Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

The ‘return’ of Balram Chainrai

Posted by John Beech on August 14, 2010

The news that Balram Chainrai is set to return as owner of Portsmouth (1) has resulted in surprisingly little comment so far, although once the final impediments are removed this is likely to change.  At the moment all that is awaited is approval by the Football League and the transfer of the golden share.  This cannot however happen until the League’s next board meeting, which is not until 9 September.

Inevitably there will be comparisons with the coming out of Administration of Leeds United.  I think there are differences, but they hinge mainly on the motivations of the individuals concerned, a distinctly opaque topic, and the extent to which the outcomes were intended – a highly subjective and speculative distinction.  In pushing the distinction, a commentator is likely to face the accusation of being a Pompey apologist.

There is a worrying inevitability in all of this.  With the way the structure of the club’s debts have evolved, any other purchaser is disadvantaged compared to Balram Chainrai because of the fact that Chainrai had lent the club money, and acquired it in the first place through a default on that loan.  The accusation that will be made – and it holds considerable water – is that Chainrai will have minimised his losses at the expense of the unsecured creditors.  In effect, his decision to make what must with retrospect have been an unwise business decision – to lend money to a football club that was rapidly becoming a financial basket case – has been mitigated in its impact on him, thanks to the UK’s inadequate laws of insolvency.  If he had made any attempt to assess the club’s credit rating before he made the loan, the outcome would surely have been ‘you cannot be serious’.

To me, it seems that the critical point at which events took a turn was the making of the loan to the club, with the club itself as surety against the loan.  If ever there was a need for regulation, it is surely to prevent this happening – a club mortgaging itself to an outside party who has never been subjected to what was then the Foot & Proper Persons test.  I’m not suggesting that Chainrai would have failed, or that he will not pass the replacement Owners & Directors test, but I would suggest that clubs should not be allowed to put themselves in a position where ownership is put at risk without some independent review of the potential implications.

For the Fratton faithful, there may well be a sigh of relief that the club is moving forward again, albeit under the ownership of someone who this time last year had probably never heard of Portsmouth FC, and whose committment is even now less than unequivocal. But there may be a further factor which cause the saga to drag on and on.  The new arrangements are expected to see the formation of a new company and the liquidation of the existing company, thereby facilitating a much-needed investigation into the affairs of the old company.  With Chainrai having a foot in both camps, the potential for the investigation getting bogged down is higher than if there had been a clean break with a new owner.

The dog’s breakfast that Portsmouth’s financial affairs have descended to may thus take some time to return to an acceptable normality.  The one ray of sunshine in all of this is the club’s new Chief Executive, Davis Lampitt, formerly the Football Association’s Head of Football Integrity, a quality which had been in short supply at Fratton Park.  He is a man I have a great deal of respect for, and I find it hard to imagine a better person to see the club through the ongoing fiasco.  He commented “I’ve had a conversation with [Mr. Chainrai] and realistically he does want to realise the money he put in to the club. But in the short term the only way he can do that is to get the club back on its feet.  I think the interests of the club and the interests of Mr Chainrai are aligned at the moment.”  From the narrow perspective of Pompey’s CEO I would tend to agree with his last point, but it is still a sub-optimal situation, and one which should never have been allowed to happen.

Be all that as it may, the return of Balram Chainrai as Portsmouth’s owner is going to leave a bad taste in the mouths of many observers for some time to come.

UPDATE – 16 August 2010

Some early indications from Balram Chainrai here.

LATEST – 19 August 2010

Administrator Andrew Andronikou is planning for the club to come out of Administration on September 15th (A), assuming all goes well at the Football League meeting on September 9th.  Fortunately or unfortunately, depending on whether you view things from a finance or a football perspective, this is beyond the transfer window.

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5 Responses to “The ‘return’ of Balram Chainrai”

  1. “Foot and proper persons test.” Seems a more appropriate name, somehow.

    Thanks for this and recent posts. Was away for a week and have caught up in an afternoon. Much appreciated.

  2. What will rankle outside of Greater Portsmouth is seeing lots of articles where Pompay’s new old owners spokepeople (like the new CE) will talk of “significant investment” and “getting back to the PL”… You mentioned Leeds United, the distinction between the two cases passes me by despite your article, they form the guide to whether the outcome is “fair” in the long term. Basically if Portsmouth do not recieve an additional penalty, and its likely they won’t as the CVA process is being used, and they don’t spend a minimum of 3 years no higher than the Championship then they will clearly had a material advantage from Administration.

    As an aside I wouldn’t hold your breath on Insolvancy reform.

    • John Beech said

      At the heart of the problem is the fact that fairness is not an intended outcome of the various processes taking place – it is an incidental outcome, or not – and is also a subjective judgment.

      As for any differences between the Portsmouth and Leeds United cases, I must confess that I feel constrained from commenting fully because of the litigiousness of one of the parties involved. As I said, they are in any case subjective rather than demonstrably substantive.

      In general, Michael, I share your pessimism on the prospects of insolvency reform. The HMRC case against the leagues over the Football Creditors rule has, in my opinion, been weakened by their failure against Portsmouth. Broader reform may come out of the general consultation process (see Bubbling away in the background…) going on at the moment, but whether it will be sufficient to rein in football clubs I am less sure.

      A bad taste in the mouth and unheld breath I think sums it up!

  3. I for one am pleased it will be after the transfer window closes when Portsmouth exit administration, nothing would sum the distorted moral fibre of football than the sight of signings at Fratton Park in the next 11 days (or to be blunt in January if significant transfer fees are spent).

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