Football Clubs (Insolvency)

Penny Mordaunt Excerpts

Tuesday 18th March 2014 Westminster Hall

[Penny Mordaunt (Portsmouth North) (Con)]

I apologise to colleagues in advance for being absent for the remainder of the debate. I wish to speak in the debate in the main Chamber on Ukraine.

I start by rebutting the claim, often made, that we politicians should butt out of discussing football because football is a business and it should not be in our remit to meddle in it. Leaving aside the rather unbusinesslike practices that my hon. Friend the Member for Folkestone and Hythe (Damian Collins) outlined, I make this comparison: if a supermarket—Tesco, say—folded in my constituency, I could comfort my constituents with the fact that they can buy their bread and milk from Sainsbury’s. I could provide no equivalent comfort to Portsmouth football club fans by pointing out that they can buy their season tickets from Southampton, a bit further along the coast. That is clearly nonsense, and it goes to the heart of what is special and unique about football clubs. They are more than just businesses. Football clubs bring tremendous economic value to an area, but they also carry tremendous social value.

I pay tribute to my hon. Friend for his work in raising the issue, his Bill—which I am happy to support—and his work on the Select Committee. I pay tribute to all the other members of the Committee, too, for their sterling work on raising this issue and on concentrating the Government’s mind on getting that result. My hon. Friend spoke eloquently on football’s finance and governance problems, so I will constrain my comments to putting on record some of the trials that faced Portsmouth football club, which, happily, recently managed to achieve the largest and fastest ever 100% community buy-out.

The club, which was established in 1898, has had no fewer than nine owners in the past 15 years. The supporters’ rescue bid was triggered in January 2012 as the club entered administration for the second time in two years, with debts of £100 million. A scheme was launched inviting fans to pledge a £1,000 investment in Pompey Supporters Trust, starting with a down payment of £100. Discussions were also held with high-net-worth individuals. The trust’s plan was to create a new legal entity, Portsmouth Community Football Club Ltd. The trust would invest in that new entity the share capital raised from its members. Alongside that, there would be direct investment by wealthier fans. The trust would be the majority shareholder in the new club, with community interests further protected by a shareholders’ agreement.

In October 2012, the Football League announced that the trust had won its support as the preferred bidder. By then, the trust had received pledges from more than 2,000 fans who had paid the initial £100 sum. Eleven presidents pledged a further £1.5 million, having already provided the administrator with £400,000 in cash to keep the club afloat. Obviously, they gave that cash without any guarantee that they would take over the club. The trust put together a £2.75 million loan from a local property developer and Pompey fan, secured against the future ownership of the stadium and backed by a £1.5 million loan from Portsmouth city council, which further completed the bid.

Chainrai, who was the default owner and who retained a £17 million charge on the stadium, refused the trust’s £3 million offer for the stadium. Eventually, despite prolonged legal battles and counter-offers, in April 2013 Chainrai accepted an out-of-court offer of £3 million for the stadium, along with a further £450,000 for the release of the floating charge against the club’s other assets.

I could talk at great length about the trials that we went through to secure that deal, but I will give three examples. Before an administrator was even appointed to kick off the process, a football administrator who thought they were going to be appointed was already in the club trying to strip assets. When we were putting together the business plan and trying to figure out and unravel the complex web of who owed what to whom, which resulted from having nine owners in 15 years, we could not see the football authorities’ rulebook, which would have let us know where the parachute payments should have gone and under what circumstances. It is hard enough for a trust to put together a business plan, but in those circumstances it was nearly impossible.

There was a lack of transparency, and I know that problem is adversely affecting Coventry City at the moment. At the eleventh hour, our bid was nearly knocked out by a coalition of people who arrived on the scene without having previously expressed an interest in taking over the club. They claimed that they were going to offer more for the club, which was clearly an attempt to knock our bid out of the competition. Those were dark days indeed, and a strong supporters’ trust bid was made fragile by the lack of a level playing field.

Happily, the trust was successful, and it took a club such as Pompey to achieve it. Anyone who has played us knows the tenacity of our fans. They are troupers, and it was their faith, and the support of a few individuals who were prepared to risk a considerable amount, that meant that we were successful, that Pompey are still playing, and that the good guys won.

I see Portsmouth football club as a trailblazer, and I hope it is a catalyst for change. If we do not change, many of our much-loved clubs will not be around in the future. The ordeal was worth while, and the club is now making a profit. There has been considerable investment in the grounds, and I am happy to report that Portsmouth won their regional FA community club competition last Sunday.

The football authorities have moved somewhat, but they have not moved enough. In this House, we have to show the same resolve that Pompey fans showed during their battle and see through the reforms. I am happy to support this debate, and I am very happy to support my hon. Friend’s Bill. We must be resolute in getting a proper finance and governance structure for our national game.