Birmingham City ‘safe’ despite parent company BIHL calling in receivers

http://www.theguardian.com/football/2015/feb/17/birmingham-city-parent-company-bihl-receivers

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Birmingham City could have 10 points deducted after the club’s Hong Kong-listed parent company, Birmingham International Holdings, appointed the receivers Ernst and Young to take over the running of its business. Club sources said they informed the league in advance that BIHL directors were proposing to appoint Ernst and Young but the league nevertheless said it was seeking an urgent meeting to discuss the issue.

The league’s rules define the appointment of receivers as an “insolvency event” which, at its board’s discretion, can lead to 10 points being deducted. BIHL has emphasised it is not facing insolvency or any threat of it and has made the appointment to enable the club to be better run.

BIHL took over City in 2009 for £81.5m and this is the latest twist in the traumatic saga of relegation and financial difficulties since the principal shareholder and former chairman Carson Yeung was arrested, then convicted of money-laundering in Hong Kong last year. The league was already seeking to clarify if Yeung has been acting in breach of his ban to act as a club director after the BIHL board announced last month it had blocked an attempt by him from prison, where he is serving a six-year sentence, to have three directors removed and three of his own associates appointed.

That standoff is understood to have been replicated in other areas of BIHL decision-making, with the board split between those close to Yeung, who owns 27.5% of the shares, and the other directors. City referred to those problems in a statement, explaining that a majority of BIHL directors decided to appoint receivers to bypass “fractious and inharmonious relations within the management”. The effect is to take the running of BIHL out of the board’s hands.

BIHL announced an £11m loss last year and the accounts noted “significant doubt as to the group’s ability to continue as a going concern” but the board insists it is not insolvent. The club statement said “most emphatically” that no winding-up petition had been issued and Ernst and Young were quoted saying it does not see “any liquidity issue”. The suggestion, portrayed as good news, is that the receivers will be more likely to find a buyer or investor for the beleaguered club than a board riven by factions and dealing with the potential influence of Yeung.

Panos Pavlakis, the BIHL director running affairs at St Andrew’s, is thought to feel confident that this reasoning, and the dialogue with the league, will enable the club to escape a points deduction. If a club itself appoints receivers a 10-point penalty is automatic; but if it happens at the parent company, the board has discretion, taking into account circumstances including the integrity of the competition and reputation of the league.

A league spokesman said: “We have requested a meeting with the club and the appointed receivers at the earliest opportunity to discuss the matter.”