long-term picture is still 
at best uncertain. Romanov has revealed that he has so far received two offers for his controlling interest, and rejected both as insufficient.

One, from a consortium headed by former Livingston manager Angelo Massone, was ruled unsuitable for other reasons in addition to finance. The other, from the Foundation of Hearts group, was rejected as insufficient. Both groups have suggested they will return with new offers, but it seems certain that the Massone offer at least will again be turned down.

The raising of £1m means that more than eight million new shares are now in circulation – Hearts having confirmed yesterday that, contrary to some previous reports, the shares were not part of the existing stock held by Ubig, Hearts’ parent company. The purchase of new shares still dilutes the percentage of the total held by Ubig, but it retains an overwhelming majority of the total. It can also decide on future debt-for-equity swaps which would increase the total of shares in circulation.