Wednesday, 11 March 2009

The Hovering Axe

West Ham United's Icelandic owners remain on the verge of securing the vital court victory that will provide a further three months' protection from bankruptcy, giving them until the summer to negotiate the club's sale. According to this morning's Guardian, Hansa, the club's parent company, is now almost certain to secure another three-month cessation period after the only major creditor seeking to plunge it into bankruptcy and force a fire sale of its assets changed its position to allow for sale of the club in orderly fashion.

Bjorgolfur Gudmundsson, who owns 95% of West Ham through Hansa, has seen his network of business interests decimated by the collapse of Landbanksi, the Icelandic bank in which he had a 41% stake. MP Bank, which will be owed 5.4% of the total debt after a proposed share swap, had argued that Hansa should be wound up and its main assets sold to clear its estimated £238m debts, but shifted its stance after a recent meeting of creditors including the new government owners of the Icelandic investment bank Straumur-Burdaras that was nationalised this week, will come as a relief to West Ham executives.

They believed that even if Hansa was forced into bankruptcy, the subsidiary that houses West Ham Ltd would have been protected. But the fact that all of Hansa's creditors are now agreed that it should be given time to sell the club in an orderly fashion will remove one of the main complications surrounding the process. MP Bank dropped its opposition because Straumur, which was chaired by Gudmundsson's son Bjorgolfur Thor Bjorgolfsson, dropped its claim to have first refusal on the proceeds of any sale. The about-turn was a result of it this week being seized by Iceland's Financial Supervisory Authority under new laws introduced last year by the government when its banking system collapsed.

Straumur-Burdaras now becomes the final major Icelandic bank to fall after reporting its liquidity had dried up, forcing the government to seize the lender. The IFSA suspended the board, oversaw the resignation of the CEO and immediately appointed a committee that will take over the management of the Reykjavik-based bank. The takeover completes the nationalization of Iceland’s four largest banking institutions, after the Atlantic island’s financial system buckled under the weight of foreign debt. Straumur shares have now been suspended in Iceland, while Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Banki hf were all seized by the government in October, precipitating the collapse of the krona.

It is understood that MP Bank will now be treated equally with all other creditors when it comes to dividing up the proceeds of the sale of West Ham. The additional three-month cessation, which is yet to be approved by the Reykjavik court but which sources say is highly likely to now be rubber-stamped this week, will give Gudmundsson until June to sell the club. He was originally hoping to raise up to £250m for West Ham, which he bought for £85m plus £22m in debt in 2006. But that figure is now considered wholly unrealistic by City sources and he may have to settle for less than £100m.

The Guardian states that the club hope that a recent upturn in fortunes on the pitch under Gianfranco Zola, plus the fact that that it owns its own ground in London, has taken steps to rationalise its wage bill and is relatively debt free will encourage potential bidders despite the fact that several clubs of a similar size are also open to offers. Since particulars were sent out by Standard Bank in December, it is understood that five non-disclosure agreements have been signed but that none have yet progressed to full due diligence.

The ongoing Carlos Tevez affair should also be substantially settled by the end of this month. Lord Griffiths will reconvene his arbitration panel on 16 March to decide on the level of compensation due to Sheffield United. Meanwhile, a joint investigation by the Premier League and the Football Association into the conduct of West Ham executives in the wake of the original verdict is continuing.

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