Share Transfers Agreed/Cooling off period

[mutley]

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Who cares about the specifics...there ****ed

This 😃

[Geo_1875]

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I'd lay my head beside you Sergey - I do not see anyother way out for them.

Get a room you two :)

[greenginger]

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Big leap but assume Massone is preferred bidder & Liths accept. If it is then decided (SPFL?) that he is not fit & proper person...what happens next?

Vlad was never on Heart's board and I'm sure Massone could get some stooges to form a board and have their strings pulled.

[PapillonVert]

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Big leap but assume Massone is preferred bidder & Liths accept. If it is then decided (SPFL?) that he is not fit & proper person...what happens next?

If his aim is to get his mitts on the physical assets (i.e. land) then what does he care whether he is a fit & proper person to run a football club?

His offer is 100% for a CVA, 0% for working capital suggesting he ain't interested in the on-going business.

[CropleyWasGod]

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What the bidders are willing to pay for HMFC that counts. For FOH and Bob that''s £1.8 million which is obviously way below what Tynie would fetch if sold to a property developer. These are no goes.

It comes to what Massone and crew offer upfront which ranges from £4 to £5 million. BDO operating on behalf of creditors so don't care about working capital. Question is do they really have the money to put on table now? From Massone's past record the answer is no. But if he did BDO could sell all assets of current HMFC to a newco with Massone paying for them. The money is held in trust until Lithuanian situation is untangled. I think the SPfL would view this as a technical necessity to untangle HMFC from the Lithuanian knot and keep newco in top league. But very quickly newco would run into funding issues and liquidation follows.

More likely scenario is that Massone does produce the money or has too many conditions attached and Ukio Bankas having rejected CVA - see my earlier posts why I believe they will have more than 75% of vote - and liquidation then happens.

That would be a Sevco situation. There would be no chance of the SPFL allowing them to stay in the top league.

And, for the record, BDO should be concerned about the working capital of the business. One of their 3 statutory purposes is to "rescue the company as a going concern." That can't be done without regard to the working capital.

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This is my first post on the whole situation ..I have been enjoying the daily updates and having a good laugh to myself reading about what the yams think will happen compared to the what will happen in reality....

But here is a question if they go down the liquidation and newco route the only real asset they have is the brand name or licence but who owns that ......
If say its UBIG how can that be sold if all assets are frozen ...
And where would that leave a newco trying to gain membership of the SPFL or div3

Hearts own that.

If it's sold through a CVA, the new owners take it on.

If it's sold to a Newco, it's a Sevco situation. The Newco has to apply to join the SPFL and the SFA, as neither memberships are transferable.

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If his aim is to get his mitts on the physical assets (i.e. land) then what does he care whether he is a fit & proper person to run a football club?

His offer is 100% for a CVA, 0% for working capital suggesting he ain't interested in the on-going business.

Coming in late here, but is it? I can't see how it would be 100% for a CVA and nothing for the secured creditor(s).

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Sergey, would it be worth dropping a note to your Lithuanian contact and let her know the derisory offers that have been made ( according to AllisBarry ) for the purchase of 7 acres of City Center real estate presently occupied by a worthless football team.

Tell her no attempt has been made to properly value the land and the sole concern of the Club's administrator seems to be to make sure the football club is OK and the tax payers of Lithuania can go and do one.

If she can get it out in the media over there perhaps some pressure can be applied to prevent a football club rip-off similar to last years asset sale scandal in Govan.

Given that BDO were proposed by Lithuanians, they probably know already.

Given, too, that UKIO and UBIG have an effective veto over the whole deal, they will definitely know soon.

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And those two enquiries are.......?

Sorry, can't say. Confidentiality etc.

The content isn't really important, though. It's the lack of response that is surprising.

[Part/Time Supporter]

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Do BDO have the assets to sell?

NO!

END - OF - STORY.

That isn't quite correct. It's the assets of UBIG that are frozen. HMFC Ltd itself isn't frozen by this order, but it does include the shares in HMFC Ltd owned by UBIG. If the Lithuanian legal process prevents those shares from being sold anytime soon, a way around that issue would be for BDO to sell the Hearts business and assets from HMFC Ltd to a Hearts newco.

