Source: Telegraph
Portsmouth owner Balram Chainrai first in line for £17m repayment as secured creditor
Chainrai gave notice this week that he intended to take Portsmouth into administration on Friday, and officials from accountants UHY Hacker Young have already taken control of the club, working out of Fratton Park and liaising directly with the Premier League. Officially Portsmouth remain in talks with a number of potential investors but there is no llikelihood of a deal, and Chainrai is expected to fly back to Hong Kong on Thursday night, leaving the administrators to formally begin addressing Portsmouth's creditors on Friday. Related ArticlesPortsmouth plight reflects badlyPortsmouth set for administration on FridayPompey talks continue as administration loomsSulaiman al Fahim exit plan shocks PortsmouthPortsmouth 1 Stoke City 2Sport on televisionThey are expected to find that despite being the man in charge when the money ran out, Chainrai has structured his ownership in order to avoid taking a significant financial hit. Chainrai is in a position of strength because he is a "secured creditor", after lending money to the club charged against their assets, including Fratton Park and future revenues. According to insolvency law, creditors of failed businesses have to be paid in a strict order, with secured creditors close to the head of the queue if and when assets are realised to pay debt. Chainrai has two charges over Portsmouth, the first secured on Oct 6 against the ground, and a second charge against "the whole of [Porstmouth's] undertaking and all its property and assets" agreed on Jan 7. This second charge significantly strengthens his hand, and he has further protected his position by transferring the freehold of the ground into a privately-controlled company. He is thought to have agreed to write off some of his debt in exchange for the ground, which will be leased back to the club for an annual rental of about £1million, but it is unclear how much. The last accounts valued the stadium at £11million, but the local council has argued that the ground has limited real value as it can only be redeveloped if the club is found an alternative home. Given that condition, Chainrai may have written-off only a moderate sum. The impact of Chainrai's secured position is that he could be paid the bulk of the £20million the club are due to receive in broadcast revenue and parachute payments from the Premier League between now and next August. That would leave the administrator having to sell players to satisfy other creditors, and if Chainrai retains control of the ground the club's appeal, as an investment to new owners, would be strictly limited. Attempts to sell Portsmouth as a going concern this week have foundered as potential investors discovered the extent of the club's indebtedness. Interest from a South African-based consortium cooled when they discovered that the club's merchandising revenue has already been licensed to a third party for three years, cutting off a crucial source of revenue. It is understood to be one of many examples of future income being sold to meet current debts. Chainrai's involvement with Portsmouth began in October last year when he agreed to loan £17million to Ali Al Faraj, enabling the absentee Saudi Arabian to take control of the club. He agreed the loan just two weeks after he successfully sued Arcadi Gaydamak, father of Sacha Gaydamak, for the same amount in the Israeli courts. Chainrai's link to Gaydamak Snr is one of many curious elements of Portsmouth's recent history. Chainrai's spokesman said he agreed to loan the money to the club after being approached by the agent Pini Zahavi, who was looking for investors on the club's behalf. The club's best chance of a swift resolution to the crisis is if one of the interested parties decides to buy them out of administration in the next two or three weeks.