BIHL: Receiver’s Announcement on Restructuring and Funding

11 May 2015 | 4 comments

Blues Trust statement on announcement made by Receivers

logo100x100The 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 Commitment

The 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.

Blues Trust

4 Comments

  1. terry grant
    terry grant on 11 May 2015 at 3:26 pm

    it sounds to me is Carson Young and Pannu may be involved and possibly using St Andrews as collateral you should demand that the football league investigate in detail to make sure that Birmingham don’t end up like Portsmouth did. so the supporter can sue the FA.

    T Grant

    • Mark Sutton (article author)
      Mark Sutton (article author) on 12 May 2015 at 12:22 am

      Terry
      We need to wait for further announcements about who is involved. At the moment we just don’t know. Daniel Ivery on Often Partisan suggests it is not Carson and Pannu for various reasons, but he says these are just his thoughts. The trust will continue monitoring the extent to which the ground is used as security for loans – as you say we don’t want to end up in the Portsmouth situation. As far as we can tell none of the Football League rules have been broken. We think that the Receivers, as a company with an international reputation, will make sure they comply with the rules. So, we are waiting for the next announcement.

  2. williammorgan
    williammorgan on 11 May 2015 at 3:39 pm

    Is this debt against St Andrews a way of new owners buying into bih then selling St andrews with the debt so that new owners can do what they like with St Andrews so making a mockery of St Andrews being an asset to the community.

    • Mark Sutton (article author)
      Mark Sutton (article author) on 12 May 2015 at 1:19 am

      William
      The announcement by the receivers basically says that they are trying to keep BIHL and the club going with money from the loan secured against St Andrew’s. My reading of the legislation is that the Asset of Community Value rules continue to apply if control of BIHL changes which seems to be what the Receivers are trying to achieve. The ACV rules do not apply if BIHL default on the loan and we need to be aware of that if things turn out the wrong way. We also need to get our interpretation of the rules checked out by legal people.

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