Options running out for Pompey as court looms
In two days' time, Pompey will stare into the face of oblivion.
London's High Court is scheduled to decide the fate of the club - and the option of liquidation is on the cards.
They are the first Premier League club to face a winding-up petition, brought about by the Inland Revenue being owed 7.5m in unpaid tax.
If the judge decides to grant the order, Pompey will no longer exist.
But financial experts, some of whom may soon be in control of the club themselves as administrators, said there were other avenues the club could go down to avoid this, including administration.
Julie Palmer, partner at the Portsmouth office of finance firm Begbies Traynor, said: 'I think the interesting thing would be what happens before Wednesday.
'The petition against the club will be heard - unless it decides to go into administration. Effectively that stops the winding up.'
But if the club does decide to put itself into administration before the hearing, it would be slapped with a nine-point penalty deduction.
That would all but guarantee their relegation from the Premier League and make their financial recovery even more difficult for administrators.
'In terms of going out of the Premier League, as you can see from clubs like Leeds, once you go into that kind of freefall it's difficult to stop,' said Ms Palmer.
Begbies Traynor handled the administration of Southampton FC and could be appointed to take over Pompey if the club goes into administration.
Veteran administrator Gerald Krasner is former chairman of Leeds United, and as a partner with Begbies Traynor he put Bournemouth FC into administration.
He said the club's best option looked like doing an out-of-court deal with main creditor the Inland Revenue before walking into court.
To do otherwise meant the decision could go either way and the judge could opt to wind up the club.
He told The News: 'It's like asking if I flip a coin in the air is it going to land on heads or tails? It could be either.
'If they're going for an adjournment without having done a deal with the Inland Revenue then I don't understand their logic.
'That isn't to say it won't happen because football isn't logical.
'But not having done a deal the Revenue could insist on winding up to teach a public lesson to football clubs that someone's got to be made an example of, and that they don't mess around any more.
'If that happens, Portsmouth ceases to exist.
'The three potential options are this: firstly, ask for an adjournment and do a deal first. The second is to ask, even if they haven't done a deal.
The third is that they go into administration.'
Administration is like a 'holding position' which would protect the club from being wound up and liquidated.
'I'm not going to make a prediction,' said Mr Krasner.
'But of those three options, the most likely is they'll do a deal with the Revenue before Wednesday.'
But he said Pompey were really leaving it to the last minute to exercise the administration option.
'With Leeds it wasn't left to one minute to midnight. But Portsmouth are getting close.'
Carl Faulds, director of Whiteley-based Portland Business and Financial Solutions Ltd, said administration was the safest option.
He said: 'They can go into administration, and that's what I would expect them to do. But they're seeking an adjournment.
'That's a big gamble. The court could hear the case, say the debt still has to be paid and put it into liquidation, and they'd have lost the opportunity to put it into administration.'
On the day itself, the case will be one of many which is listed for hearing at the High Court.
It is not yet known who the judge will be.
A spokeswoman for the court service said both the name of the judge and the time of hearing were likely to be announced online tomorrow.
Mr Krasner, who has been before the High Court many times, said: 'There could be hundreds of petitions being heard on the same day. Some are just a rubber stamp. This one won't be like that.
'Representations will be made to the judge and he'll make his decision. But I think it's highly likely they'll do a deal.'
Andy Beckingham, business restructuring partner at Southampton-based BDO Stoy Hayward, said: 'As a spectator, you'd see very little. The learned judge reading the papers, the counsel for the company, and the counsel for the creditors. The counsel for the company would probably say "please don't make the winding-up order, and we agree all future taxes will be paid immediately they become due".'
Whatever happens the court hearing will be a tense affair for Pompey and its legion of fans.
NINE-POINT PENALTY COULD SEE AN EXIT FROM PREMIER LEAGUE
Pompey has one sure fire way of protecting itself against winding up.
But it comes at a cost.
The firm can apply to go into administration.
To do so, it would have to bear a nine-point penalty, putting their Premier League survival in greater jepoardy.
The administrators will take control of the whole company, effectively confiscating it from its current owners.
The current owner is Hong Kong businessman Balram Chainrai.
He now owns a 90 per cent stake in the club which he acquired after Ali Al-Faraj defaulted on repayments on Mr Chainrai's 17m loan.
Sulaiman Al Fahim remains the owner of the remaining 10 per cent of the club.
The reason the Inland Revenue applied for a winding-up order is in order to recoup money it is owed in back taxes.
But it may also be doing it to make an example of Pompey for falling behind in its taxes.
A second petitioner, Grosvenor Basingstoke Properties Ltd, has also subsequently submitted a winding-up petition.
Its claim is believed to be significantly less than the Inland Revenue's claim.
While it is in administration, the High Court cannot make a winding-up order and force it into liquidation.
Under control of the administrators, Pompey could continue to trade as a business while the administrators looked for a new owner.
But tough decisions would still have to be made on how to keep the club afloat.
Carl Faulds, managing director of Whiteley-based administrators Business and Financial Solutions, said:
'The administrator could say to the players "look chaps, here's the money I've got coming in and here's what's going out.
'"So for us to continue trading, hold on and you might get your money later, but in the meantime this is what I can pay you".
'That possibly is a breach of contract.
'But they're already breaching contract because it hasn't paid its debts.'
But he said administration was a short term solution to the problem, and would merely buy the firm time while a real survival plan was worked out.
In administration, the club's old debts, incurred before it was taken into administration, are frozen.
The administrator would then look to sell the assets of the club to a new owner who would be obliged to settle debts owed to secured creditors, football creditors, and preferential creditors.
The preferential creditors are largely off-field staff who are owed cash.
They would be entitled to up to 800 in back wages or holiday pay owed to them.
But other debts - including its back taxes - could effectively be written off.
LIQUIDATION AT THE HIGH COURT THIS WEEK COULD BE THE END OF POMPEY
The winding-up petition seeks to destroy Portsmouth Football Club.
If wound up, the club will formally cease to exist - the worst case scenario.
They would then be broken up by an official receiver, and parts of the club sold off to reclaim some cash for creditors.
The contracts of the players would also be torn up, making them free agents.
Perhaps worst of all, if the club are unable to stave off liquidation they face the prospect of going from being an FA Cup-winning Premier League side, to being a non-division team.
'The limited company is actually the member of the league,' said Carl Faulds, managing director of administrators Portland Business and Financial Solutions.
'And if that company no longer plays there's no place for it in the league.
'If a new company were founded it would have to go knocking to the league, and it's entirely up to them whether they say come on in, or sorry chum, you're out.'
Portland was the first company to handle the administration of a football team, after taking control of Aldershot FC in 1992.
Fellow director Steve Godwin remembers its fall from grace, and said a similar fate could await Portsmouth.
He said: 'The Aldershot that you see now is a new club.
'It started effectively as a non-league club and had to work its way up.
'If Portsmouth goes out, basically a new club would start, but would have to start wherever you could find a space in a league.'
He added that he used to be a Pompey fan himself, but has since stopped going to matches.
'I became disillusioned with football,' he said, 'The game's been hijacked really.'
But it is not just taxes which the club are being slow to pay.
As a measure of how fraught things are at the minute, at the time of going to print the club are even late in filing a copy of their accounts at Companies House, the register of UK firms.
All firms are required to do this, and missing the deadline has already earned the club a 150 fine, a penalty which is due to increase the longer they delay filing them.
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