Pompey administrators hit back at alternative CVA proposal

The Portsmouth administrators have hit back at insolvency firm Griffins’
claim it could offer creditors a return of between 65p to 99p in the pound.

The modified company voluntary arrangement (CVA) offer has been described as
“flawed” and based on assumptions that “do not add up”, according to a UHY
Hacker Young spokesman.

Andrew Andronikou, Peter Kubik and Michael Kiely, from UHY Hacker Young, were
appointed joint administrators to Portsmouth on 26 February 2010.

The trio have offered creditors a 20p in the pound return over five years
under a CVA. A creditors meeting to vote on the proposal is due to take place
next week.

However, Griffins’ modified CVA claims an increased return of as much as 99p
in the pound could be funded through various changes in the proposal, including
reducing wages at Portsmouth to £5m. Currently wages total £42m. UHY
administrators plan to reduce this initially to £13.6m and to £10m – £8m the
following season if the club remains relegated.

A spokesman for UHY said: “Whilst we always welcome fresh ideas, this offer
is fanciful.

“Griffins’ proposal would send out completely the wrong message to creditors.
It would be saying that football clubs can be run with excessively high levels
of debt, without robust financial management, and that everyone will get their
money back in the end.”

“If the club paid out 65 pence in the pound, let alone 99 pence in the pound,
it simply wouldn’t be able to survive.”

The spokesman added: “For some reason the proposal overstates the club’s
income over a five year period by over £17 million. Some of the errors are
basic. For example, Griffins has included VAT in its calculations, but that
would go to HMRC, not the club.”

Other issues to be addressed in order for the modified CVA to achieve a 99p
in the pound return to creditors include the club’s former owner Sacha Gaydamak
needing to drop his claim of £30m.

“Griffins’ is claiming that Gaydamak could be liable for £50m unless he gives
up the £30m he is owed by the club. If Griffins has evidence of any wrongdoing
on Gaydamak’s part, I hope they will make that available to the authorities and
current administrators. No evidence has so far come to light that Gaydamak acted
unlawfully. He isn’t simply going to walk away from £30 million unless there is
a reasonable prospect he might face a claim for £50 million,” said the UHY
Hacker Young spokesman.

“Griffins’ proposal would send out completely the wrong message to creditors.
It would be saying that football clubs can be run with excessively high levels
of debt, without robust financial management, and that everyone will get their
money back in the end.

“I am not sure whether advancing a proposal to win business from creditors,
which could destroy the club in the process, is a responsible position for an
insolvency practitioner to be taking.”

Griffins has robustly defended it’s claims, stating that it had “no interest
” in seeking any appointment over Portsmouth FC “of any description”.

“Our involvement is to represent creditors and to advise them on our concerns
about the proposed CVA,” the firm said in a statement.

Griffins added that it believed UHY Hacker Young had “not understood” the
comments made in its modified CVA plan. “Whether deliberately or otherwise, they
have misrepresented the document and the suggestions made therein,” said
Griffins.

Griffins said it remained surprised that the administrators had expressed
“support” for the management of the club “before a full investigation has taken
place.”

“We remain of the view that our modifications are sensible and provide a
better deal for creditors. The club would also be viable in the future.”

Further reading:

Insolven
cy firm Griffins challenges Pompey administrators with higher return

Portsmouth
FC heading for groundbreaking deal

Breaking
news: HMRC to veto Portsmouth CVA

HMRC
tackles Premier League football creditor rule