Heart of Midlothian F.C.’s future was cast into doubt earlier today when the club announced that, unable to cope with £25 million in debt, it will enter administration. Again, for those of you not familiar with the term, the club is bankrupt.
The auditing, tax, and advisory firm BDO International have been appointed as the club’s administrators and it will be their job to sort out the club’s finances, which are complicated by the fact that the club’s two owners- UBIG and Ukio Bankas- are also both bankrupt entities. Both companies were once owned by Hearts’ majority shareholder Vladimir Romanov.
Specifically, it will be BDO’s job to convince the creditors of UBIG and Ukio Bankas to allow Hearts to exit administration (in the U.S. we would call this “reorganization”) and remain a going concern, rather than to be liquidated to in order to repay some of the £25 million they owe UBIG and Ukio Bankas, who in turn owe money to their creditors.
If they are unable to do so, the 139 year old club could go out of existence- as Rangers F.C. did- resulting in an additional First Division club being promoted (most likely Greenock Morton F.C.) and a Hearts “newco” having to be formed and most likely being dropped to the Third Division.
Despite putting the entire playing squad up for sale and appealing to supporters for additional donations, the club was unable to pay the full £100,000 it owed in taxes to HM Revenue & Customs, never mind the £500,000 the club required to maintain day-to-day operations during the close season.
At this point the best possible outcome is that the club will be docked 15 points for the 2013-2014 season. Last year that would have relegated Hearts by a point, and the 2013-2014 squad will be weakened by the selling off of its best players and a ban on signing new players. Given these factors it would take a miracle for the club not to be relegated to the First Division at the end of the season.
If there is any ray of light in all of this it is that in going into administration it will now be much easier for an individual or group to takeover the club. Several high profile individuals, supporters groups, and even American investors have been rumored to be interested in buying the club.