The doomsayers have been predicting the implosion of English football for about a decade, but only now is there the real possibility that a club could go out of business.
Administration seems unavoidable for Portsmouth as the self-imposed deadline to find another buyer by Friday looms. It could be the best hope the club have of staying in business, and the Premier League has of protecting the integrity of the competition, though the tax man may yet have the final say on the demise of the 2008 FA Cup winners.
Reports suggest the tax debt is £20 million from a total figure of £70 million which means, in effect, the tax man could control the administration process and effectively put the club out of business. The tax man will expect to get most of his money back, but as a company must repay the same percentage of debt to all creditors, whoever comes in at Fratton Park will need deep pockets. Pompey have found that troublesome all season.
The powerbrokers at the Premier League are desperate to avoid the south-coast outfit going bust, which would make them the first professional English League club to go out of existence since Maidstone United in 1992.
Maidstone's demise as a Third Division club, just two days after the Premier League began, was not so problematic for the Football League, given that the Stones didn't even kick a ball that season. But Aldershot FC went out of business five months earlier, on March 25, just weeks before the end of the 1991-92 season.
Aldershot's entire record was expunged and the league was recalculated as a 22-team division, and this is what the Premier League must fear, as its rules state that the same would happen. The Premier League needs the season to be completed in full.
There would inevitably be winners and losers should Portsmouth's results be wiped out. Manchester United would have six points cut, and Chelsea three, meaning a four-point gap would re-open. Arsenal would lose six points and would surely be out of the title race.
Liverpool would be the big winners in the battle for fourth, losing no points at all, as they were defeated at Fratton Park while Pompey have yet to visit Anfield. Tottenham and Aston Villa would lose three points, but Manchester City would see six points wiped out. Rafa Benitez's men would be firmly in pole.
The biggest losers at the foot of the table would be West Ham (four points) and Bolton Wanderers (three). Wigan, Wolves and Burnley would not lose a single point. It would cast Bolton adrift at the bottom and put West Ham only out of the drop zone on goal difference rather than with the four-point cushion they enjoy now.
13 Wigan Pld 25 Pts 25
14 Sunderland Pld 24 Pts 24
15 Wolves Pld 25 Pts 24
16 West Ham Pld 25 Pts 23
17 Hull Pld 26 Pts 23
18 Burnley Pld 25 Pts 23
19 Bolton Pld 25 Pts 20
|Premier League relegation picture with Portsmouth's record expunged|
Expunging Pompey's record is the only fair solution. You cannot automatically award victories in the fixtures Portsmouth would have played. Assuming their opponents would win every game, when Portsmouth have hardly performed to Derby County standards, doesn't make sense. The teams that have lost to Portsmouth, like Wigan and Wolves, would be the ones aggrieved instead.
And that's why the Premier League will do everything in its power to make sure Portsmouth complete their fixtures.
West Ham are desperate to keep their four points. Co-owner David Gold said recently he would personally loan Portsmouth £10 million, but there is no way the Premier League will allow such a conflict of interest, designed to protect the Upton Park club through a cross-club loan.
Talk of the Premier League advancing future TV payments, due in May and August, contravenes League rules and it would also create a troublesome precedent for other teams getting into trouble, not to mention adding a further hole in Portsmouth's future revenue streams. That alone could put off potential buyers.
The only way the Premier League can get Portsmouth through to the summer is by "propping up" their debt. It could placate the creditors by withholding those future television monies and paying football clubs, the tax man and any other party due cash directly. This is not a perfect solution, but it could enable the Premier League to manage the situation until it no longer becomes their problem.
The Premier League alone will not be able to save Portsmouth: a buyer will have to come forward and satisfy the tax man and the other creditors. And with Her Majesty's Revenue & Customs eager to make an example of football clubs after losing millions in PAYE in the last decade, Pompey are walking a tightrope. This led to HMRC trying to wind the company up.
HMRC did have preferential status on the list of creditors when a business collapsed until 2003, but now have had to join the back of the queue with Chinese takeaways and cleaning companies. Only footballing debts are guaranteed to be paid in full.
The size of the bill owed to HMRC poses serious problems, though. Under insolvency regulations, 75% of creditors must agree to any Company Voluntary Arrangement (CVA), which effectively restructures the debt with the new owners paying back a proportion of the outstanding debt.
If the figures stated at the beginning of this article are correct, then HMRC owns 29% of the total debt and can veto any takeover bid. There is no chance they will take a derisory offer of 10p in the pound and may actually choose to close the club down. With three other clubs taken to court by HMRC recently - Cardiff, Southend and Notts County - patience is wearing thin at a time when total tax returns have taken a hit in the recession.
The ownership of the land and the ground does not help matters. Sacha Gaydamak is owed around £28 million, but owns the valuable land around the stadium, while current owner owner Balram Chainrai has the rights to Fratton Park. Chainrai would expect to lease the ground back to new owners at £1 million per season, though he must find someone to buy the club and satisfy HMRC first.
No one is at all certain just how Gaydamak and Chainrai's debt is structured, not to mention Sulaiman al-Fahim's 10% holding and the status of Ali al-Faraj. The administrator could have a very difficult job saving this club.
Even if Portsmouth do have a future beyond this season, it will be a long, hard road back. The nine-point penalty for entering administration (a point less than the Football League due to fewer games being played in the top flight) will effectively send them down on Friday.
In order for Portsmouth to start next season on a level playing field, they must have that CVA in place by the start of the campaign, and have settled all their footballing debts.
If not, they will be subject to a further 20-point deduction by the Football League, which could almost instantly condemn them to League One for 2011-12. Leeds United, Rotherham United, AFC Bournemouth and Luton Town have been handed penalties of 15, 17, 17 and 20 points respectively for failing to agree a CVA.
But that's if they have a football club. Anything will be a blessing - getting a CVA will be a battle in itself.