Pompey takeover bid hits snag
Not only has Portsmouth been prevented from exiting administration this week, but also potential buyer Balram Chainrai has been stopped from buying the club outright and selling it on for a tidy sum.
Hong Kong businessman Chainrai had two Chinese conglomerates in final discussions to buy the former English Premier League club from him if his takeover plan was successful, but everything has been put on hold after Her Majesty's Revenue and Customs (HMRC) lodged an appeal in the High Court on Thursday against the club's deal with creditors.
A Company Voluntary Arrangement (CVA) to exit the process was agreed but HMRC is seeking that the CVA be revoked or suspended on the grounds that there were 'irregularities' in the way the votes of creditors were taken. It was a major setback for Chainrai as the appeal will not be heard until October or November, so the club must remain in administration until then.
'I was not keen on buying the club, but if no one was going to takeover the club, I was prepared to do it so I could sell it later and recover the majority of my money as quickly as possible,' Chainrai (pictured) said. 'I don't want to liquidate the club. I don't want to be the one who destroys it as the fans who follow Portsmouth are fantastic.
'I want to keep it running and eventually someone can buy it from me. Despite the HMRC's decision myself and my business partner are prepared to hang in there because we see value in the club.'
Chainrai initially took over the 90 per cent shareholding in Portsmouth held by previous owner Ali al-Faraj, of Saudi Arabia, in February after the club had missed deadlines to repay money Chainrai was due and the loan ballooned to GBP17 million (HK$200 million).
He had hoped to become Portsmouth owner for a second time by purchasing it through Portpin, his investment company, but he remains Portsmouth's largest secured creditor and is now owed about GBP15 million.
In the grand scheme of things, Chainrai is not unduly worried about the outcome - as a secured creditor he is assured of recouping the GBP15 million he's still owed by the club despite it being in administration. However, the HMRC's decision scuppered Chainrai's attempt to buy Portsmouth with the minimum of fuss and sell it on for a profit.
The CVA, prepared by the administrator, Andrew Andronikou, proposed 20p in the pound to all creditors over a four-year period, which would have allowed the club to exit administration without a football sanction. HMRC argued, though, that their interests had been 'unfairly prejudiced' by the CVA agreement as they were unhappy with the offer of 20p in the pound and the fact that Portsmouth's administrators had reduced HMRC's claim from GBP37 million to GBP24 million.
'In the CVA I agreed if there were no buyers I'd buy the club out of administration at 20p to the pound,' Chainrai said. 'It was voted through and confirmed by all creditors. But the HMRC's appeal means the CVA cannot now be passed until the appeal is heard in court. This won't happen until October or November, so the club must remain in administration. It was an 11th hour decision by the HMRC and really the only sufferers in all of this are the creditors. My position does not change. I'm still a secured creditor and I can sell assets of the club to recover my money if I have to.'
Chainrai argued that 20p in the pound was a fair offer to creditors as last month fellow Championship club Crystal Palace reached a deal where its creditors were paid just 1p in the pound to exit administration. To make matters worse, Portsmouth will get a double digit points deduction from the Football League for still being in administration at the start of the new season.
But what will be gnawing at Chainrai most of all is his inability to buy the club when he had wealthy, Chinese prospective buyers lined up.
'It's upsetting,' he said. 'This delay and the points deduction from the Football League will mean the price to buy the club will now change. It'll mean I'll buy the club cheaper, but I also won't get as much for it whenever I end up selling it on.'