Creditors approve Portsmouth CVA deal

by Rachael Singh

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26 Jun 2012

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Trevor Birch

ADMINISTRATORS TO PORTSMOUTH FC have managed to secure a rescue deal at the collapsed Championship side.

The club entered administration for the second time in two years on 17 February, with PKF partners Trevor Birch, Ian Gould and Bryan Jackson appointed.

As part of the rescue deal, known as a Company Voluntary Arrangement (CVA) organised by the administrators, unsecured creditors such as the taxman and local businesses are likely to receive 2p for every pound owed.

Although secured creditors such as banks are likely to be paid substantially more, 75% of creditors, by value of debt, need to vote in favour of the proposals in order for a CVA to be approved, an exit strategy all clubs must use to stay in the League.

According to the administrators' spokesman, HM Renue & Customs was the only large creditor to vote against the CVA, which is taxman policy in football rescue deals. However, the CVA still managed to receive 95% of creditor votes.

Birch, (pictured) a partner at PKF, said: "The decision is another important milestone for Portsmouth and takes the club a significant step closer to leaving administration. We are beginning to see light at the end of what has, at times, been a very long and dark tunnel. This is, however, still dependent on restructuring the player cost base, which is a condition of both the existing offers."

As part of the CVA deal, the administrators can also continue to negotiate with other interested parties, such as fan group called the Pompey Supporters' Trust, which submitted an offer last Friday.

The CVA is based on an offer from former owner Balram Chainrai's company Portpin. It is offering to settle outstanding wages for part-time club employees (prior to it entering administration), and debts owed to charities as well as small local businesses owed less than £2,500.

HMRC recently lost a legal battle to change insolvency payments in football administrations. Usually, in a corporate collapse, the secured creditors such as lenders are paid first, then the unsecured creditors such as the taxman and local suppliers with whatever is left.

However, in a football administration, football creditors such as players and other clubs are paid in full and first, ahead of secured and unsecured creditors – a structure known as the football creditors rule. HMRC failed to have this rule overturned in the High Court earlier this year. Because of the FCR, the taxman as policy votes against football CVAs.

HMRC has until the end of the month to appeal the High Court decision.

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