Yesterday I wrote about the new HMRC petition to wind up Hearts over a tax debt in excess of £400,000.
The announcement of this, which the Hearts Board had to do if they wish to proceed with their share issue, was followed by an apocalyptically titled letter to the fans – The future of Heart of Midlothian.
It reads as follows, with my comments in bold:-
Today the Board of Heart of Midlothian plc is writing to you with the express wish that every supporter provides emergency backing for the club.
This is not so much a request as a necessity.
To use the words yesterday of John Robertson, one of the greatest players in this club’s history, this is a “Call to Arms”.
There is no greater need than now for supporters to invest in the club in whichever way you can, without delay. How can you do this?
I think it is fair to say that, as an attention-grabbing introduction, it hits the spot. In the same way as no one reading the Share Prospectus could be under any illusion about the need for the investment sought, this letter in fact suggests that the Prospectus, which made Private Fraser’s demeanour seem like that of Timmy Mallet, was a harbinger of glad, confident morning.
The club needs “emergency backing” “from every supporter”.
Invest in the Share Issue! Take time to look at the Share Offer brochure and give some thought to what you might be able to afford to commit to the Offer. There are risks, we know, and these are laid out clearly so be very sure this is right for you before committing but please at least consider it.
The Board cannot try to drum up interest in the share issue without pointing out the risks. As the “risks” effectively guarantee loss of the investment, there is no business case at all for investment – instead it is, if you pardon the pun, a need for the heart to triumph over the head.
Buy a ticket for you and a friend for the St Mirren game next weekend (Saturday 17th November KO 3pm)! We currently have 4,700 available seats for this game and we must fill the stadium for every game from now on to have any chance of avoiding future financial consequences.
To say that a sell out is needed for every match from now on is laying things out starkly. A sell out is needed “to have any chance” of avoiding financial consequences.
One might wonder about the contrast between the earlier statement yesterday and this one. That statement indicated that, with money due to Hearts, they were hopeful of reaching a payment arrangement with HMRC over the unexpected overdue £400k. That seems to have changed. Have the projections deteriorated between the two statements, or did HMRC tell Hearts that the choice was to pay up or go under?
The thing with HMRC is that, eventually, the patience snaps and repeated failure to abide by payment arrangements leads to that facility ultimately being withdrawn. It looks as if Hearts are at that point now, and saying, as they do, that they are vergens ad inopiam will not encourage HMRC to give them more time.
Hearts have 4,700 seats still free for 17th November. At best that might bring in an extra £100k? So less than ¼ of the new tax bill?
Buy a ticket for you and a friend for the Celtic game on 28th November. It’s always a cracking atmosphere under the floodlights at Tynecastle and we will welcome the champions for what we expect to be a cracking game. Let’s fill the stadium and help the club continue to operate.
Buy a ticket for you and a friend for the Aberdeen game on 8th December. Aberdeen has already requested additional capacity as they vie for top spot in the Clydesdale Bank Premier League and this could squeeze availability for home fans. However, we want to look after our own fans and if demand from you is there, then we will make the Roseburn Stand available once again to Hearts fans.
Without the support of fans there is, as we issue this note, a real risk that Heart of Midlothian Football Club could possibly play its last game next Saturday, 17 November against St Mirren.
This isn’t a bluff, this isn’t scaremongering, this is reality.
For a football Board to state, in stark terms, that it is less than two weeks from closure is not a step to be taken lightly. The fans would be unforgiving if it was a case of crying wolf. The implication is though that HMRC is playing hardball and wants £400k in the next week and a half.
A winding up petition cannot be opposed on the basis that you want time to pay HMRC, unless the time is very short.
Taking account of the changes seen since the share prospectus, it seems that the tax bill has completely knocked all of Hearts’ projections askew.
Discussions on whose name is above the door, talk about how the money has been spent and debate on whether the investment in silverware has been appropriate is all natural but quite simply worthless at this moment in time.
The only valid debate now is how can you help the club. Is the club worth less than £110?
This is a very well pitched emotional appeal to the fans. Effectively the Board are saying, “You do not like how we run the club but you need to give us more money to do so, otherwise the club dies”.