That's what (eventually) happened with Portsmouth, which was financially controlled by another failed Lithuanian bank. BDO are hoping that this won't be the case with Hearts, because the potential punishment for going down the newco route is far greater in Scotland than it is in England. Therefore they have to work on the basis that the UBIG shares will be made available, at least in the initial process.

[Onion]

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If his aim is to get his mitts on the physical assets (i.e. land) then what does he care whether he is a fit & proper person to run a football club?

His offer is 100% for a CVA, 0% for working capital suggesting he ain't interested in the on-going business.

[Sanger]

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I don't think BDO could sell any of HOMFC's secured assets without approval of the Lith. Admin.

The decision to create a newco would be made in conjunction with Lith admins. It has probably been agreed already. Why else would BDO float it. And us way to get round the Lith impasse. That is why a newco would be viewed differently from Sevco. A HMFC newco if agreed by all parties would be a technical way round the Lith situation. If Ukio (see why they would control vote in my earlier posts)then agree to CVA where they get 90% plus of the offer then effectively HMFC could come out of administration even under the technical newco. But that would need a cash offer in the region of £4-£5 million upfront which is highly unlikely which is why I think it will go liquidation with money put in trust for when Lith situation unravels.

[grunt]

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That is why a newco would be viewed differently from Sevco.

This makes no sense to me at all. Viewed differently by who? Do you mean by SFA / SPFL? If not, then who?

[ScottB]

Rangers would rightly go ballistic if a newco Hearts kept its league position. Regardless of whatever situation of their own making.

Bottom of the SPFL structure for them. Not that I believe there is time left for a newco to form prior to the seasons start now anyway.

[Caversham Green]

I've been a bit out of circulation for the last few weeks, and probably will be again for the coming week, but here's some observations on the current position:

First, the distribution of administration funds would take the following priority:

1. BDO's fees - they wouldn't do the work if they weren't likely to be paid in full
2. Secured creditors in full up to the extent of their debt. They would normally expect to be paid in full or take the whole of the balance of the funds after the administrator's fees. They could however come to an agreement outwith the CVA or even leave their security in place post-CVA. That's unlikely to happen in this case given the Liths' own financial status.
3. Unsecured creditors - I've learnt during the course of this thread that this includes any 'secured' debt that exceeds the value of the secured asset, which means the Liths will dominate any CVA vote.

As Sergey keeps saying, the Liths' own current situation is the overriding factor in any CVA process - Ukio have an absolute duty to obtain as much as possible from the process, while UBIG may not even have the legal capacity to vote as things stand since they are in a state of limbo.

On to the offers as reported by The Scotsman.

FoH - The reporting of this looks confused to me - it tells us where the £2m is going to, but not where it's coming from and then tells us where the £3.75 is coming from but is sketchy on where it's going to. In any case, the creditors are only going to be interested in the £2m and will consider whether that is enough to satisfy points 1. and 2. above. BDO are duty bound to consider the future working capital requirements of the club if it is going to exit administration intact. That will include the likelihood of collecting the pledges from the plums.
HMFC Ltd - The report suggests that this bid is inferior to FoH's, but the working capital figure looks to be more solid that the spurious pledges offered by FoH. The same considerations still apply for acceptance though.
Five Stars Football Ltd - This is being presented as a personal bid by the disgraced former owner of twice-in-administration Livingston and reportedly makes no provision for future working capital needs. If true, BDO would have to present it as a liquidation offer as the club could not exit administration as a going concern. It's also the offer that the creditors are most likely to accept (if they're in a position to do so) since it gives them twice as much as the next best offer.

Given the standard of reporting throughout this saga I have no doubt that there is more to each of these offers than has been reported and do not necessarily believe the figures quoted are accurate.

