West Ham's new owners – a consortium led by an Icelandic bank which has been bailed out by its own government – said yesterday that they had taken control at Upton Park to protect the club from the imminent threat of becoming the first in the Premier League to enter administration.
The CB Holding consortium, which comprises the outgoing chairman Bjorgolfur Gudmundsson's creditors, took over on the eve of a court hearing in Iceland today in which Gudmundsson was likely to have been stripped of the protection against bankruptcy that had been in place since March.
One company in the new consortium, which will command a seat on the West Ham board – Iceland's MP Bank – was pushing to bankrupt Gudmundsson, a move which, under league rules, would have seen the Hammers deducted nine points and placed at severe risk of relegation to the Championship next spring. But the largest creditor, Straumur-Burdaras Investment Bank – under Icelandic government control having gone into administration itself – has helped broker a transfer of the club to the creditors.
Ominously for manager Gianfranco Zola's hopes of spending money, the club's new non-executive chairman, Englishman Andrew Bernhardt, is Straumur's head of debt, but Bernhardt said: "I can assure fans we will sanction investment in new players, but all within the parameters of sensible budgeting based on revenues generated by West Ham."
The Hammers can at least be grateful they have avoided becoming the most serious Premier League casualty of the credit crunch. That was becoming a possibility as the end of the moratorium protecting Gudmundsson was in sight. Bankruptcy and administration would have seen West Ham incur a nine-point penalty under section C, rule 60 of Premier League rules, a disastrous outcome which would compel them to virtually match last season's 51-point total simply to survive.
There appear to be no concerns at West Ham that Straumur's own financial plight will see it fail the Premier League's fit and proper person test. That test may rule out an individual who has presided over the collapse of a football club but not necessarily the collapse of another business, such as a bank. The league said it had asked West Ham to provide details of the change of ownership. "Once we have that information we shall assess and, if needs be, act accordingly," a spokesman said.
Straumur does not appear ready to sell the club for at least three years, despite the presence of at least one active prospective buyer – American, according to some sources – who has been waiting in the wings. Several other bids have reached the due diligence stage since Gudmundsson was hit by the global economic meltdown, but none has come close to his £150m asking price.
"We don't see anyone out there willing to buy at our price," said Straumur's Georg Andersson. "We live in a world where if anyone came in with a ridiculous sum of money [a sale could happen]. We don't see anyone capable or willing to do that."
Andersson said Straumur, which has a 70 per cent share of CB Holding, had decided to take the club over "mainly to protect our interests", in the move which had been under preparation for weeks. "The former owners of West Ham were going out of moratorium, which meant it was most likely they would go into bankruptcy, and under league rules the club would ... be penalised with a points reduction," he said. "The value of the asset would have decreased enormously. As a bank, we would have preferred the owners to keep the club and had success with the whole thing, but that is not the case. We [had] to do something."
Gudmundsson bought the club for £85m, taking on debt of around £22m, three years ago. He lost around £500m in the credit crisis but his efforts to sell West Ham have been complicated by the level of debt – currently around £75m including the £26m the Hammers will be liable for in the settlement of the Carlos Tevez affair with Sheffield United.
Straumur insisted West Ham were not in the de facto ownership of the Icelandic nation, owing to the fact the Reykjavik government had taken control of the bank. "We have not been nationalised. We are preparing a restructuring plan which in three to four months should see us re-emerge as an independent asset management company," Andersson said.
It is understood some senior executives at Straumur are disgruntled that MP Bank has, as they see it, used Gudmundsson's financial misfortune to increase its own profile in Iceland by making high profile calls for him to be left high and dry. No one at MP Bank could be reached yesterday.
Bernhardt has no background in football but said: "I'm delighted an agreement has been reached and look forward to working with [chief executive] Scott Duxbury and his team in the coming years."
Under the Hammer What the sale means
*Who are the new owners?
A consortium of banks owed money by Hansa – West Ham's parent company established by previous owner Bjorgolfur Gudmundsson. The largest bank, Straumur, will have three seats on the board and 70 per cent control.
*Why have they bought in?
Because Hansa might have fallen into administration, plunging West Ham into a points deduction which could have meant relegation. Hansa was protected from liquidation until today, after which the smallest of its creditors might have foreclosed on it.
*Will they spend?
Not inordinately. Straumur is in dire financial straits itself. But attempts to sell the club on in three years will be jeopardised without on-field progress. Zola must sell to buy.
*Was a points deduction a possibility?
Although this kind of deal had been anticipated for weeks, insiders say the club had been aware of that possibility, as the alternative safety route – the sale of the club – looked unlikely.