Reluctant saviour tries to buy time to settle Portsmouth tax debt

Portsmouth's new owner only wants to recoup £17m loans – but first task is to defer Wednesday's deadline on club's winding-up order
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The Independent Online

Balram Chainrai, the Premier League's most reluctant owner, appears a more astute businessmen than his predecessors, but even he did not appreciate the complex realities of football's finances when he was drawn into the sport.

Having loaned Portsmouth £17m to keep it afloat in October the Hong Kong-based businessman expected to slice £7m off the debt when the club received their television rights payment in January. However, Chainrai was unaware that football creditors come first. That cash was diverted to Watford, Chelsea, Tottenham, Lens and Rennes by the Premier League.

This left Chainrai facing a huge loss should the club be forced into administration by a winding-up petition brought by Her Majesty's Revenue and Customs (HMRC) over £7.5m in unpaid taxes, and due to be heard on Wednesday.

In the circumstances Chainrai, and his partner, Israeli property developer Levi Kushnir, decided the only solution was to take over the club and then negotiate with HMRC. They thus took a controlling interest, via their British Virgin Islands-based investment company, Portpin, exercising a clause in the loan which allowed them to do so if repayments were not maintained.

This may be challenged with Mark Jacob, the British lawyer Ali al-Faraj appointed to the Portsmouth board, claiming neither party has complied with the loan agreement. The club's statement on the takeover said the original deal deposited "with Mr Chainrai the original [Premier League] share certificate and a signed but undated share transfer in favour of Mr Chainrai, which could be dated and exercised in the event of default on the terms of the loan agreement."

Chainrai's first step has been to apply to HMRC to delay the petition. The second will be to seek another owner, the fifth in a year, but before then the club's finances need to be stabilised. This will almost certainly mean further investment by Chainrai and Kushnir, but unlike the two previous owners, Sulaiman al-Fahim and Faraj, they appear to have the funds to do so. Chainrai, and any directors he appoints, will have to pass the League's Fit and Proper Person Test which on the information available so far seems probable.

As the alacrity with which they have issued statements on Chainrai's behalf suggests, the takeover has been greeted with relief within the club, with Jacob's challenge seen as "daft". Peter Storrie, the chief executive, who is himself facing charges of tax evasion, will again assume day-to-day financial control with Jacobs, expected to depart and controversial Israeli adviser Daniel Azougy no longer involved.

Manager Avram Grant also seems more secure despite his being embroiled in a personal crisis when he was named yesterday as the manager who visited a brothel late last year. However, the club regard this as a private matter and his wife, Tzofit, who lives with their children in Tel Aviv, issued a statement of support. Grant had appeared on the verge of quitting after the previous administration, which had promised the manager he would be able to invest in the January transfer window, sold Asmir Begovic and Younes Kaboul without telling him. Now the club is in different hands he seems happy to continue.

The Premier League is also happy at the change in ownership. The involvement of Azougy, who has been convicted of fraud in Israel, and thus would not pass the Fit and Proper Person Test required of directors, was a growing problem. It was increasingly obvious he was operating as a shadow director but while the Premier League could refuse him entry to meetings between club officials and their chief executive, Richard Scudamore, it was finding it difficult to act against Azougy.

The League will also be pleased if, under Chainrai, Portsmouth cease to be a fiscal laughing stock. A spokesman denied the club's situation was an embarrassment, but admitted it was "frustrating". He added: "For a club to get into this position given the income streams available to Premier League clubs has to be down to rank bad management, but Portsmouth is an extreme example. It does not mean the governance checks and balances do not work. And if the new regulations brought in in September [which are designed to flag up financial crises] were in place a year ago they would not be in this state."

The takeover should make today's unprecedented meeting between Scudamore and a fans' protest group, SOS Portsmouth, more amenable. Originally conceived to provide fans with more information, to explain the limits in the League's power to rein in clubs – and to head off a proposed demonstration outside the League's London office last Wednesday – it will now concentrate on the future.

