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Hibs sack manager & Hearts on the brink of "doing a Gretna"
Posted by Glenbervie on 6 November 2011 - 8:46pm.
Hello disinterested non-footy, non-Scottish readers. You'll be wanting to look away now because the next few paragraphs are about Scottish football. Again. From an Edinburgh perspective, it just feels like the end times - main post in comments below...
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The main bit
Hibs have just sacked manager Colin Calderwood but this isn't particularly unusual with the Leith club. Alex Miller was their last long-serving manager of any heft (1986-96) and since then they've gone through ten in 15 years for an average tenure of around 18 months per man.
Otherwise, the club is run well. It has a decent, modern stadium (capacity of nearly 20,500) and no particular debt problems. But it has also sold all its best players in recent times, sometimes down south, sometimes overseas but often to the Old Firm. Rather than spend cash it doesn't have, the club lives within its means and is currently ninth in the SPL with 13 points from 14 games.
Yesterday, the team lost 0-1 at home to Dunfermline and the patience of the fans cracked. There were calls for the manager's resignation, again, and today Calderwood got the elbow after just under 55 weeks in charge.
Across the city at Tynecastle, it's not the fans who have cracked but the owner. Vlad Romanov saved Hearts from a fate worse than renting Murrayfield back in the 2004/05 season - that and financial oblivion since under different ownership they had already been overspending for some years. A Russian-Lithuanian businessman who made his cash during the breakup of the USSR, he took effective control of the club in early 2005 and his shareholding has increased since then.
Going precisely the opposite route to Hibs, Vlad threw lots of money at Hearts, in a manner of speaking, with a growing overdraft at the Lithuanian bank he controls (Ukio Bankas, based in Kaunas). The reported debt at the moment is something like £30m for a club with a turnover around £8m - in a country where the TV rights for SPL football might as well be given away free in a Kinder Egg.
Hearts have also gone through managers like nobody's business since Craig Levein left in 2004: nine including the current incumbent. In the last few weeks, the club has also officially discovered that it can't redevelop its stadium to a decent standard (thanks to the conclusions of an official report into the matter), it therefore has to move from Tynecastle, the local authority can't help with any kind of community stadium, wages for the top earners in the first team squad have been paid late, and the club squeaked out of a winding-up order initiated by HMRC by ponying up half a million quid it should have paid ages ago. Romanov meanwhile is citing the reverse Led Zeppelin defence: it's anybody's fault but mine. The sheer Soviet-era paranoid style of the club's official PR statements lately has amused onlookers, but not Hearts fans of course, fearful for the future.
The latest BBC bulletin about Hearts included the following:
"mired in debts of around £30m"
"Mr Romanov has confirmed that he will stand by the club and continue to support it to the extent it remains reasonable" [my emphasis]
"Hearts must therefore prepare to reduce investment in the playing squad to match the income in the coming season"
"Hearts at the moment is strongly dependant on the funding from the major shareholder and the attempts of the media to undermine the position of the club and Mr Romanov pose a direct threat to the immediate future of the club" [my emphasis]
The lay observer might suspect that three years after the credit crunch with a double-dip recession, or depression, facing the world, banks battening down the hatches and even the chequebook of a Baltic millionaire running out of pages - or the investment guys at Ukio Bankas on the verge of bottling it completely - then Hearts are heading right into the debt-storm almost everyone expected they would experience sooner rather than later. Everyone but the most bonkers Hearts fans that is - the majority of the support are probably staring into a pint of Deuchars and sobbing gently.
The main difference between Hearts and Hibs at the moment is that Hibs will be around this time next year when Hearts might not. Meanwhile, it remains to be seen whether the SPL can actually absorb the double blow of Rangers (see other threads) and Hearts hitting the buffers at the same time. Speaking as an Aberdeen fan, i am not gloating. But i do wonder if the Dandy Dons should just apply to join the Norwegian Tippeligaen with some despatch.
As a Hearts fan....
It's worth pointing out that the debts owed by Hearts are directly to the owner (or his bank),so there isn't any third party likely to pull the plug like Lloyds Bank of Scotland were very close to doing with Rangers. Clearly there is the possibility of someone like HMRC doing this however, but that would depend on whether Romanov's intentions are that he'll finance the ongoing costs but no substantial new investment going forward, or whether he's pulling the plug completely. Some commentators have suggested the latter, its more likely the former - after all, he'll get something back if someone else wants to buy him out.