[Waxy]

Having to form a newco means your club has become defunct. That's it. End of history etc. Forming a Newco means you must start at the bottom from a new beginning. Still baffles me how The rangers got back in. Corruption and rule bending all over the place. The Jambos would find it more difficult me thinks. Why didn't St Bernards, Third Lanark not just form newcos back when the world was black and white?

[greenginger]

Is there really a necessity for additional working capital to keep the good ship Yam afloat ?

The shortfall is based on BDO/David Southern's projected spending. A real cut and burn policy could keep the club ticking over on expenditure similar to Morton.

Or,

Massone may be able to introduce Yam F C to an Italian Bank which could provide them borrowing facilities, underwritten by Massone and his backers.

Note. Failure to repay this type of loan may result in something more painful than a 15 point deduction.

[cabbageandribs1875]

Cosa Nostra 1 New Hertz 0

[Jack]

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If his aim is to get his mitts on the physical assets (i.e. land) then what does he care whether he is a fit & proper person to run a football club?

His offer is 100% for a CVA, 0% for working capital suggesting he ain't interested in the on-going business.

Massone has a history of not paying for electricity, ground rent, or players hence there being no need for working capital. ;)

[aDONis]

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I've been a bit out of circulation for the last few weeks, and probably will be again for the coming week, but here's some observations on the current position:

First, the distribution of administration funds would take the following priority:

1. BDO's fees - they wouldn't do the work if they weren't likely to be paid in full
2. Secured creditors in full up to the extent of their debt. They would normally expect to be paid in full or take the whole of the balance of the funds after the administrator's fees. They could however come to an agreement outwith the CVA or even leave their security in place post-CVA. That's unlikely to happen in this case given the Liths' own financial status.
3. Unsecured creditors - I've learnt during the course of this thread that this includes any 'secured' debt that exceeds the value of the secured asset, which means the Liths will dominate any CVA vote.

As Sergey keeps saying, the Liths' own current situation is the overriding factor in any CVA process - Ukio have an absolute duty to obtain as much as possible from the process, while UBIG may not even have the legal capacity to vote as things stand since they are in a state of limbo.

On to the offers as reported by The Scotsman.

FoH - The reporting of this looks confused to me - it tells us where the £2m is going to, but not where it's coming from and then tells us where the £3.75 is coming from but is sketchy on where it's going to. In any case, the creditors are only going to be interested in the £2m and will consider whether that is enough to satisfy points 1. and 2. above. BDO are duty bound to consider the future working capital requirements of the club if it is going to exit administration intact. That will include the likelihood of collecting the pledges from the plums.
HMFC Ltd - The report suggests that this bid is inferior to FoH's, but the working capital figure looks to be more solid that the spurious pledges offered by FoH. The same considerations still apply for acceptance though.
Five Stars Football Ltd - This is being presented as a personal bid by the disgraced former owner of twice-in-administration Livingston and reportedly makes no provision for future working capital needs. If true, BDO would have to present it as a liquidation offer as the club could not exit administration as a going concern. It's also the offer that the creditors are most likely to accept (if they're in a position to do so) since it gives them twice as much as the next best offer.

Given the standard of reporting throughout this saga I have no doubt that there is more to each of these offers than has been reported and do not necessarily believe the figures quoted are accurate.

Hi Cav

There was a very interesting statement by Bryan Jackson at BDO's first formal press conference.

He made two (interlinked) things very clear, that nobody seems to have given much thought to;

1) BDO won't be getting paid from any ongoing working capital raised from the fans/tickets/merchandise etc.
2) BDO fees were entirely linked to a 'satisfactory return on the sale of Tynecastle' (may not be a direct quote, but he made it clear that the sale proceeds from the stadium were key to how/if BDO got paid).

Unfortunately, I can't find the unedited press conference but it's what he said.

This strikes me this would drive behavior where the best return is focused on the sale of assets and not the going concern.

Thoughts?

Yours
aDONis

[PapillonVert]

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Massone has a history of not paying for electricity, ground rent, or players hence there being no need for working capital. ;)

Or as they say on the boulevards of la belle France whilst shrugging their shoulders, plus ça change, plus c’est la même chose.

