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BST Gazette Column 11/01/2019

BST11/01/2019

It’s remarkable to think that it’s now over twelve months since the first £10m instalment of the judgment handed down by Marcus Smith was paid by the Oystons/Segesta and that nothing of any significance has been paid since.

Oyston defaulted on all subsequent payments and consequently enforcement procedures were triggered against his assets, a total of 24 properties and 6 companies, including Owen’s shareholdings in Closelink (which owns a share of Whyndyke) and Segesta (which owns Blackpool FC, the stadium, the training ground as well as the Travelodge and Quernmore Hall). However, since the orders for sale of those assets there has been a noticeable pause in proceedings.

Why the pause? What is going on? Has a deal been done? Why doesn’t Valeri just get on with it? In recent months we’ve all no doubt had conversations with friends, family and fellow fans during which one or more of those questions will have been posed.

Valeri Belokon was good enough to send a message to frustrated fans over the Christmas break. Understandably that didn’t specifically deal with the cause of the delay; rather it acknowledged the criticism levelled by fans in respect of the lack of progress and confirmed that Valeri shared the same concerns.

As it stands, the balance of the judgment (£22m plus interest) hasn’t been paid and there is no indication that Owen or Segesta readily have the means to do so. When Oyston visited Latvia in June last year he seemed to have persuaded Valeri to give him further time to raise the necessary funds and yet it appears whatever promises made then were not subsequently honoured. Enforcement of the charging orders against various properties was then commenced but even then penal notices had to be sought presumably as a result of a perceived lack of co-operation on Owen’s part. To date no committal application has yet been issued to force compliance with the outstanding penal notices and no auctions have yet been scheduled.

So what’s next? What progress towards change might we see in 2019? What are Valeri Belokon’s options? Observers can only speculate, but there appear to be three in the main, with the third looking increasingly likely. To take them in turn -

Enforced Auctions:
On the face of it, pressing ahead with the auctions seems the most logical choice as it’s the continuation of a procedure that was started in the spring of 2018.

However if Owen’s prevarication and lack of co-operation since the orders for sale were made should continue, it could significantly delay the piecemeal sale of properties and also impact on the Court’s ability to supervise a sale of Oyston’s shares in Closelink and Segesta, steps which were always expected to prove problematic.

It has to be borne in mind that the sale of Segesta would involve extensive due diligence (Valeri’s New Year statement specifically referenced this) before any willing purchaser could acquire Blackpool FC. It’s reasonable to conclude that this is most likely the main reason for the ‘pause’ in the enforcement action.

Agreed Terms:
Then there is the possibility of the two parties agreeing a settlement. It remains an option, though the steps Valeri has taken since Owen’s trip to Riga last summer suggests that whatever promises Oyston made at that time, he has failed to honour them.

The most likely route to agreed terms in such circumstances would be for Owen to borrow the money required to pay Valeri off. However, this might not be easily achieved – for how would such a large loan be serviced from the limited income streams that remain available since the ethical boycott/not-a-penny-more took effect?

The possibility of Valeri taking the football club and the stadium in exchange for what’s owed doesn’t currently seem to be a likely option. Of course the Latvian has his own issues with the EFL. His Kyrgyzstan conviction for allegations he refutes (albeit imposed in absentia) means he automatically fails the League’s Owners and Directors Test, though that ban is capable of being appealed.

A Court Appointed Receiver:
Back in December 2017 Marcus Smith queried the parties as to whether it might be appropriate for the Court to appoint a Receiver to supervise the realisation of those assets required to discharge the judgment. Valeri Belokon stated he preferred not to takes steps that might unduly impact the football club itself so at the time that option wasn’t pursued.

However, a year down the line with other options stalling, it is possible that the appointment of a Court Receiver is the route most likely to be pursued in view of the sums that need to be realised to discharge what is a significant judgment debt. So what would the appointment of a Court Receiver mean in practice and how would this be likely to impact on Blackpool FC?

The first thing that must be appreciated is that there are subtle differences between a Court Receiver and an Administrator.

Administrators have taken charge at many clubs over the years and are generally seen as a favourable alternative to the spectre of liquidation. Their appointment is usually sought by a club’s directors and instigated to protect the club from legal action by its creditors, thereby allowing it to continue to operate as a going concern whilst a buyer is found. Administrators are licensed insolvency practitioners who, generally speaking, have proven successful in managing to save clubs from liquidation, albeit sometimes in rather controversial circumstances where their owners have significantly overspent.