Also, Hearts kind of broke even this year (before player amortisation) so in cash terms they're ok (ish). Hibs made a loss for the first time in ages - having not sold so many players to the ugly sisters for once.
So, I don't agree with your conclusion, nor your analogy with Gretna. Not for one moment do I think things are happy in lala land, and there's a real danger that the top half of the Prem may become an achievement in line with say Aberdeen or Dundee Utd or Hibs, but I'd be willing to have a small cyber-bet that both teams will be around next year, and in 5 and 10 years time....
I dug out the annual PwC report into the SPL
(The latest version, published this year, quoting official figures from 2009 and 2010)
It says that Hearts were running with a wages/turnover ratio of 126% in 2009 and 115% in 2010 ... also overall turnover was down in those years (not atypical for SPL sides), and that Hearts lost around £8.6m in 2009 but made a small profit of £39,000 in 2010 (both figures before tax)
Net debt for Hearts was pegged at just over £36m in 2010
Now if no one is willing to take on Everton (in the English Premier League) and it took ages to get someone like Craig Whyte to buy Rangers (with the consequences for the club's debt still to be determined, apparently) then who in their right mind would buy Hearts, given the figures quoted above? Where does the debt go and how much does Vlad want to get out? If he did something wildly altruistic (like sell the club for fair value but take the debt with him) then, fine. But do you think he will do that?
Plus the weasel words in the official club quote in the BBC report were that he would continue to support Hearts "to the extent it remains reasonable". That phrase sounds alarm bells, surely?
It all depends
If Romanov can afford to write the whole £36m off then it will cause huge problems as the club will be forced to survive with no investment from its owner.
If he's trying to keep things as a going concern with a view to getting some of his money back (and I agree, it would have to be a nutter Euromillions Hearts fan to pay the whole debt off) then he's going to have to pay for any loss or cash outlow in the short term.
Hearts main issue is the stadium. After years of messing around, we're stuck with a stadium in what was a prime property area, unable to develop it, and unable to afford to move. Had Romanov spent £20m initially on a new ground, we wouldn't be in the mess we are (and neither would he). However, that wasn't to be.
Overall, he's been good for us - hes put his money where his mouth is, his public pronouncements are amusing (and a bit like Cantona's "seagulls fly over the trawler", everyone knew what he meant and agreed with it) and he genuinely wants to do well. He's now just going to have to hope someone's willing to bung him £10m or £20m to allow him to exit the whole shebang.
Calderwood
Chris Hughton was desperate to get Calderwood as his number two when he became manager at Birmingham in the close season. In fact there was a tug of war between Birmingham and McClarens Notts Forest. Ironically had he gone to Forest he could now be number one. His credentials weren't that great so it was something of a surprise that two clubs were battling for him whilst his employers were doing everything to hang on to him. Funny old game isn't it?
Football is fucked south of the border too - my club have an owner facing a prison sentence for money laundering. He paid twice as much for the club as it was worth - I guess that's easy if the money doesnt belong to you (allegedly). He lived the dream and paid inflated wages for players who didn't give a shit (thats you David Bentley) or who had passed their sell by date (thats you Alexander Hlieb). Since the summer we have trimmed our wage bill by 75 percent, recouped around £24 million in transfer fees and received the premier league parachute payment. Apparently we still don't have a pot to piss in. The question is how rigourous are the fit and proper person tests that the Premier League use to verify the worthiness of these foreign owners? I look forward to the day when the Premier League is won on footballing merits and not on financial clout. It is becoming a boring pastime watching football and Sky should stop kowtowing to the top 4 and spend more time on grassroots football or it will be finished within 5 years.
I feel genuinely sorry for Hearts supporters.
Only a few seasons ago they were assembling a team that looked like potential SPL champions under George Burley. Like supporters of all so called 'provincial' clubs (Motherwell for me - disappointed to lose today!)I was looking forward to someone challenging the Ugly Sisters of Scottish football however Romanov has since turned a once proud club into a laughing stock. Goodness knows where this is going to end.
