We’ve crossed a UBIG hurdle

Ian Murray

Ian Murray

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Not so much good news and bad news, just good news and no news for Hearts.

Meetings in Lithuania yesterday did not bring the deal fans hoped for to help their club out of administration. However, progress was made with Ukio Bankas Investment Group (UBIG), who agreed to transfer their 50 per cent stake in the Edinburgh club to prospective owner Ann Budge during a creditors’ meeting at their headquarters in Kaunas.

The ‘no news’ came from Ukio Bankas, who have yet to agree to release their 29 per cent stake. Lengthy face-to-face discussions between Hearts administrators BDO and Ukio lawyers failed to produce an agreement on the bank’s shares and talks will continue over the next few days.

Ukio are believed to want more money than the £2.5million offered through a Company Voluntary Arrangement (CVA) but have been told that is not possible. BDO officials Bryan Jackson and Trevor Birch flew to Lithuania on Sunday expecting both UBIG and Ukio creditors to meet yesterday to vote on transferring their Hearts shares. However, only the UBIG meeting went ahead. It is hoped a Ukio creditors’ metting will take place next week.

Ukio conditionally approved the CVA to take Hearts out of administration last November. They stand to receive all of the £2.5m as the club’s only secured creditor, whilst UBIG agreed to a payment of almost £100,000 for their shareholding as an unsecured creditor at yesterday morning’s meeting.

Reasons for the delay with Ukio have not been officially disclosed but the Evening News has learned that late offers of more cash have slightly unsettled administrators for the insolvent bank. There are other issues to be resolved relating to the deal but those involved will not comment for fear of jeopardising any potential agreement with the Lithuanians.

An email offering £15m for Hearts’ shares over a 15-year period was sent by Edinburgh businessman Pat Munro to Lithuanian administrators on Sunday. Bob Jamieson, who failed to provide proof of funding for his proposed takeover bid last year, is also awaiting developments but will only try to get involved if Budge walks away due to ongoing delays.

BDO believe both Munro and Jamieson lack substance but their interest is being described as “unhelpful” to the process. Ukio are obliged to investigate any offers on behalf of their creditors to ascertain whether they could source more than £2.5m.

That money is being provided by Budge on behalf of the united fans group, Foundation of Hearts. They remain cautiously optimistic following yesterday’s events in eastern Europe but are aware there are still hurdles to negotiate.

“If I can use a footballing analogy, then if we were offered this result before the game then I think we would have taken it,” said Ian Murray, chairman of Foundation of Hearts. “UBIG was a major hurdle which we’ve got across. There’s one major hurdle to go and as far as I understand there have been some really positive discussions which have taken place. We hope to have this all concluded shortly. We just have to continue to be patient. We’re dealing with a complicated legal process in Lithuania. We made significant progress yesterday because I thought the biggest hurdle to negotiate was UBIG. That has been overcome. Hopefully, we will get all of this done now by the middle of April. That would be a big benefit given the stark realities of what Bryan Jackson [BDO administrator] has said with regards to funding.

“Given where we are, hopefully we’ll be able to get this done in time before the club runs out of money.”

Cash to keep Hearts operating is due to run out at the end of this month or early May at the latest. Hence BDO, Budge and the Foundation are keen to secure a deal for the club’s shares as quickly as possible.

Ukio lawyers have been informed that the £2.5m CVA is a realistic price for both their shares and Hearts’ only major asset – Tynecastle Stadium. Ukio hold security over the ground and it is debatable if they would get the same amount, let alone more, if the club was forced into liquidation and the stadium land put on the open market.

Asked if Hearts may need third party funding to bridge any cash shortfall should the latest delay become longer than expected, Murray replied: “I wouldn’t have thought so. If there is, we can’t resolve that until we know where things stand. If the Ukio creditors’ meeting goes ahead next week and everything is positive, then I’m sure there can be discussions about how you take that forward. If it doesn’t go ahead next week then it changes the dynamics of it. It’s difficult to say at this stage whether anything would be required at all.

“Obviously, the Foundation was there to provide the bid funding as soon as the deal was done in any case. We would have to be assured the deal was going to be done.”

The worst case scenario for all concerned is liquidation. Hearts are in their 140th year as a club but are most certainly at their lowest ebb. If a deal with Ukio cannot be concluded, and their 29 per cent stake cannot be added to UBIG’s 50 per cent and transferred to Ann Budge, the club may well cease to exist.

Ukio’s lawyers may explore every legal avenue possible to see if they can find more cash for the Hearts shares. Once they are ready to proceed, they must follow the correct process, involving a formal creditors’ meeting and votes on a number of issues. Only one relates to Hearts, and that is the transfer of their 29 per cent stake.

“They want the proper process to run through and they want to make sure they can justify to their own creditors that they’re getting the best value for this part of their portfolio,” explained Murray. “I think BDO are working hard to convince them that is the case but they have to come to their own decision on the matter.

“The belief was that there would be a creditors’ meeting for Ukio Bankas yesterday but that hasn’t happened. We’re at a stage where we just have to work to get through the proper process and hope we can get this done by the middle of April. That’s where we are today.

“The process which happened with UBIG yesterday – a formal creditors’ meeting taking place – that process still has to happen for Ukio.

“It must happen soon or Hearts will be forced into receivership. The good news from UBIG’s creditors was tainted slightly yesterday afternoon by the lack of clarity from Ukio. The next few days will be crucial for all concerned.”