[CropleyWasGod]

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The decision to create a newco would be made in conjunction with Lith admins. It has probably been agreed already. Why else would BDO float it. And us way to get round the Lith impasse. That is why a newco would be viewed differently from Sevco. A HMFC newco if agreed by all parties would be a technical way round the Lith situation. If Ukio (see why they would control vote in my earlier posts)then agree to CVA where they get 90% plus of the offer then effectively HMFC could come out of administration even under the technical newco. But that would need a cash offer in the region of £4-£5 million upfront which is highly unlikely which is why I think it will go liquidation with money put in trust for when Lith situation unravels.

Sorry, I can't agree with that at all. The SFA and SPL set a precedent with Sevco, and they would have to follow that in Hearts case.

In a liquidation, why would the money be put into trust? The assets are sold, and the proceeds distributed in accordance with normal liquidation procedures. Liquidators etc, followed by secured, followed by unsecured, followed by shareholders. There would be nothing left for the shareholders, so the unravelling of the holdings would have no relevance.

[jdships]

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Is there really a necessity for additional working capital to keep the good ship Yam afloat ?

The shortfall is based on BDO/David Southern's projected spending. A real cut and burn policy could keep the club ticking over on expenditure similar to Morton.

Or,

Massone may be able to introduce Yam F C to an Italian Bank which could provide them borrowing facilities, underwritten by Massone and his backers.

Note. Failure to repay this type of loan may result in something more painful than a 15 point deduction.

Regardless the nature of the business " cash Flow" is arguably one of the most important facets of forming a company and remains so throughout its life .
" Buying " HFC is the simple part . If they intend to be successful in major terms investment / sponsorship and continued support is all important to provide as you call it " working capital "
I have a friend who is a Director of a Third Division club in Scotland and he and all his fellow Directors pay in a sum every month to pay gas/electricity bills and to maintain a decent " cash flow "

[hibeesjoe]

If Hearts get liquidated and turned into a newco after the season starts what does the spfl do? Will they be told that it doesn't matter where they finish in the table at the end of the season it's of to div3 for them

[CropleyWasGod]

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Hi Cav

There was a very interesting statement by Bryan Jackson at BDO's first formal press conference.

He made two (interlinked) things very clear, that nobody seems to have given much thought to;

1) BDO won't be getting paid from any ongoing working capital raised from the fans/tickets/merchandise etc.
2) BDO fees were entirely linked to a 'satisfactory return on the sale of Tynecastle' (may not be a direct quote, but he made it clear that the sale proceeds from the stadium were key to how/if BDO got paid).

Unfortunately, I can't find the unedited press conference but it's what he said.

This strikes me this would drive behavior where the best return is focused on the sale of assets and not the going concern.

Thoughts?

Yours
aDONis

Early in the discussions, I had a cut and paste ready whenever anyone raised the issue of BDO's fees, and used it a few times. When BJ used the word "property", I took it to mean either "property as part of a going concern" or "property as part of a break-up".

To focus on the sale of the assets rather than the GC would be contrary to BDO's duties. In most cases, the latter does result in a higher return for creditors and BDO have to start out with that assumption. They are still, IMO, going along that line, albeit with less confidence now than they did before.

[Caversham Green]

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Hi Cav

There was a very interesting statement by Bryan Jackson at BDO's first formal press conference.

He made two (interlinked) things very clear, that nobody seems to have given much thought to;

1) BDO won't be getting paid from any ongoing working capital raised from the fans/tickets/merchandise etc.
2) BDO fees were entirely linked to a 'satisfactory return on the sale of Tynecastle' (may not be a direct quote, but he made it clear that the sale proceeds from the stadium were key to how/if BDO got paid).

Unfortunately, I can't find the unedited press conference but it's what he said.

This strikes me this would drive behavior where the best return is focused on the sale of assets and not the going concern.

Thoughts?

Yours
aDONis

I remember that. Point 1 is fairly normal - administrators generally only get paid out of the proceeds of the administration itself rather than 'trading' funds during administration (I think CWG might have pointed this out as well at one point) but point 2 is very telling if taken literally.

