Gaydamak's plans for Portsmouth FC

We clearly jumped the gun with our recent article stating that Al Fahim had pulled out of the takeover. Although our source has been remarkably good so far, it is clear that Al Fahim has not pulled out and is still trying to pull the deal together. With so much uncertainty and lack of clarity, it is a good time to clear up the entire position.

Yesterday's Times provides useful confirmation. It confirms that the original deal between Gaydamak and Al Fahim (agreed in May) was as follows:

Gaydamak transfers all the clubs debts (£60m)to Al Fahim. In return, the ownership of the club is transferred to Al Fahim for a token payment.

This arrangement would have allowed Gaydamak to walk away from the club and its debts and Al Fahim would become the owner. The Club debts stood at around £60m, with £36m due to Standard Bank at the end ofAugust/first week in September. The additional £24m were due to Gaydamak personally - Gaydamak receives around fifteen percent interest on much of this loan.

Gaydamak could not afford to keep subsidising the club which had been losing around £2m a month -even with a number of expensive players due to have their contract expire in June/July, Gaydamak needed to sell the club. Should the sale of the club not take place, the club were all too aware that the Standard Bank demand was unlikely to be renegotiated.

Back in May, when the takeover was announced, Al Fahim agreed in principal to takeover the club subject to Due Diligence.
At that time the debts of the club were documented in the audited accounts and were in the public domain.

As we all know, things have not worked out as Gaydamak and Al Fahim planned.

Al Fahim is certainly a man of independent wealth. How wealthy is a matter of conjecture, but all indications are that he has less than £60-£70m. Al Fahim had originally intended to buy the club with co-investors but he was not able to make this happen - the FAPL Fit and Proper Persons Test ensured that any co-investors would need to come forward. It appears that the newly strengthened FAPPT has restricted the funds available to Al Fahim.

With the takeover becoming protracted, Portsmouth had no choice but to implement 'Plan B' and sell players to ensure that it had sufficient funds to pay Standard Bank's £36m. Although these transfers generated high sale 'headline' figures, owing to the structure of the sales, the amount of up-front funds paid to the Portsmouth bank accounts was often for a lower amount. For Portsmouth, cash in the bank was the important factor.

The Season Ticket receipts and much of the Sky TV money received in August was used to keep the club running (wages were very high indeed until many contracts expired at the end of June and July). The Sky TV money is paid in two installments, in August and in January.

In addition, Portsmouth has wages to pay and, although these are significantly less than the peak of £70m per year, around £3m per month are still required to keep the club going.

It now appears that the club has the required funds to keep Standard Bank happy. However additional funds are required to pay the players wages until the next Sky TV money injection in the new year.

Gaydamak is still owed £24m by the club and, although much of it pays a handsome interest rate, Gaydamak wants Al Fahim to takeover the debt - Gaydamak wants his £24m back.

Owing to the player sales, Al Fahim now requires considerably fewer funds to take over the club from Gaydamak. Gaydamak needs only £24m and he will to be able walk away. However Al Fahim needs considerably more in his coffers than £24m as the team needs to be strengthened and future wage costs covered. To add to the complexity, the current proposed deal will only payback Gaydamak a portion of his £24m immediately - Gaydamak would not be able to walk away and would remain on the Board as a way of protecting his remaining loan.

Al Fahim still needs a co-investor or an institution willing to lend him the funds - this continues to be difficult and they are not currently in place. As a consequence, Al Fahim has not yet advised the FA Premier League of the source of the funds - this is because the source of the funds is not yet tied up. The details of the source of the funds and the overdue paperwork continues to be a sticking point and the FAPL will need at least a week to satisfy themselves that all is in order. When the paperwork had not been submitted by close of business on Tuesday, we mistakenly believed that Al Fahim's internal deadline had been passed and Al Fahim would not now be proceeding with the takeover - clearly we were wrong and Al Fahim is continuing his efforts to secure the finance.

Portsmouth FC are hopeful but unsure if the takeover will happen and need to plan for the worst-case scenario. Consequently it has announced that players will continue to be sold if the takeover does not take place. These additional funds will be required to pay players wages and run the club until the next Sky TV lifeline is received in the new year.

The crucial question is whether sufficient funds could be raised to ensure the club can continue to function and thereby ensure it does not go into administration. Our understanding is that by selling several of the key players, the club could escape administration. For Gaydamak, this will be his top priority - if the takeover does not commence as it is the only way to ensure the £24m loan is not lost.

Of course, further players sales are unlikely to be required if Al Fahim does take over the club. However this will depend on the amount of funding that he has secured.

To add to this complicated picture, the timing of the takeover also needs to be considered. The FAPL will need a minimum of a week to check the source of Al Fahim's funding and on top of that, it will take a few days to bring in any new players. If the funding paperwork has not been submitted to the FAPL by around 18 August, then Gaydamak will have push through with the sale of the remaining senior players.

Gaydamak genuinely wanted to transfer the ownership to someone who is able to move the club onwards. He had never intended to strip the club of assets in this way - sadly the ongoing delays have forced him into this position, with the prospect of more sales to come if takeover is not sealed soon.

The original deal is now less impressive for Gaydamak, as he is being asked to give the club away for nothing to Al Fahim, despite the fact that he will still have loans outstanding.