Blues Trust statement on announcement made by Receivers
The Blues Trust is aware of the announcement by the Receivers of Birmingham International Holdings Limited (BIHL) on 8th May covering “Update on Possible Restructuring” and “Securing of a Funding Commitment”.
Update on Possible Restructuring
The announcement says an offer expressing interests in the shareholding of BIHL has been shortlisted – this is subject to further negotiation and the Receivers intend to enter into an exclusivity agreement with the potential offeror. The Trust finds it helpful that the Receivers have made this announcement and committed to providing regular updates on the restructuring process. However, more information is required before an assessment can be made regarding the implications for the club. We hope that the process will result in a positive outcome for the club but at this stage it is too early to make a judgement.
Securing of a Funding CommitmentThe announcement also described proposed arrangements for BIHL to borrow up to HK$153,000,000 (about £12.8million). The lender, Trillion Trophy Asia Limited, will also provide a cash collateral of £880,000 to assist the club to obtain a banking facility. A key issue is that the loan and the collateral will be secured against St Andrew’s. The announcement refers to the obligation to meet the funding requirement of the English Football League and goes on to say that the loan will be used to finance the general corporate funding requirements and general working capital of the group.
Whilst the need to secure funding through the loan is perhaps not unexpected given the published accounts, the Trust is concerned at the scale of the proposed borrowings. It has been suggested that the offer and the loan are connected but this is not confirmed in the announcement. It is possible, for example, that the loan is intended as a short-term measure and could be converted into a right to shares in BIHL at some stage in the future – this was the means by which Carson Yeung’s loan to the club was addressed. At this stage, these suggestions are purely speculation, and we must await further announcements from the Receivers before we can understand the full implications. We assume that the loan is also, in part, required to ensure the Receivers and their financial advisors are remunerated.
It is also a concern that the debt will be secured against St Andrew’s, as any default by BIHL on the debt could result in the ground being sold. St Andrew’s has been registered by the Trust as an Asset of Community Value – in normal circumstances this provides restrictions on the timing of any sale allowing the Trust or other community groups to bid. However, it is our understanding that these rules do not apply if the land is sold by a person having the power of sale by way of security for debt.