Parent company declared insolvent

icon brokenball20 May ~ Hearts closed their SPL season on Saturday with a 1-1 draw against Aberdeen and the immediate threat of administration hanging over them. The club's parent company UBIG has requested to be declared insolvent, which could trigger an 18-point deduction and mean relegation to the second tier of Scottish football. UBIG are a Lithuanian investment firm that have been placed on a list of companies deemed "unable to meet their obligations" by its country's government bankruptcy management department.

Hearts owe UBIG £10 million and its sister company, Ukio Bankas, another £15m. Ukio Bankas are the Lithuanian bank owned by Hearts' majority shareholder, Vladimir Romanov, and were recently placed into administration with liabilities in the region of £400m. The concern for Hearts is whether an immediate demand for repayment of the £10m owed to Ukio Bankas by its administrators could force the SPL to impose the 18-point penalty this season. This would relegate the club, who finished the season on 44 points – 14 above bottom club Dundee.

The club's own finances don't make for encouraging reading either. In their last reported accounts for the year ending June 2012, their turnover increased yet they made a loss of £1.65m – despite competing in the Europa League, winning the Scottish Cup and profits from player sales totalling almost £2m. Last December they came to an agreement with HM Revenue & Customs to pay more than three years of backdated tax and National Insurance contributions, which will be reported in this year's financial returns.

Several top clubs have written to the SPL already this season for clarification on Hearts' financial situation but they have been told that no rules have been breached in regards to insolvency of an owner or operator of a club. However, Hearts owner Romanov himself has admitted he has lost everything with the collapse of Ukio Bankas and that he has invested around £60m during his eight years in charge. On several occasions players at both Hearts and Romanov's Lithuanian-based basketball team, Zalgiris BC, who play in the sport's version of the Champions League, have been paid late or, in the case of Zalgiris, gone unpaid completely.

Romanov and the entire UBIG board of directors resigned in February and he has pledged to sell his shareholding in Hearts. Discussions with fans groups have taken place to find a reasonable price and strategy for a handover to take place but, with the authorities in Lithuania looking to recoup Ukio Bankas' huge losses quickly, the supporters could find themselves taking control of a club with severe financial constraints and without its SPL status. Mark Godfrey

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