Redundancies are likely to be among the first consequences of Heart of Midlothian Football Club plc being placed into administration.
The accountancy firm BDO have been put in charge of the company that operates the club, and cost cutting will be among their initial acts as they attempt to stabilise the finances to buy time for a rescue package to be pulled together.
The administration of HMFC plc will be carried out by Trevor Birch, who oversaw the last insolvency of Portsmouth; Bryan Jackson, who is doing the same for Dunfermline Athletic Football Club plc; and James Stephen, one of the BDO partners who is working on the liquidation of Rangers Football Club plc. The three were appointed yesterday after Ukio Bankas applied to the Court of Session for the move. Directors of HMFC plc, which employs 131 people, including a first-team pool of 26 and 10 youth players, had previously lodged their intention to appoint the accountancy firm KPMG.
"Fans will, inevitably, be concerned and none of them will have wanted this moment to arrive," said Jackson. "We will undertake an urgent examination of the company's records prior to making further announcements. We are acutely aware of the need for speed given the uncertainty of the last few weeks and the proximity of the season's start. We will be talking to all the parties that have shown interest in the club in order to find a resolution as quickly as possible."
There are currently five potential bidders, although the Foundation of Hearts, a coalition of fans groups, appears to be at the most advanced stage. Ukio Bankas are owed £15m, secured against Tynecastle as part of a floating charge, while UBIG, the investment firm that was owned by Vladimir Romanov, have a debt of £10m. The two companies are also the major shareholders, with Ukio Bankas owning 29.9% of HMFC plc and UBIG holding 50%.
Any attempt to agree a Company Voluntary Arrangement will require the two Lithuanian companies to agree to accept a partial payment of their debt. However, the situation is complicated by the fact Ukio Bankas are currently in administration, and UBIG are on the verge of the same fate. As a consequence, Ukio Bankas' administrators have frozen UBIG's assets, which means the 50% shareholding in Hearts cannot currently be sold. Reports from Lithuania continue to insist, though, that the preference is to sell HMFC plc as a going concern, rather than split up its assets.
"The problems that we inherited cannot be deleted," said Gintaras Adomonis, bankruptcy administrator of Ukio Bankas. "Despite that, we are trying to find every tiny win-win option suitable both for the creditors of the bank and the club. I believe [BDO], with such a vast experience in football-related cases, are one of the best options. Now the [fate] of Hearts is in [the] hands of administrators. We do hope that it will be possible to coordinate the interests of all the creditors and Hearts will find its new owner soon."
Cashflow remains a significant problem, with season ticket sales significantly down on last year. Once the finances have been stabilised, BDO will seek bids from interested parties. The administration process also immediately prompts football sanctions, and Hearts will start next season with a 15-point penalty. A registration embargo has also been imposed and will remain until HMFC plc exit administration.
"The situation affects fans like myself and players, but Heart of Midlothian is a substantial employer in the city," said Alex Salmond, the First Minister. "Like other clubs who've gone through that process, it's a time of anxiety for the employees. One comfort I would have at this time is that other clubs have gone through it and emerged at the other end of the tunnel, and that's what I fully expect Heart of Midlothian to do. They've been around for a long time and I'm sure they'll be around for a long time to come."
Club staff received confirmation of HMFC plc entering administration when they were sent an email by the club director Sergejus Fedotovas, who was writing to them on behalf of the board. "The club is on the verge of a transformation that hopefully will bring new fortunes to Tynecastle," Fedotovas wrote. "I need to thank you all for your work and enormous efforts that helped us to finish last season. I hope you will all get deserved recognition and will be treated well under the new regime. I would like to thank all of you for your work and dedication, all you have done will take its place in history."
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