Hearts and The Shysters Charter

21 Jun

Brian Jackson, Neil Patey this close seasons big signings in Scottish Football.  To be fair both have been around a while.  Experienced with proven track record an asset to anyone who requires their skills.  The shame is Brian and Neil are not players they are football finance experts and in a world of internet forums every fan in Scotland is fast becoming competent with the ins and outs of football finance.

I watch with horror as another club looks likely to be liquidated.  Not placed into administration, liquidated.  Every piece of information I have seems to point to the fact Hearts will be liquidated before new season kicks off.  Reasons are simple debts out multiply annual income by over 3.5 times. Three and a half is around the maximum ratio.

Back in the old days when Bank Managers were respected and a mortgage meant a few meetings with this man not a quick hassle free phone call. Banks operated a simple lending plan.  For Joe Public it was simple three times your annual earnings oh and at least a 5% deposit. How we wish in this day and age that this simple financial certainty was still upheld.  Maybe just maybe we wouldn’t have so many state owned banks in 2013 if this was still the way things were done.

The banks with years of careful experience did not just come up with the three multiplied as it was their favourite number.  The banks after decades of experience realised that three was the magic number to lend out savers hard earned cash.

This brings us back to Hearts indeed any football club in Scotland with debt.  What the hell were the banks thinking dishing out increased loans to clubs that would do well to service the interest on the original loan let alone a new increased topped up loan.  A mortgage needed guarantees, collateral to give it its proper name.  A home owner technically does not fully own their home until the mortgage loan is paid off.  So what was put up as guarantee by clubs.

Last year Rangers via what is increasingly seen to be a move by a con man managed to pay off the bank.  The bank happened to have a man on the board and some would suggest in the dash for its cash the bank didn’t care who Rangers were sold too as long as they got paid in full.  Lloyds TSB/HBOS got paid in full and didn’t bat an eye when Craig Whyte then worked his spell over Rangers.  They had there money who cared about due diligence. It seems increasingly obvious that a combination of Craig Whyte and Her Majesties Revenue & Customs pursuit of a failed £100,000,000 claim consigned Rangers ultimately to Division 3.  When the magical EBTs were mainly declared legal HMRC did not say whoops we caused a company to fail via frozen accounts, refusal to compromise and vindictive persecution, no HMRC still convinced its right kept the accounts frozen and appealed the decision.

Hearts though have no powerful other in the picture.  Hearts fans have only one or a series of ones to blame for their predicament.  From the moment Wallace Mercer Sold Hearts the writing was on the wall.  Smart businessmen ignored the good business sense that had made them rich and followed the ideals of the fans.  More, More, More and when you have done that lets have some More. Investment not in reducing the debt, paying it off but servicing the debt.  In credit card terms paying the interest only.  The loans don’t appear to of had a structured repayment plan.  The checks and balances on these loans failed – missed payments tacked on to the loan.  That seems to of been en vogue.  Ambition may bite the nails of success but in this case it destroyed the heart and soul of a club.

Bill McMurdo blogged (http://billmcmurdo.wordpress.com/2013/06/21/way-down-upon-the-swanee-river/) that it appears that Hearts are only the first of a select band of clubs who are destined to call on Brian Jackson and his colleagues.  Bill mentions that unfashionable clubs who have sucked up the pain both publically and privately to ensure that their club runs within its means. Clubs that have put up with beatings and defeats from players opposing teams couldn’t afford are now in pole position to challenge.  As the sneering contemptuous masses of Clubs like Hearts who  looked down on Clubs running good businesses will now find out.  The so called Diddy’s are coming.

Hearts, Aberdeen, Dundee United, Hibs, St Johnstone, Inverness CT and Motherwell all indebted, all looking down from Ivory towers some may be saying there but for the grace of god but all dreading the call from the bank.  All failing to hit the debt being three times income ratio. In these times of reduced media and sponsorship, stands being partially closed due to lack of sales this income is falling as,fast as the interest is being added onto the loans. The lenders are in a panic. The lenders are fed up with multi-million pound liabilities sitting on their books. From a distance and upon forensic inspection these clubs business models don’t add up. The banks are not far from placing a member on the boards of these clubs and a demanding lender approving, disapproving and being in any control of your club is a bad thing indeed(ask a Rangers Fan). Simply put the lenders want out.
The Hearts situation has ramifications for all clubs with debt if a CVA is offered by BDO and the banks think that so many pence in the pound is a good deal they will engineer administration at other clubs to get something back from loans.  Cut losses and run! The flip side if the CVA being created offers in Banks eyes a low pence in pound value, the banks will be battering on the door of chairmen demanding repayment of the loans starting now.  Not cut losses and run more a structured repayment plan that will at best cost each club a players wages a year maybe more. That’s a player not at a club. That’s the double edged sword for most  top division teams.  Not for them cutting their cloth to suit but cutting their throats to pay and pay quickly one way or another.

They are clubs in SPL perfectly well run within means and budgets.  Clubs that have suffered for years destined to finish near the bottom but seen to be happy to be at the party.  Well breaking news they weren’t just at the party they were biding their time waiting for the perfect storm. Who is laughing now.

Sympathy for Hearts is in short supply they bet the farm and lost.  Sympathy should be given however to the countless redundancies being made.  Not the players released because with best will in world players tend to actually profit from being released one way or an other.  no sympathy for the people who today do not have a job and have bills to pay.  The people who worked in offices, answered phones and cleaned to building.  Today jobless going down the job centre after giving years to a reckless club.  Sympathy yeah I am for them.  I wonder if they believed the story given to SPL/SFA at end of last season that Hearts were ok didn’t need Lithuanians.  I wonder if some even bought luxuries thinking this story must be true because the authorities say it is.

The checking facts, Finances, Fit & Proper person investigation department at the SPL/SFA is I am told a room with two rubber stamps sitting on a table. One of the stamps says approved and  the other is a copy in case the first one breaks. That really is the question though.  Who in Authority is carrying out these checks on accounts and is a person fit and proper to run or be on the board of a football club.  Brookes Milestone (Gretna), Craig Whyte (Rangers), Gavin Masterton (Dunfermline) and Vladimir Romanov ( Hearts) all taking over clubs in last decade all the clubs dropped into the smelly stuff.  ALL APPROVED BY THE AUTHORITIES.  Same authorities who approved Stewart Reagan as chief of SFA.

You reap what you sow its true Karma is a bitch all the clichés are coming thick and fast.  As fast it would seem as Heart of Midlothian Football Club falls from top league to given the new structure the Lowland League.  As all Scottish fans should maybe get out of the habit of rejoicing and think who is next.  The Shysters Charter that is Scottish Football is entering the end game.

With the real possibility of two clubs either disappearing from football or relocating in a lower league this weeks fixture lists look more like a fantasy league than a declaration of events.

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