Football finance expert Neil Patey clears up what’s happening at Tynecastle.
Q What are the scenarios from here?
A The first scenario is that the administrator, BDO, receives a bid that satisfies the major two creditors and a creditors’ voluntary arrangement (CVA) is agreed. Under that scenario, the potential purchaser buys Hearts and the company continues to exist. Hearts continue to play Premiership football, with a 15-point deduction for the season. However, if the CVA is rejected – in other words, if the offer is not enough – it has to go down the liquidation route and Hearts could then only continue if its assets were bought independently by a newco.
Q Is it common during an administration process involving a football club like Hearts for offers to be rejected?
A Yes. It’s never as simple as ‘here’s the price and we’ll buy the business’. There’ll be conditions attached. It takes usually a number of iterations (revised bids) for the administrator to understand all the conditions attached and therefore which is the best offer. The administrator has to assess the deliverability of the bid.
Q What if the existing bids are only £1 million shy of what is needed, as has been reported?
A In comparison to the overall debt levels of the company of £25m, it’s not a significant amount. But it’s not a small amount in terms of the actual bids being made, as we understand it, about £3m.
Q Would a bidder usually hold anything back?
A At the end of the day it’s a negotiation. You’re putting in what you believe is a reasonable and credible bid, but more often than not you’d normally have some scope to increase that. It could be slightly different for the Foundation of Hearts. They might have more restricted means, with a lot of their funding coming from the fans.
Q How many revised offers can be put to BDO to buy Hearts? Is there a limit?
A There’s not a limit. It’s a competitive auction. It wouldn’t be unusual for two or three iterations.
Q What other conditions will be important in the bids other than price?
A The bidders will be undertaking due diligence. There might be a condition on the allowed time period for diligence. We also don’t know what the bidders have said regarding liquidation. In the Rangers situation, different bidders had different conditions attached on whether the CVA had to be agreed to and if it wasn’t would they be prepared to buy the club via liquidation and, if so, what would that do to the price.
Q How long do the bidders have before Hearts are forced into liquidation?
A It could go on for months. What the administrator needs to do is continue to run the club, but not at a loss. They can’t be incurring any additional debt. BDO will only return to the courts to get a liquidator appointed once they have exhausted options to reach a CVA or to get an agreement that satisfies creditors.
Q Can UBIG and Ukio Bankas push for Hearts to go into liquidation?
A The person that has the most influence is the administrator for Ukio Bankas because they have security over Tynecastle Stadium, but I don’t see their role speeding up the process.
Q How would UBIG going into liquidation affect Hearts?
A It makes it easier. BDO is on record as saying that. Right now, BDO need to get a CVA agreement with someone within UBIG because the company has a large chunk of the debt and because it owns 50 per cent of Hearts shares. The problem is all the assets of UBIG are frozen and there’s no-one willing to speak on behalf of UBIG. The company is in limbo because it’s in the process of going into administration, but there’s no administrator appointed. When an administrator is appointed to UBIG, there’ll be one person for BDO to go to and negotiate with.
Q What happens if Hearts enter liquidation?
A For Hearts to continue to exist, you would need a buyer to come along who was happy to set up a newco, buy the assets and apply for membership to League Two. There’s every possibility that you might not find a bidder that wants to entertain that. That would be the total doomsday scenario where Hearts would no longer exist.
Q What happens to Tynecastle Stadium if the club goes into liquidation?
A If the prospective purchaser buys Tynecastle from the administrator of Ukio Bankas, it’s bought by the winners of the bid. But there is a scenario where Ukio Bankas’ administrator believed the best value for them is to sell it to a property developer, then newco Hearts would have to find an alternate place to play football.