The Rangers implosion
is coming your way soon, courtesy of HMRC multimillion tax bill and new owner being potless charlatan.
The Rangers Implosion
Can I ask, as someone who happily admits to not knowing a great deal about scottish football / politics, if someone could give a brief summary (in a non biassed way - if that is possible), of the troubles that are about to hit the mighty Glasgow Rangers?
Many thanks.
That's a bit like asking:
"Why is Europe having a financial crisis?"
PS: but in very very brief terms ... the club exploited a tax loophole to pay players in a certain way and this has come back to bite them on the bum and they could be faced with the kind of HMRC bill that could see them slide into administration ... also the former owner, Sir David Murray, ran into difficulties with his wider business empire and couldn't support the club the way he used to ... the bank has effectively been in control of Rangers for a while now and the club up for sale - Scottish football is hardly "an investment" so it took a long time for someone to come along and take over; Craig Whyte bought the club for a quid earlier this year but what happens next (to the club debt, the liability for the possible HMRC bill and so on) remains to be seen ... it's not a pretty picture
The subject was recently covered
in Private Eye as regards the tax evasion and, also, BBC Scotland ran a programme on the new (shady) owner and his, rather chequered, past.
Briefly, the club set up a Trust some time ago, to pay players, partly so they could avoid NI. The Trust was incorrectly administered from the off. The projected bill is believed to be around £20m, but could double once interest and penalties are included. It is uncertain what provision has been made as to who would pick up this bill.
Whyte, the new owner, was disqualified from acting as a director for 7 years in 2000. He has a string of failed businesses behind him, and his tenure to date has been conspicuous for the lack of funds expended on players and missed payments to creditors. Recently, two sacked directors have successfully applied to have funds set aside to cover any awards that may be made for wrongful dismissal.
Administration beckons by the turn of the year.
Rangers
If Rangers fall, Scottish football goes with them or at least to Celtic plus nine part time SPL sides - every other club is reliant on the Old Firm for a huge proportion of their ticketing and commercial revenues - remember the row about who sells what tickets for away games involving Rangers and Celtic. The TV deal, worth buttons now WITH a minimum of 4 Old Firm clashes, will be worth far far less buttons in the future. Without a decent TV deal - your league sponsorships go kaput too. No trickle down of cash from the top flight to Cowdenbeath, Coatbridge and Kirkcaldy. Scottish football would be staring into th abyss in its entirety. SPL would end up as the equivalent to the Conference in England. Society in the west of Scotland would never be the same again (maybe no bad thing - would help the A&E departments and social services no end).
It won't/can't happen. Expect Rangers to carry on but be effectively playing on one leg for the next decade.
Administration beckons by the turn of the year.
Firstly, thanks Glenbervie & Ianess for your replies.
Administration ? It happened to Portsmouth recently, & it cost them dear, but as GR are such a big fish in a small pond, would a points deduction have the same affect ? - Its not as if there is a queue of big clubs that could take advantage of their misfortune.
I think what I am trying to say is that GRFC are big enough to ride out a storm - 10 point deduction for 1 season, hardly a catastrophe for them is it? (As things stand, they could lose 10 points now & still make a fist of this seasons title)
Or is there a lot more to it? surely they couldnt go out of business could they?
I am really intrigued / confused.
10 point deduction is the minimum
There is an argument that, if they lose the tax case, they have benefited from their tax scheme to the extent that a number of their trophies over the past few years are tainted - put simply, if they hadn't been operating the scheme, they wouldn't have been able to afford the players they bought, and their titles are therefore ill-gotten gains. If that is the case, 10 points should be the minimum deduction - demotion shouldn't be out of the question.
In any event, their cash flow seems to be so bad that they might not make it to the result of the tax tribunal i.e. administration before Christmas. rangerstaxcase.com sets it out in (great) detail.
10 points deduction
Rangers can withstand, particularly given current league position. However, I believe the club would also be disqualified from European football for a year.