It all depends, I suppose, on how scunnered the Hearts fans are with matters. If they are bloody minded, and want the Romanov regime to leave, then they might feel that the way to engineer this is to let the company be wound up, and for someone to buy the club (at the going rate of £1 perhaps) from the liquidator, so that the Maroons can rise, as a confused lawyer once sad, like a salamander from the ashes.
This club has been supported for the last seven years by generous funding from the majority shareholding business Ukio Banko Investicine Grupe (UBIG) and we continue to seek the support of UBIG at this stage. However, no business is immune to the financial realities of the current global economy and for this reason the club’s reliance on its supporters is greater than at any point in the last seven years.
As the share prospectus said, UBIG was not going to pull the plug this season, although the position for next was reserved. However it was also made clear that further funding from UBIG was highly unlikely to be forthcoming.
UBIG though have a choice. As creditors to the tune of £22 million, with an interest bill, accruing at over £1 million per annum, what happens to its debt if Hearts fail?
UBIG holds fixed securities over the heritable assets and a floating charge over the rest. Basically anything realised by the liquidator (as the halfway house of administration seems highly dubious) will go to pay the liquidator and then to pay UBIG in respect of its various securities.
But winding up makes the players free agents, so there is no value there. How much is Tynecastle worth and to whom?
Maybe Hearts should ask for some tips from Charles Green on how to bolster shareholder value and indeed to double turnover in a single year.
Our partners, our opponents, media, football bodies, many others – all are watching and judging how we will respond to the challenge. If we cannot demonstrate that we are united and we represent a force then there will be no due respect to the club from anyone around.
Without your help now, we could be entering the final days of the club’s existence. There are limited options for the Board of Directors to take to avoid the catastrophic consequences that a funding shortfall would mean for the club.
A The fans stump up the cash.
B UBIG put more money in.
The Board statement is right. No matter the mismanagement that some might feel there has been at Tynecastle, the only game in town is Mr Romanov. There are no Maroon Knights looking to take over to save the club. In fact, even if there were, it could only be on condition that the debt was wiped out. No one is going to pay UBIG £22 million to clear the debt, then buy their shares and then invest in the team.
As Phil Mc Giolla Bhain wrote about Rangers some time ago, what is wanted is a “stupid billionaire”. There are few billionaires in the world, and very few indeed are daft.
In a footballing sense alone Hearts will suffer an immediate 17-point penalty. This would just be the start of a painful process that will affect every one of us and could lead to far more damaging actions that threaten the very existence of the club.
I am not sure where the 17-point penalty comes in, but of it is liquidation, not administration, then that is game over. The issue is not a points deduction, but the removal of the team from Scottish football.
One of the tasks which Duff and Phelps successfully completed for Rangers was to have them get to the end of the season. That allowed them at least the chance of trying to stay in the SPL once the sale of the assets and business took place. Should Hearts fail to fulfil its fixtures, then even a resuscitated Hearts will have no option but to seek admission to SFL3.
The power is still in the hands of every Hearts supporter and for that reason we want to be as honest and transparent with you in the hope that you, too, believe that this club is worth saving.
Now please make every effort you can to take any or all of the four steps outlined above and help this great sporting institution survive.
What to do if you are a die-hard Hearts fan? Do you support them financially as asked, even though you might have little or no regard for the owners?
Would it work to call the UBIG bluff?
If Hearts go into liquidation then the liquidator can sell off the “history” of the club.
According to Wikipedia “Hearts have many A-list celebrity fans including; Stephen Hendry, Ronnie Corbett, Ken Stott, Alex Salmond and Sir Chris Hoy.”
Would any of them, or indeed a combination thereof, come together to form a Maroon Dream Team?
If it is liquidation, then the players would be lost to free agency. The ground would be in the hands of UBIG, but they might be happy to rent it out on the basis that it is one of the few ways of generating money from it.
As Mr Green has shown at Rangers, it is possible to resurrect a team, debt free, merely by buying the “assets and business” for a few pounds, and installing them in a newco. As of 10.03 pm yesterday, the name Hearts FC Ltd was available, should someone want to set up a newco.
What future do Hearts face?
A Green-like revival, a stay of execution from Mr Romanov, or a Third Lanark-esque demise?
The next few days will be very interesting indeed.
Posted by Paul McConville