That appears brighter, if still unclear. Portsmouth are around £60m in debt, half of that due to former owner Alexandre Gaydamak, and including seven-figure sums owed to agents and former players. The club runs at a hefty loss and is in danger of dropping significantly in value through being relegated. It may not be easy for Chainrai to find a buyer. If people – or banks – wanted to invest in Portsmouth, Faraj would not have come to him in the first place. One can only imagine what rate of interest the £17m loan incurs.

Much depends on Gaydamak. Fratton Park is well-placed for development, which is where the involvement of a property developer in Kushnir may alarm fans, but nothing can be done without Gaydamak. He held on to a significant plot of land surrounding the stadium as security as he presciently doubted Fahim's resources.

Gaydamak, who himself refrained from putting the club into administration on Monday after it defaulted on a £9m repayment, welcomed the takeover, then noted that "we continue to own the land which surrounds Fratton Park so Mr Chainrai will want to talk to us".

The conversation could be fraught. Last year Kushnir and Chainrai successfully sued Arkady Gaydamak, Alexandre's father, for £14m over a business deal that soured.

Four years, five owners: The men who took charge of Portsmouth

*Balram Chainrai (and Levi Kushnir) (present owner)

Portsmouth's fifth successive foreign owner, and the third to buy the club via a company registered in the tax haven of the British Virgin Islands, is a Hong Kong-based businessman of Nepalese extraction with a British passport.

The 51-year-old's original source of wealth appears to be a family-owned Hong Kong business involved in the import and export of consumer electronics (televisions, computers, and so on). He has since been involved in a varied range of interests including property investment, asphalt roofing and fitness centres operating in countries as diverse as Britain, Mauritius, Singapore and Russia. Chainrai, widely known as "Balu", is a past chairman and a current committee member of the Indian Chamber of Commerce in Hong Kong. However, should this week's Forbes' list of Hong Kong's richest businessmen be accurate his net worth is no greater than £500m.

His partner is Levi Kushnir, 56, an Israeli property developer with considerable interests in the United States including a chain of petrol stations and another of convenience stores. However, three of his companies were recently put into receivership and his interest in football seems limited. After attending a Portsmouth match earlier this season Kushnir, 56, insisted: "I have no involvement [in Portsmouth] whatsoever," he said. "I go to football once a decade." ......... Glenn Moore

*Ali Al-Faraj

(5 October 2009-3 February 2010; P20 W6 D4 L10)

Saudi businessman who, through Falcondrone, a company based in the British Virgin Islands, took a 90 per cent stake in Portsmouth on 5 October. This left Al Fahim with 10 per cent and the title of non-executive chairman. Al-Faraj did not buy Gaydamak's land. Never seen at a Portsmouth match, nor met the club's executives. Known to supporters as "Al-Mirage".

*Sulaiman Al Fahim

(26 August-5 October 2009; P6 W2 D0 L4)

Dubai-born businessman best known for fronting Manchester City's takeover by Abu Dhabi Group, and playing Alan Sugar role in a UAE version of "The Apprentice". Agreed to buy club in May becoming chairman in July before completing takeover on 26 August. Did not repay all Gaydamak's loans so the latter held on to land around the ground, essential for any development, as security.

*Alexandre Gaydamak

(2 January 2006-26 August 2009; P160 W62 D64 L34)

French businessman with an Israeli passport. Became co-owner, with Milan Mandaric, in January 2006, assuming sole control in July 2006 via British Virgin Islands-based Devondale Investments. Oversaw heavy investment leading to FA Cup in 2008, but left club with huge wage bill. Father, Arkady, owns Beitar Jerusalem, and has been convicted in absentia in France of gun-running in Angola.

*Milan Mandaric

(18 May 1999-2 January 2006; P447 W157 D104 L186)

Made a fortune in his native Yugoslavia, then emigrated and made a new one in America becoming a naturalised citizen. Owned five previous clubs, in America, Belgium and France, before buying Portsmouth, who were then in administration, in 1998. Appointed Harry Redknapp who steered club into top flight. Now chairman at Leicester City, and charged with tax evasion last month.

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