That's by the by, because the major issue I can see is that they've been sold to a con merchant with a dodgy business history. The BBC special had a revealing interview with a board member from the previous regime who revealed he'd been leant on heavily by Lloyds to rubberstamp the sale, despite the Board's misgivings about Whyte's credibility and his past business record. Whyte refused to go on the programme to answer the various damning allegations, but did the usual bullshit trick of threatening to sue. the BBC. Let's see if these writs ever get to court. I'm not holding my breath.
European League?
Compared to the EPL and SPL, the Championship does seem to be the only division* where at the start of the season anyone can win/get promoted. It makes one wonder if the giants of EPL & SPL were hived off into a European league, we would be left with two divisions where any club could win and a kind of magic would return.
There is a genuine risk that Man City will win the Premier League for the next 10 seasons, and will probably beat Arsenal's "never to be repeated" invincibles season this year.
* and probably Leagues 1 & 2.
The game is a bogie
As we used to say.
The one club in Scotland who are relatively "happy" that Hearts, Rangers etc are in the klartz are Celtic. Not only does the absence of a credible competitor in Rangers make it incredibly easy for them to sook up whatever euro/prize money is on offer for winning in Scotland. But the longer they stay as the only big fish the more insistent would be their bleating to join the English league.
Hmm, not sure
If Rangers go then Celtic are left as the rebels without a cause. They would be far and away the richest and most powerful club north of the border with an almost guaranteed crack at the Champs League every year, as you say. (At the moment they are simply the richest club north of the border with a rather chronic inability to overcome a financially hamstrung Rangers.) But without an exit strategy, how would they sustain interest in winning the SPL, again, and plodding through European football in the autumn before getting knocked out, again? I think for them it would be England or a lingering death of interest in Scotland - and at the moment it doesn't look like England.
Rebels without a cause....
Did they ever have one?
Are these scotch clubs all missing a trick?
Subscription podcasts? It's the future.
Romanov wants to sell Hearts and buy a theatre
It was on the BBC website today and the source was a Russian news agency - so the opportunity for saying "I was misquoted" remains, but it's looking more and more like Vlad's had enough of football altogether.
He also owns clubs in Lithuania (Kaunas) and Belarus (Partizan Minsk) - he's supposed to be getting shot of those too.
The issues remain however. Having too much time on my hands, let's look at some...
1. If he wants to sell Hearts and pay off all the debt, then the price would be way too high for anyone. No sale. Vlad remains in charge but spending on the first team squad plummets. (This is happening already.)
2. If he wants to pay off some of the debt, then that lays open two possibilities...
i. An asset-stripper comes along who reckons he could pay off Romanov, sell Tynecastle, move Hearts to a rented Murrayfield - or groundshare with Hibs - but still realise a profit. The club would presumably be sold again in the next few years
ii. Or there might be a more benevolent buyer who wanted to keep Hearts in place at Tynecastle for the time being and was willing to take on some of the debt. This would still entail a cutback in spending on the playing squad of course, unless they were willing to retain Vlad's habit of spending more than 100% of turnover on player wages
3. Vlad doesn't care about the debt and just wants the market value of the club, as if it wasn't deeply in the red to a Lithuanian bank. A benevolent millionaire hoves into view, signs a cheque, and Hearts start a new chapter in their history (although the caveat of spending more money on wages than is affordable remains).
I may not be a fan, but I don't want Hearts to go bust or get asset-stripped. Finding a buyer in the current climate seems a major, major problem however.
Indeed
I think we're in option 1 at the moment unless anyone comes along with any serious option. I suspect the money he's put in will be treated as sunk (he is the bank after all) and limiting any further outgoings will be the priority. Obviously option 3 remains the most optimistic outcome, but there's always option 2a which is a new owner comes in with a deal to build a new Tescos in Gorgie, with the price being a new stadium on the outskirts of town - a model for many other new stadia builds in recent years.
I still don't think we're anywhere different to where we were a year or two ago, except that he's managing the expectations of the fans, SFA and media monkeys down by installments.
Although today it was reported that
he reckons Hearts are worth £50m
http://news.bbc.co.uk/sport1/hi/football/15844006.stm
Sorry, should say...
except that he's managing the expectations of the fans, SFA and media monkeys down by installments and the expectations of would-be buyers up by installments.
Willing to bet the final price is a long way south of £50m.....although that's up there with "sun rising in east" in terms of quality bets.