Portsmouth cash crisis created by late payments
ESPN Soccernet can reveal that Portsmouth's current cash flow crisis revolves around a £1 million payment due to Chelsea and further complications over Lassana Diarra's move from Arsenal.
Pompey owe £1 million to Chelsea over deferred payments on the purchase of Glen Johnson, and have a similar situation with Diarra, although the payments on his transfer from Arsenal are not actually due until the end of this month. The situation with Diarra is further complicated by a sell-on clause relating to his subsequent £20 million move to Real Madrid.
The Premier League have the power to pay a slice of Portsmouth's £12 million broadcast revenue due at the beginning of next year direct to any club that is still owed money if key debts have not been settled before January.
New owner Ali Al-Faraj is still in the process of restructuring the financial situation he inherited from the previous owners and, according to Peter Storrie will do so by the end of November.
A £15 million loan from Balram Chainrai and Levi Kushnir secured against assets of the club will cover the latest cash flow crisis for the late payment, plus cash needed to pay off debts to HM Revenue and Customs. Mark Jacob, Faraj's lawyer, has been accompanied at Portsmouth's last two matches by the two businessmen, with the club finally confirming their involvement.
Storrie told ESPN Soccernet: "They are providing a loan to the club. They will not be new owners as it is being suggested, this is well off target.
"The loan was in place when they were involved with trying to purchase the club originally, but the new owner plans to completely re-finance the business and that should be in place by the end of November."
The Premier League stepped in with a transfer embargo because it is a high priority that other clubs must be paid in full and on time. So too are debts to the Inland Revenue. Meanwhile, Storrie has been working relentlessly to reschedule payments due on player purchases.
Manager Paul Hart wanted to bring in free agent Eugen Bopp earlier this week but was refused permission, with the league arguing that it would be irresponsible to allow Portsmouth to take on further financial liabilities. The League also previously placed an embargo on Portsmouth in August, although that was subsequently lifted, allowing Hart to bring in players shortly before the transfer window closed.
Portsmouth are the only club that has been subjected to a transfer ban by the Premier League - as Chelsea's has been imposed by FIFA - but they are optimistic the sanction will be lifted shortly.
"This concerns unpaid money to other clubs," Portsmouth spokesman Gary Double said. "We are confident the situation will be sorted by the end of the week."
Clubs can agree to stagger payments over the balance of a player's contract, but there is now pressure to move back to the system in which 50% is paid up front and the remaining balance settled within a year.
Portsmouth have only paid off some of their debt to Revenue and Customs and, despite reducing their bank loans from £40 million to £10 million, they also remain in debt to Barclays.
The severity of Portsmouth's financial difficulties was highlighted when it emerged that the deal to acquire a 90% stake had cost Faraj nothing as it simply involved taking over the debt that had largely been build up under Alexandre Gaydamak.