Pompey To Submit CVA Proposal

Andrew Andronikou, Administrator of Portsmouth FC will this week send out a Company Voluntary Arrangement (CVA) proposal to creditors of the club offering 20p in the pound of their debts to be paid off.

It is thought that the proposal will be sent out tomorrow, in terms of a football club, a CVA is the best way to leave administration, as any other way would incur further points penalties in the football league.  If 75% of creditors agree to the terms, then they become legally binding and creditors will be due to receive 20% of what they are owed over a maximum 5 year period.

Andronikou’s target when he was appointed was to help the club out of administration by the first week of June, a target that will be achieved if the CVA goes through.  

It is thought that the first year payments of the CVA are going to be funded via reduced player wages and releasing players in order to slash the wage bill, the main cause of their current problems.  After that, the remainder of the CVA payments will be funded via the clubs parachute payments from the Premier League, whereby relegated teams will now be paid £48m over a 4 year period.

Under FA rules, all football creditors are to be paid in full as they have ‘super-preferential’ status, a rule heavily frowned upon by other parties, HMRC in particular.  HMRC have previously said they will reject all CVA proposals from football clubs until the remove the football creditors rule.

However, it is thought that HMRC are likely to back the CVA on the grounds that it will last just six months with the supervisors working on a sale of the club in this time.

A sale of the club would allow its football activities to continue under new ownership, while liquidators could investigate the goings on under the former management. 

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Posted at 04:38PM May 27, 2010 by Marc Stenton in Insolvency  |  Comments[0]