News that Hearts are set to go into administration today will give Scottish football has yet another morality lesson to consider, but this time, there will be no pleas for rule changes, no lobbying by the massed ranks of the media for other clubs to ‘do the right thing for Scottish football’, as opposed to the actual right thing. Hearts will face their fate with a straight bat.
This is an unusual football insolvency. Normally clubs go into administration when they cannot cut costs quickly enough to satisfy a creditor but on this occasion it was the way the club’s debt was structured which caused the problem.
While Celtic have long term loans with fixed repayment terms stretching years into the future, Hearts owed money to their own shareholders, most of which was repayable on demand (as almost all non-term loan bank borrowing is). If Hearts shareholder-creditors had issued loans instead of an overdraft, as long as the club continued to make repayments administration would not be on the table.
Ukio Bankas and UBIG, once both controlled by Vladimir Romanov now both insolvent, extended generous credit to the club without the formalities of an agreed repayment schedule. This informality led to their ultimate downfall.
I’ve read interesting views elsewhere that the absence of Rangers International from the SPL has claimed a further victim but there is no evidence to suggest that RI FC playing in the SPL would have sufficiently supported the Lithuanian property and investment market to prevent the collapse of the country’s banking system.
As far as we are concerned it is business as usual but there could be a crunch coming. All we can do is look after Celtic (principally by buying season tickets, never underestimate how important this is) and let nature take its course. If the crunch comes to Kilmarnock (I know, how would this be possible with a sharp kid like Michael Johnston in charge?), St Mirren, Motherwell and others, the game here needs to come up with something more radical than a unitary league body. Any ideas? I’ve one.
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