Without question he said they would be paid out of the sale proceeds of Tynecastle - unless that was a slip of the tongue, that means that the stadium will be sold separately from the club which means the club is to some extent going to be broken up. People in BJ's profession have to choose their words very carefully and he is an experienced operator so I would be a bit surprised if he had actually misstated the point.

[Waxy]

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If Hearts get liquidated and turned into a newco after the season starts what does the spfl do? Will they be told that it doesn't matter where they finish in the table at the end of the season it's of to div3 for them

If this happens they shouldn't be allowed to play anymore fixtures.They become defunct.

[Hibercelona]

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If Hearts get liquidated and turned into a newco after the season starts what does the spfl do? Will they be told that it doesn't matter where they finish in the table at the end of the season it's of to div3 for them

They wouldn't be getting sent off anywhere. They'd be dead. A newco (new company) would have to start from the beginning.

[Caversham Green]

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If Hearts get liquidated and turned into a newco after the season starts what does the spfl do? Will they be told that it doesn't matter where they finish in the table at the end of the season it's of to div3 for them

Remember that what happened with Rangers was that the other SPL clubs voted on whether to allow the transfer of their SPL share to Sevco. They voted no in that case, but if the demise of HoMFC was going to bugger up the fixtures in the middle of a season it's not inconceivable that they vote yes to a transfer of the yams' share.

[Sanger]

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This makes no sense to me at all. Viewed differently by who? Do you mean by SFA / SPFL? If not, then who?

By the SPFL - if a CVA is accepted on a newco because the newco is a way out of the Lithuanian tangle then it would not be viewed as a newco that came about because of a failed CVA attempt that led to liquidation a la Gers. IMO of course!

[hibeesjoe]

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They wouldn't be getting sent off anywhere. They'd be dead. A newco (new company) would have to start from the beginning.

How would that work in the middle of a season though. Would all games teams had against them go down as 3 points and Hearts instantly thrown out the league? I Still can't help but feel they will scrape there way out there predicament, although depending on 5k tramps donating £25 a month through direct debit sounds madness as a business plan.

[aDONis]

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Early in the discussions, I had a cut and paste ready whenever anyone raised the issue of BDO's fees, and used it a few times. When BJ used the word "property", I took it to mean either "property as part of a going concern" or "property as part of a break-up".

To focus on the sale of the assets rather than the GC would be contrary to BDO's duties. In most cases, the latter does result in a higher return for creditors and BDO have to start out with that assumption. They are still, IMO, going along that line, albeit with less confidence now than they did before.

I agree with you to a large extent, but, because BDO's remuneration is linked to the sale of 'property', I feel there is potential conflict. Particularly if you look at the the mix of a deal.

I'm hypothesising, but because the secured creditor and BDO are higher up the food chain, two deals could be treated very differently.

So for example if we take a bid of £2m for the Assets + a £2.5m commitment to pay Xp in the pound to the unsecured creditors further down the food chain. May not look as good as a simple £4m for the assets + 0p to all unsecured creditors.

BDO are certainly no strangers to the de-coupling of the club from the legal entity (i.e. club), err fib and I'm pretty sure we're about to see it again.

Yours
aDONis

[Waxy]

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Remember that what happened with Rangers was that the other SPL clubs voted on whether to allow the transfer of their SPL share to Sevco. They voted no in that case, but if the demise of HoMFC was going to bugger up the fixtures in the middle of a season it's not inconceivable that they vote yes to a transfer of the yams' share.

Which should be a criminal act.Sending a new company straight to the top when it really should take millions of pounds investment to get there.Like every other team had to do.

Rightly refused last time and also should for the yams for the same reasons.
Sporting integrity.

[Hibercelona]

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How would that work in the middle of a season though. Would all games teams had against them go down as 3 points and Hearts instantly thrown out the league? I Still can't help but feel they will scrape there way out there predicament, although depending on 5k tramps donating £25 a month through direct debit sounds madness as a business plan.

All the games played against Hearts would become VOID.