The appointment of a Court Receiver on the other hand would generally be sought by a Judgment Creditor to assist with enforcement action – a step which is unprecedented in English football. As such is there is little understanding of how such an appointment might work in practice.

The decision to appoint a Court Receiver usually comes about because other more traditional methods of enforcement have proved unsuccessful, particularly where the Judgment Debtor has complex asset-holding structures. There is no formal requirement that the Court Receiver be a licensed insolvency practitioner. However because insolvency practitioners have the requisite experience in investigating assets and managing distressed clubs, it’s often the case that they will be the people the Court will turn to when appointing a Receiver.

A Court Receiver’s powers are governed by the order that appoints him/her. As such there are no rigid rules as to the specific terms of the receivership and/or the powers available to the individual appointed. Rather, the Court can tailor these to the factual background that resulted in the decision being taken to seek the appointment in the first place.

Consequently it’s difficult to accurately predict what would happen if a Court Receiver were to be appointed in Blackpool’s case, particularly as the primary task would be to realise Owen’s, Karl’s and Segesta’s assets – not necessarily to run the football club; though you’d expect that latter to remain a distinct possibility, given it’s the asset that generates the most revenue.

Assuming a Court Receiver were appointed to take over the running of Blackpool FC, then from a practical perspective what we will likely see will probably mirror what happens in Administration, with the club staff all reporting to the Receiver rather than the club’s directors. It’s also highly likely that a General Manager with a background in the football industry would be brought in to manage the football side of the business, so as to remove the need for any Oyston involvement in the day-to-day running of the Club pending its sale.

Possibly the most significant advantage the appointment of a Court Receiver would bring is their ability to sell the assets ‘as seen’ without reference to the owner’s inflated view as to their value and indeed without having to provide the usual warranties a seller might be expected to provide to a purchaser. This could simplify the sale process albeit at the cost of perhaps deflating the price that might otherwise be achieved on disposal.

The greatest concern from a fan’s perspective would be how the EFL might react to the appointment of a Court Receiver, as under their rules this is deemed to be ‘an insolvency event’ in the same way that Administration is. As such the appointment could lead to the sanction of a 12-point deduction being applied which, as the League table currently stands, would see Blackpool drop into the relegation places. It is thought the threat of such a sanction being applied is the most likely reason this option hasn’t been pursued by Valeri Belokon until now.

It is important to state however that because it is the holding company Segesta and not Blackpool FC itself that would be subject to the appointment of the Court Receiver, the points deduction isn’t automatically applied by the EFL; rather they retain a discretion as to whether to impose the sanction or not. As there is no precedent to this specific scenario, BST has written to the EFL in an attempt to seek clarification about the governing body’s stance should the situation arise. It is to be hoped that, knowing the background at Blackpool as they do, the EFL would be sympathetic and exercise their discretion favourably, particularly as the ‘insolvency event’ hasn’t been brought about by reckless spending.

A further point to consider is whether the appointment of a Court Receiver who was directly managing the football club would cause boycotting fans to reflect upon their position on the ethical boycott and whether they should resume attending home matches to demonstrate to prospective owners that Blackpool FC is a viable option. This is something that the Trust and its members would need to consider carefully in the event of a Receiver being appointed and once the specific terms of any receivership were known. No such decision should be taken lightly or prematurely.

To Conclude:
We always knew the fight to reclaim our club was never going to be easy. However, Owen’s apparent determination to hold on at all and any cost to himself and Blackpool FC is really taking us into unchartered territory, where predicting the outcome becomes increasingly difficult.

At this time of considerable uncertainty, we as Blackpool fans need to brace ourselves for the worst and to focus on the objective – the ultimate removal of the Oyston family from our football club.

It is said ‘long term gain often requires short term pain’. The risk of a points deduction being applied by the EFL is likely to be the price we will have to pay to secure change.

Whilst we await developments over the coming weeks and months, it is vitally important that as fans we stick together and present a united front, so that come the day the Oystons finally exit Blackpool FC, we are best placed to help any new owner with the reconstruction of our club.

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