IAN MURRAY steps into Tynecastle’s Executive Suite looking confident and undaunted. He is wearing a bright red tie, particularly apt for a Labour MP, and is very much ready to mix football with political wrangling.
He sits down ready to chat about Foundation of Hearts’ bid to take Heart of Midlothian out of administration and deliver a supporter-owned club. It would be entirely fitting if he produced a deck of cards and a suitcase full of £100 notes, for he is now embroiled in a critical game of poker. And make no mistake, the stakes are high.
Whether the football club Murray is sitting in survives is now purely down to him and his Foundation of Hearts cohorts. No pressure, indeed. The Foundation were awarded preferred bidder status by Hearts’ administrators BDO last week. The club’s future now rests in the hands of the fans’ umbrella group chaired by Murray.
Everything hinges on the Foundation agreeing a Creditors’ Voluntary Arrangement (CVA) with Valnetas UAB, Lithuanian administrators for the club’s biggest creditor, Ukio Bankas. They are understood to want £5 million for a CVA and have threatened to liquidate, whilst the Foundation’s current offer is less than £3m. Murray has a vital role to play in negotiations if he is to save the club he has supported since childhood.
The Foundation have Hearts-minded and Edinburgh-based investors funding their proposal. Special Purpose Vehicles BIDCO and FANSCO have been created for legal reasons to hopefully complete the deal – the investors being BIDCO and the Foundation being FANSCO. Don’t even contemplate confusing those with SEVCO, for Murray is adamant Hearts will not be liquidated in a re-enactment of Rangers’ fall from grace.
Should a CVA be agreed, bidco would have control of hearts, which would then be sold on to the Foundation. Following the announcement of the Foundation as preferred bidder, a crucial period of negotiation begins with the Lithuanians over a CVA. More than 6700 fans have pledged monthly money to the Foundation and will be given a say in the running of Hearts if the supporters’ group gain control.
Angelo Massone was dismissed as a rival bidder last week. Bob Jamieson fell by the wayside before him. All that is left is Murray and the Foundation – and the heat is on.
“We want to deliver a CVA as professionally and as efficiently as we can. We also want to give the fans comfort that everything is above board,” says Murray. “The fact we’ve got preferred bidder status shows BDO are comfortable with the people behind our bid. Their identities will be out as soon as possible.
“We’re not talking about figures in terms of meeting Valnetas in the middle. We have a bid on the table and we have preferred bidder status. Valnetas are comfortable that we can take that forward. We need to have discussions and determine where we are in terms of fulfilling the more detailed due diligence needing done.”
That bid on the table will be the subject of much eye-balling between Murray and Valnetas over the coming weeks. No deal can take place until Ukio Bankas Investment Group (UBIG) have administrators appointed – a matter for the Lithuanian courts to address. UBIG holds 50 per cent of Hearts’ shares and the Foundation would have to secure those to gain control.
Any money used from the unnamed financers involved in BIDCO will be paid back over a period of years, depending on funding from pledges. Interest will be minimal and contractual agreements prevents the money being used to back any other bid. The investors do not wish to be named right now in case the Foundation’s bid fails and they are fingered for not coming across with enough money. Their names will be revealed if and when a CVA is agreed.
“There are different ways you can buy a football club,” continues Murray. “You can borrow the money commercially, which is incredibly difficult to do in the current economic environment and is quite expensive. You can hive off the assets and rent them back, but again that’s not really affordable given the current funding gap at the club going forward.
“The third one is to get business people who are Hearts-minded, who want to do this for no personal return, and have a relationship that is contractual between the purchaser and the supporters to deliver fan ownership, and do it as a partnership in that way. I think that’s the best deal for the club and the best deal the supporters see as a good way forward.”
That the Foundation’s backers will make little gain on their investment is seen as a huge positive for Hearts. “That’s why it’s the best deal and I hope people can see this is the best way forward,” says Murray. “It was always going to be the case that you can’t buy a football club with direct debits, regardless of how many you have, there was always going to have to be a capitalisation of that revenue.
“We now have a partnership between an organisation that has the revenue in the supporters, and Hearts-minded Edinburgh business that has the capital to be able to purchase the club. The contract between these two organisations will now be water-tight in the sense that they now can’t sell it to anyone else but the fans.”
Time is of the essence for the Foundation, which merely increases the pressure on Murray. Hearts have funds to see them through until Christmas but thereafter comes a shortfall. The current wage bill sits around £800,000 after administration saw the last of the high-earning players leave. The club will be allowed to sign players over the age of 21 come February 1, 2014, but only if they are out of administration. That means a CVA must be completed.
“The January transfer window will have closed so there will only be a proportion of players you could sign regardless,” continues Murray. “It’s up to the footballing professionals at this club to decide what they will require. What we really need to do is deliver a CVA as quickly as possible, but it has to be right and obviously it has to be acceptable. If we could deliver it tomorrow, we would. The club is down to its bare bones in terms of staff and playing staff. There is £535,000 of football debt to be dealt with and that is all taken into account in terms of what revenues Hearts will require over the next three years.”
Murray seems determined to force Valnetas’ hand. The option of liquidating Hearts is risky as it rests on selling Tynecastle, which Ukio Bankas own, to recoup funds. Problems with planning permission and interested parties willing to build on the ground cherished by so many in and around the Capital could be major stumbling blocks.
One recurring question is what the Foundation would do if they gained ownership of Hearts only to make a decision which resulted in many fans cancelling monthly direct debits – thereby undermining their funds. “We’ve built in a tolerance for increases and decreases in the number of direct debits,” says Murray. “People’s financial circumstances could change.
“Delivering supporter ownership means they have a say in what happens at the football club. There is no longer someone sitting at the top making decisions without any recourse. That’s an important element here. There will be an understanding and there will be input of the decisions made.
“Under the previous owner, hiring and firing policies were rather haphazard and didn’t seem to have any thought process behind them. That will now be up for members to determine. I can understand people’s discomfort but there will be a communications exercise that will allow all these issues to be addressed. Not every fan is going to agree with every decision made at any club. There must be patience that it’s all being done in Hearts’ best interests.”
There is little doubt Ian Murray is acting in Hearts’ best interests. He does not have the suitcase full of cash to play the game Valnetas want to play. He prefers to drive a hard bargain.