Chaos theories

Sarah Gilmore attempts to understand the basis of the problems at Fratton Park and wonders just what the future might hold

On May 18, 2008, along with an estimated 250,000 people, I walked down to the seafront to celebrate Portsmouth’s FA Cup win. I’ve lived in the city since the mid-1980s and witnessed several pretty major events occurring here such as the commemoration of the D-Day landings and the bicentenary of the victory at Trafalgar. But neither of these events came close to involving virtually every person in the city and beyond.

In a city as frequently overlooked as ours, the FA Cup success was more than a homecoming for a trophy last won in the 1930s, it was a validation. Six months later, the side’s achievements in the second Harry Redknapp era were underlined by a one of the best games I have ever witnessed at Fratton Park. Although the draw against AC Milan, during Tony Adams’s short reign as manager, signalled the end of Portsmouth’s UEFA Cup campaign, it felt like a victory.

Just over a year later, the club are at the bottom of the Premier League and the outlook is grim. Most of the reasons for this decline are well known: the team is on their third manager since Redknapp’s departure, some of the more gifted players went with him at the earliest opportunity and as the club tried to claw back money spent during Harry’s tenure the scale of the debt started to be felt.

While manager Paul Hart maintained a dignified silence as it all started to unravel, he was unable to pull off the huge task of generating a sufficiently cohesive, high performing squad as some money became available just before the start of the season.

The hub of the current crisis seems to revolve around events during and after Sacha Gaydamak’s tenure as “owner”. Gaydamak allegedly paid Milan Mandaric upwards of £32 million for his shares in the club and invested £20m in January 2006. This had been vital to the club in its fight against relegation, allowing Redknapp to buy practically a whole new squad.

Gaydamak is now owed £28m, with £9m of that being due at the end of January and a further £19m scheduled for payment in May 2012. In addition to these sums, £13m is due to clubs in transfer fees. Should this not be paid, the Premier League has threatened to withhold TV payments – money Avram Grant has stated is needed to bolster the squad given that several key players are now away at the African Nations Cup. However, given that HM Revenue & Customs has issued a winding up petition, these rows could all become immaterial after the court hearing in February.

Gaydamak’s sale to Abu Dhabi property financier Sulaiman al-Fahim in May 2009 highlighted the deep pockets needed to salvage the club – pockets Al-Fahim did not seem to possess. Later claims that current owner Ali al-Faraj is welcome to the £50m Al-Fahim had raised to help finance the club are widely viewed with suspicion. However, Al-Fahim did make a £5m investment in August which prevented the club from going into administration.

On July 21, Al-Fahim was appointed non-executive chairman and nearly a month later it was revealed that a rival consortium, headed by Al-Faraj and current CEO Peter Storrie, had also made a bid for the club. But it was only a few months before Ali al-Faraj was back in the mix as the club’s finances started to dry up, with staff and players not being paid for September. On October 5, a deal was agreed whereby Al-Faraj and Falcondrone – a British Virgin Islands registered company – would have a 90 per cent majority holding with Al-Fahim retaining a ten per cent stake and the title of non-executive chairman for two years. Additionally, Falcondrone also agreed a side deal with Gaydamak which gave them the right to buy Miland Development Ltd (which owns various strategic pockets of land around the ground) once refinancing is complete.

What conclusions can we draw from this mess? First, that Harry Redknapp’s activities in the transfer market are well documented and Sacha Gaydamak must have been aware of his reputation. While it could be argued that his investment in players using Gaydamak’s credit kept the club in the Premier League, their wages (if not their transfer fees) were a big price to pay, especially given their swift departure at the end of 2008-09. Given that around £80m was brought into the club through the end of season sale, how on earth does the club still end up owing so much?

Second, all three figures at the hub of the current crisis, Gaydamak, Al-Fahim and Al-Faraj, are property developers/financiers and a revamped Fratton Park or a new stadium is desperately needed, as is an upgrade of the training facilities at Eastleigh. Land values in the area are high and it’s inconceivable that this did not influence decisions to buy the club. The current plans to redevelop Fratton Park – based on those devised at the latter stages of Milan Mandaric’s tenure – will cost £124m and it is difficult to see how Al-Faraj will succeed in refinancing the club’s debts and secure the money to complete this project. However, the club is leeching money every home game due to a small, 20,000-seat stadium and the lack of commercial development seen at other Premier League clubs.

Finally, two interlinked factors seem to currently drive this saga. The first concerns the lack of committed investment by owners who prefer to secure their positions at the club through obtaining loans as opposed to investment from their own pockets. The second revolves around the global decline in property values coupled with events in the oil markets. Al-Faraj and Al-Fahim’s wealth comes from activity in the property market in the Gulf states, usually underpinned by loans. The oil wealth of the region seemed to provide pretty decent insurance for such loans but oil prices have been in decline due to Chinese activity in the industry leading to over-supply. Given the fall in property values, building projects in the region, notably in Dubai, are now being significantly undermined with loans of £60 billion being harder to repay. The club’s failure to pay its December wages (the third time this season) and search for new loans to cover this debt calls into question the fiscal wherewithal of the new owner or his intention to put his money into the club by way of investment.

The sad irony of all of this is that it might be the football that saves Portsmouthfrom going into a freefall through the divisions. Over the past six to seven years, I have seen some very good games at Fratton Park and although there are problems with the current squad, they’re not playing badly. Whether remaining in the Premier League would prevent or simply stave off decline who knows. But if they are relegated it is very difficult to see a bounce back. A south coast derby against Southampton might yet be on the cards.

From WSC 276 February 2010